WASHINGTON Oct 14 Finance companies are
preparing to seek authority from the U.S. Treasury Department
to sell bad auto loans to the government as part of
Washington's sweeping plan to restimulate credit markets and
boost the flagging economy.
"The onus is now on us to make the case for our companies
to be able to sell non-mortgage related assets to the
government," Bill Himpler, executive vice president of the
American Financial Services Association, said late on Tuesday.
The group represents a range of finance companies,
including major auto affiliates like Ford Motor Credit Co, the
financial services arm of Ford Motor Co (F.N), and GMAC LLC,
controlled by Chrysler owner Cerberus Capital Management
General Motors Corp (GM.N) has a 49 percent stake in GMAC.
The $700 billion rescue plan approved by Congress last
month and now in the process of being implemented by the Bush
administration enables the Treasury to buy up bad auto loans,
if it deems that doing so is critical to the health of the U.S.
"We're in the process of putting together our case ... that
auto paper is key to financial market stability," Himpler
He said the association would try to "cast as wide a net as
possible" to ensure that companies holding loans that consumers
failed to pay back would be eligible to improve their books and
extend credit to new borrowers.
Auto loans traditionally perform well but defaults are
starting to pick up because of overall credit market turmoil,
the financial services group said.
GMAC has begun giving car loans only to buyers with the
best credit scores as the global financial crisis strains its
access to capital.
Another priority of the association is to persuade the U.S.
Federal Reserve to expand eligibility for short-term loans,
called commercial paper, to auto financing companies.
(Reporting by John Crawley; editing by Carol Bishopric)