Why the Auto Dealer Exemption Was a Bad Idea
Last year, the U.S. government bailed out auto giant GM at a cost of around $50 billion, gaining 61 percent of the company in the process and expecting around
Jul 31, 202075.8K Shares1M Views
Last year, the U.S. government bailed outauto giant GM at a cost of around $50 billion, gaining 61 percent of the company in the process and expecting around $20 billion in eventual losses. The government also bailed outits lending arm, GMAC, at an upfront cost of $17.2 billion and an expected eventual cost of $6 billion.
Today, backed by that taxpayer largess, GM paid $3.5 billion to purchase a subprime lender, meaning GM will pay taxpayers back in part by selling them more cars at less advantageous interest rates. Plus, Felix Salmon notes, GM did not even get a good deal on the company: “[T]he government is now using taxpayer money to buy out AmeriCredit’s shareholders at a 24 percent premiumto Wednesday’s closing price.”
The incident underscores how pointless the auto dealer carve-outin the financial regulatory reform bill is, as well. As a standalone company, in a matter of months, AmeriCredit would have come under the regulatory oversight of the new Consumer Financial Protection Bureau. CFPB regulators would have prevented it from using the industry’s worst practices— bait-and-switch scams, hiding fees and interest rates in the small print, selling unnecessary insurance products or offering subprime loans to prime-qualified customers. But, since GM bought AmeriCredit and will roll its services into the company’s auto dealerships, the CFPB will not be able to do so.
Rhyley Carney
Reviewer
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