WASHINGTON, Oct 14 (Reuters) - 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 [CBS.UL].
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. economy.
“We’re in the process of putting together our case ... that auto paper is key to financial market stability,” Himpler said.
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)