Skip to comments.Ally Financial bets on risky subprime car loans (here we go again!)
Posted on 06/01/2011 1:37:02 AM PDT by Daisyjane69
(Reuters) - Ally Financial Inc, the United States' largest maker of car loans, hopes that people have forgotten the time when "subprime" became a synonym for "disaster."
Ally, once known as GMAC Financial Services, is getting ready to go public this year, and is making the case that subprime loans for used car buyers are not about to produce the same results that they did in the housing market a few years ago -- a near-collapse of the financial system.
Auto loans performed relatively well during the downturn, and demand for cars is up, so auto lending is one of the few types of consumer debt that is growing.
Ally wants to show investors that this makes it different from many other banks, which are struggling with weak loan demand and their own soured mortgages.
The company is making more loans to subprime borrowers, and financing more purchases of used cars, both steps with higher risk. It has said it wants to raise the percentage of auto loans on used cars that it makes to 50 percent from its current 20 percent.
(Excerpt) Read more at reuters.com ...
Run away, Screaming NO!
I can’t tell how this upsets me.
My father bought an Escalade two years ago and financed the loan via GMAC. Now Ally has the loan.
I make the payments every month. But the idea that the loan is now with someone else pisses me off. The same thing happened with my home loan years ago.
When I built my house I went with a local bank for a loan. Then it was bought six months later by some outfit in Minnesota that had a class action lawsuit already lodged against them for illegal practices!
I sold my house two and half year later.
Anyway, it really irritated me that my bank would do that. They are no longer in business and were later bought out by USBancorp.
Makes sense to me - lend $$ to someone who you instinctively know will not pay it back. Lend them enough to buy a gas-guzzling ghetto cruiser with 20” spinners, while you’re at it. Oh, and make sure it’s a zero down, no payments until 2012 deal at usurious interest rates. Not to worry - the gummint will bail you out when your enterprise goes south. Wait - you could be financing our military folks! Of course, there’s always Repo Man.
Honest to gawd.
When you borrow, you give up a certain amount of freedom. The person you owe money to has the option to sell the money-making instrument to someone else.
It’s a contract that you agreed to when you took the loan.
Contracts are the backbone of any civil society.
If you didn’t want to enter the contract, then you shouldn’t have entered it.
Now you’ve entered the contract and you have certain obligations.
Contracts are the basis for individualism, individual freedom, and quite frankly all civil society flows from the enforcement and viability of contracts.
So when you think about it from that angle, its really not such a bad thing.
As party to the contract, if you don’t want those terms, simply don’t enter the contract.
Easy as that.
Where is the responsibility of the borrower?
The borrower has no responsibility for borrowing money?
And we wonder why our society is falling apart at the seams, when conservatives neglect to see the personal responsibility inherent in borrowing and lending for both parties . . . .
What kills me is that they are not only rolling the dice with taxpayer bailout money, that they have NOT fully paid back, but they have FDIC insurance as well!
Talk about betting with “house” money.....
I just want to give credit where credit is due. I’m not some master sleuth; I stumbled on this information on a blog, so it’s only proper that I give proper credit:
I was so mad after reading the piece that I forgot my manners.
“The borrower has no responsibility for borrowing money?”
Oh, yes ....just no responsibility to pay it back. /s
Yup. Betting against the house, with house money. Sheesh.
Ally is indistinguishable from the rest of the corrupt organization formerly known as GM. I will never have any dealings with them for as long as I live.
Reminds me of some James McMurtry song lyrics:
He’s cut that corner pasture into acre lots
Sells ‘em owner-financed, strictly to them who’s got
No kind of credit ‘cause he knows they’re slackers
And they’ll miss that payment, then he takes it back
Bingo. This is where bankers and the Fed have screwed over society, and this is where NYCslicker has it all wrong. Sure personal responsibility is a great thing, but when the government uses all of its powers to flood the market with cheap credit, prices of everything go up - a lot as we saw with housing and education - and you either give in or do without. The doing without part is no always so easy when it comes to a house or a car or an eduction.
Let's look at this last for instance. There is almost no professional education (doctor, lawyer, engineer) where you can count on earning enough to pay back loans on $50,000 a year + accumulated over the many years of being a student. So the responsible thing is to do without? How about the responsible thing being for the government and banks to get their snouts out of ordinary market transactions.
Not that it helps, but Ally is the old GMAC.
Not when the bank believes that no matter how weak its business plan or how scant its reserves, the taxpayers will be there to buy up any bad paper.
This is the lesson of TARP, and it's why I can't support any presidential candidate (sorry Herman) who was a TARP backer.
I have been in a related business for 30 years. Every so often some genius looks at the interest he could be earning by lending money to sub-prime borrowers so they can buy sub-prime used cars. His business skyrockets upwards as he writes a bucketload of these loans. And everything is fine until about the 4th or 5th month into the loan, when his slow pay numbers start to creep up. But he is writing so much new paper that his sales numbers allow him to hide his bad loan numbers. Pretty soon, he has more bad loans than he can handle, or that his high interest rate can compensate for, given the cost and delay in recovering the car. And then he runs out of money at which time no sane person will invest in him anymore.
Seen it before. Seeing it now. Not pretty. Used to be that the fool was losing private money. It is a crime when he is also losing taxpayer money.
-——lend $$ to someone who you instinctively know will not pay it back———
I met a guy who bought wrecked saturns and rebuilt one from several. He would then sell them, self financed, to a largely illegal customer base. They made weekly payments. When payments were missed he would tow the car. They then had to makeup past payments and prepay one ot two.
Of course they could not so he resold the car and pocketed all the payments.
Cars are different than houses. Cars can be towed away and resold without the formalities of real estate foreclosure.
And that entire argument rests on one faulty premise:
The borrower has no responsibility for borrowing.
Which is wrong.
I understand your position.
You want to blame banks for lending to stupid or irresponsible people.
I want to blame people for being stupid or irresponsible.
Mine is a conservative viewpoint. Your’s is a liberal victimhood viewpoint.
Clear as day.
Just make sure you acknowledge that you now follow a philosophy of victimhood for your life, just like the NAACP, just like liberals and socialists everywhere.
Do you like your new fellow travelers and philosophical brethren?
I don’t, but it’s your choice who you hang out with, figuratively.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.