GMAC Made Risky Subprime Mortgage Loans
STEVE INSKEEP, host:
And now let's learn more about GMAC, the huge finance company we just mentioned. It's the most recent beneficiary of a government bailout, and it's best known for its links to the automaker General Motors. GMAC supplies funding for auto dealers to buy inventory and credit for consumers buying cars. As NPR's Wendy Kaufman reports, it's also a major player in the home mortgage market.
WENDY KAUFMAN: GMAC's residential capital wrote more than $46 billion in mortgages in the first nine months of the year, that puts it among the top ten U.S. mortgage lenders. But in recent years, the company made lots of subprime and other risky loans. Its losses of several billion dollars played a big part in the near-collapse of GMAC. The parent company, owned by General Motors and Cerberus Capital, was granted status as a bank just last week.
Some analysts believe that shoring up GMAC with up to $6 billion will help boost auto sales and provide some support to the weak U.S. economy. But Thomas Atteberry, a partner at First Pacific Advisers, an asset management firm, believes it's inappropriate to use bank bailout funds for a company that made so many risky real estate loans.
Mr. THOMAS ATTEBERRY (Partner, First Pacific Advisers): Because the financial situation in this country is worse than people expected, more pervasive than people expected, we now find the Treasury Department or the Federal Reserve Bank making direct investments into, what is in essence, is a mortgage servicing and a mortgage underwriting organization.
KAUFMAN: GMAC's real estate arm said yesterday it would continue to make residential loans. With respect to auto loans, GMAC said it would now make them available to individuals with less than stellar credit. Wendy Kaufman, NPR News. Transcript provided by NPR, Copyright NPR.