Is this more of trying to cure a hangover with a shot of whiskey? Fannie and Freddie (government proxies) didn't get fixed by the new financial regulations. GM (government proxie) now enters subprime lending.
"General Motors Co., the automaker 61 percent owned by the U.S., is buying subprime lender AmeriCredit Corp. for $3.5 billion. ...
The move will give GM more ability to lend to customers with damaged credit, which will help GM reach more borrowers.
“Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings,” Chief Executive Officer Ed Whitacre said in a statement."
From FHA Website:
"Why should you choose an FHA loan?
There are many good reasons to choose an FHA loan, especially if one or more of the following apply to you ... If you have less than perfect credit: You don't have to have perfect credit to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan."
Sure, we need more car sales. Sure, we need more house sales. BUT, do we need a new subprime lending crisis.
The government has tried to solve the subprime debt crisis (too much, too easy credit) by going into more debt. Now they appear to be trying to solve the economic growth problem by increasing subprime lending (perhaps, too much, too easy credit).
For the sake of the country (and our investment portfolios), let's hope they know what they are doing -- but we have some serious doubts about that.
Yesterday, AmeriCredit (ACF) had a market cap of $2.65 Billion. The takeover premium is $0.85 Billion (32%).
Disclosure: No positions in cited securities.