They must make money this way. The interest from those loans pays the lower interest rates given to savings accounts and pays the salaries of the employees. If they simply hoard the money, it runs out rather quickly. They cannot survive that way.
With the financial system in crisis as a result of credit losses of staggering proportion, I can't imagine why anybody would want to raise credit standards...... :shock: :shock: :shock: Tom's point is spot on, banks can't make money if they don't make loans to creditworthy borrowers.....period. It is in their best interest to do so.....why do you believe that they are acting contrary to their best interests? Bankers are inherently too damn greedy to not want to make money - what you are suggesting is just contrary to fundamental human behavior. Again, and I hate to repeat myself, that is the equivalent of saying a car maker does not want to sell cars......it's just nonsense. This is a silly discussion.....
There are hundreds of stories like this one around the country: "Buyer traffic is still up, but workers local dealerships said the problem is actually turning the opportunities into sales with banks lending tight in this credit crunch. "I've been in the car business over 30 years and this is the worst I've ever seen it," said Curt Lyke, My Chevrolet used car manager. Times at My Chevrolet in Salinas have gotten so bad management's been slashed in half. "The owners are having to work harder, the managers are having to and the employees -- just to make ends meet. (It's) just a sign of the times," Lyke said. "It's tough because there are people you worked with a lot of years and a lot of times you have to scale back," said Brian Verdin, My Chevrolet general manager. The dealership said there are plenty of qualified buyers, but in this credit crunch banks won't lend them the money."
Frankly I think that the dealers and the auto makers just don't want to sell their cars.....preferring instead to grovel for public assistance. It's easier that way and they deserve it just they are having a tough time and have not been successful....they get to go to Washington, hob nob with congressional big wigs, play to a national television audience, blame somebody else and make more promises that they can't keep.....makes more sense than what you're suggesting.
This has been one of the problems all along. There was a story published about Ford and Toyota having a boat race (obviously didn't happen) and Ford lost. Toyota had one person steering the boat and eight people rowing. Ford had eight people steering and one person rowing. Ford decided to give added incentives to the one person rowing and still lost the next year. They wrote up the one person, and downsized the paddles but still lost the next year. The program was discontinued the next year. American car companies, and a lot of other American companies, are top heavy. They try to solve problems that are not there and can't see the real problem. It was probably time to eliminate some of the management there. They are on the L side of the P&L statement. The workers are on the P side. When more companies recognize this, we will be better off. Qualified??? By what standard? By the old standard that gave money to anyone and then charged you higher rates to make up for the repossessions? Dave, you attacked the credit industry before the crunch for raising rates. That has to be done to cover lending money to high risk people. Now they are not lending to high risk people and you attack them for changing???
You guys act like I made up the term...."credit crunch" It's been mentioned prominently by many different sources for months now. Come now.....you really think this doesn't exist?
I think that defined the current credit crunch, Dave. You can't have it both ways. Either they are evil for lending to high risk or they are evil for not. Which way is it?
... and maybe I missed it but where was your "Thank you" to Bush for extending the loans to the big 3 when the democratic congress would not?
The Democratic House did. The Senate at the insistence of a few Southern Republicans would not. The banks did get the credit situation into a mess with indiscriminate lending practices and now they reside at the opposite end of that spectrum by lending much too tight. Two wrongs in this case definitely do not make a right.
:lol: ......and the entire rest of the electorate with the exception of Detroit. North, south, east, west, young, libs, dems, conservatives, etc, etc, etc are opposed to the bailout - let's not overlook that minor little factoid. The largest auto lender in the country is a subsidiary of GM.....GMAC. One would think that if your hypothesis is correct, that they would be lending money hand over fist in order to spur production and move cars out the door.....how do their loan originations this year compare withh last? If you really want to know, I'll tell you...... Here is another riddle.....when was the last time we - or any developed country for that matter - saw bank credit expansion in the face of declining consumer consumption, business capital investment, employment and incomes? If you really want to know, I'll tell you...... When was the last time that it was in our national interest for banks to loosen underwriting standards and expand credit in the face of greater unemployment, reduded incomes, asset values and net worth? If you really can't figure it out, I'll tell you......but my guess is that there are others here that will provide some clue......
Sounds like you are talking about the Great Depression...which seems to fit what is going on at least here in Michigan. These down economic times are mostly responsible for the poll I just saw in which 75% of Americans are saying good riddance to George W. Of course 80% of Skyboxers reside in that die-hard 25 % that wish he were staying on for a third term. But that's the environment on this board I guess. http://www.cnn.com/2008/POLITICS/12/26/bush.poll/index.html On GMAC the story in Detroit is that they have maneuvered themselves into position to receive TARP money and the general feeling here is that they will do just what you are suggesting they should do with the money....lend it out to car buyers of GM vehicles.
