Subprime Woes Not Limited to Housing
GM's profit fell 90% in the first quarter of this year. What's interesting about this is that this wasn't due to poorer performance in their automotive division but in their auto finance arm, GMAC. A major driver for the losses at GMAC appear to be loans made to sub-prime borrowers. These weren't auto-loans but apparently subprime mortgages which GMAC originated through their mortgage arm Residential Capital.
Interestingly enough, a similar phenomenon appears to be occurring at Harley-Davidson, where their finance arm is losing a lot of money no delinquent subprime loans.
Key quote:
- "The basic picture is the same, though. Trying to keep the consumption machine going over the last few years, companies (following the Fed's lead) used easy credit to hook consumers who probably shouldn't have been buying expensive things with long term loans. Whether it's housing or motorcycles, the lesson is the same: excessively easy credit is costly in the long run."
I couldn't have said it better myself.
Interestingly enough, a similar phenomenon appears to be occurring at Harley-Davidson, where their finance arm is losing a lot of money no delinquent subprime loans.
Key quote:
- "The basic picture is the same, though. Trying to keep the consumption machine going over the last few years, companies (following the Fed's lead) used easy credit to hook consumers who probably shouldn't have been buying expensive things with long term loans. Whether it's housing or motorcycles, the lesson is the same: excessively easy credit is costly in the long run."
I couldn't have said it better myself.
Labels: subprime lending
posted by rawls at 7:00 AM
0 Comments:
Post a Comment
<< Home