Government expands its subprime business, prepares for IPO

It’s deja vu all over again in Detroit. From the Financial Times:

General Motors has agreed to buy AmeriCredit, a Texas-based vehicle finance company, for $3.5bn in cash as a way of boosting sales to non-prime car and truck buyers.

So a company that the government owns 72 percent of is getting back into the subprime lending business. Good. Glad we’ve learned the lessons about risky loans.

Most reports focus on the strategic value of the acquisition to rebuild a captive finance arm and restart leasing. Let’s look at GM’s success in paying back money so far.

Not as bad as the subprime siblings Fannie and Freddie, but not reassuring. And the government still owns 56 percent of the Ally Bank (aka GMAC) while GM itself owns another 10 percent. Definitely worth some questions.