I have actually become 'more' liberal living in the South. I think we need to straw poll this. I may reside in Alabama, but I am as true blue of a Southern Californian as there is.
Story is true indeed...the Fed has approved GMAC's application to become a bank holding company and as such qualify for TARP investment. That said, for the last 30 years they have been the largest auto lender in the country. There is no reason that if it was appropriate and prudent to expand their loan originations that they couldn't do so......GMAC's loan originations have plummeted, plummeted with a capital P because the demand for credit -world wide - has plummeted with a capital P. The Fed has flooded the market with an overwhelming supply of money, forcing interest rates to their lowest levels in the history of the county - effectively zero - because their is no demand. There is no demand because the world economy is de-leveraging - i.e, borrowing less - because the prevailing view is that there was too much debt in capital stock of the world economy. People aren't buying things especially durables. When people don't buy durables, they don't borrow money to finance their acquisiton. When people don't buy durables, dealers don't need credit for working capital to finance inventory and receivables. When dealers don't purchase inventory, manufacturers don't need to finance the purchase of raw materials and capital investment to expand production facilities....... aggregate demand for credit - world wide - has plummeted more quickly and more sharply than at any time in our lifetimes and likely in recorded history. Bank credit is contracting as it has in every economic downturn for a milennnia.....the notion that bankers are unwilling to lend money to credit-worthy borrowers is just nonsense........and any anecdotal, hearsay evidence you may have from the bar down the street or some Detroit op-ed piece pales in comparison to the cold, hard economic reality and basic human behavior.
I work for BOSCH. We are the world's leading supplier in automotive parts to the Big 3. I am at risk of losing my job right now because of the way things are going. That said.....This was a bad idea. These companies would have been better off declaring bankruptcy and restructuring. Earlier this year we spent a few days down at my plant because the Union at GM went on strike. They wanted better benefits. Now if you include their salary and benefits it would equal to about 70 dollars an hour pay and most of those workers in 8 hours don't do half the work I do in 2. Yet I make 16 dollars an hour. The union has long out lived its purpose. At one time it was a great thing and protected the employee from the employer. But now all it does is pad the people running it's pockets and hurts the business. When something becomes a negative to the business then it must go. Also. These CEOs getting Million dollar bonuses for a failing company. What the hell is this? When did you get rewarded for failure? Oh I know! This where we gave all those young kids trophies when they played little league baseball even though they didn't win the championship. Now they grew up thinking, "hey I should still get a reward even though I didn't accomplish what I set out to accomplish!" This is really bad. And now our Government must focus on them and make sure they use the money correctly and restructure instead of focusing on other aspects of our economy and the War.
Outlaw, I have already lost my job because of the Big Three's downturn and resultant credit risk they now present due to the threat of that "restructured bankruptcy". These guys go belly up and I don't see how companies like my former one or your present one ( for now ) can also avoid bankruptcy. The real long term threat to all auto related industries is that consumers would no longer buy the cars from a bankrupt company. Liquidation would then be the outcome and along with that the loss of millions more jobs and a very reduced manufacturing capability here in America. From a national strategic defense perspective I don't see that as being good policy.
They already are "belly up"....they cannot finance their operations, and they cannot attract capital from private investors at any reasonable price because they have proven for a generation that they have a failed business model and cannot be effective competitors. In my view and the view of the majority of citizens and of the informed, the best option is a massive restructuring under the protection of the bankruptcy courts.... The real long term threat is that capital - including economic, human and intellectual - is diverted from more attractive enterprises promising greater growth, innovation, job creation potential and meaningful returns to investors - the very essence of what has made our system the greatest economic engine in the history of the world. We throw money down the sh!thole of failure at great peril to our system. That is the real long term threat.....
What's for dinner? Red herring. Dave, while you are busy calling people out I haven't seen you mention this once. Autoworkers Union Keeps $6 Million Golf Course for Members at $33 Million Lakeside Retreat
Executive compensation is something thta has gone wayward for a long, long time in America. Many times a guy is an abject failure at one firm...gets his golden millions when he gets the boot and then hooks up with his college buddy who also happens to head up the board search at another firm for a new CEO. Somehow the guy gets this second chance at failure and at getting his own windfall a second time at this new firm. Anyway....in various ways this kind of crap goes on all the time in Corporate American while the rest of us just stand by and watch. Then you have the sordid story of the recent Wall Street catastrophe and the mismanagement by many different CEOs and other executives who have most likely profited enormously by all of the shenanigans. And yet most Americans are just fixated on the Big Three.....probably because most Americans just don't have a clue what really is happening on Wall Street.