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Originally Posted by cobra de capell
The last part of your post is believable, but....
The banks are the root of this problem with the credit crisis, they have trapped themselves in a situation where they could not lend the money to GM even if they wanted to.
Ford was lucky and refinanced their lines of credit prior to the financial crisis. GM and Chrysler had bad timing for their refinancing.
The banks have also refused financing to many consumers who would have lined up to purchase/lease new cars, but now they cannot. Causing pain to all automakers selling cars in the US. Plus you have the recession now.
This all started with Congress; Freddie and Fannie and went downhill fast. Those entities relaxed the credit standards to a point that if your breath showed up on a mirror, you qualified for a home loan. Banks enter this puzzle through CRA (Community Reinvestment Act) )through threats by Congress) - money needed to be loans to poor people in a big way. Therefore: Housing/no qualifying/poor people = disaster.
Car loans - I was recently working at a bank that made car loans - big time. The only people that were turning down were in the under 650 FICO score range. Yes, credit standards were increased, but isn't that the right thing to do? The public should not have to step up to buy houses and cars for everyone, correct?
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I'm sure Congress helped start this mess, but the banks compounded the problem with interesting new mortgages, like mortgages where you only had to pay interest (no principal). The banks were selling such things with the thought that the housing boom would keep going indefinitely. Why worry about increasing equity with principal payments when your equity will keep going up as your house continues to appreciate. The fine print on something like that certainly gives the bank the option to start charging you principal if they think you are going upside down. Just imagine if you combined that with a teaser rate arm and no money down. When you get hit with the new rediculous rate after the teaser and the market goes down, the bank can realize you equity is going negative and start piling on principal payments too.
I'm sure not everyone who took on some of the weird new mortgages was an complete idiot. They probably believed that they could refinance into a fixed rate easily down the road if necessary. Hey I know people who refinanced multiple times during the housing boom as rates kept falling. Well we see that became impossible for many people to refinance when the bubble burst.
Interestingly today on yahoo, there is a story about the government giving the OK for 10 banks to repay $68 billion in bailout money
http://news.yahoo.com/s/ap/20090609/...ers_and_losers
I like this part: "The banks have been eager to get out of the program to escape government restrictions such as caps on executive compensation."
The banks want to get the government out of their business. At least the government did not force the banks into bankruptcy, take over a majority share of ownership and give a big chunk of ownership over to the bank tellers and janitors.