James Pethokoukis

Politics and policy from inside Washington

Government Motors and the Great Re-inflation

July 22, 2010

OK, let me get this straight:  President Obama says he wants to build a New Foundation for the U.S. economy based on savings and investment, not debt.  So the government borrows billions to prop up General Motors.  And now General Motors uses that money to go out and buy AmeriCredit for $3.5 billion so it can more easily lend money to subprime borrowers.

This strikes me as being along the lines of using tax credits and low interest rates to re-inflate the housing market. Same old, same old. As the WSJ put it last week:

Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging. From credit cards to auto loans to mortgages, the hunger for new business as the crisis ebbs is causing some financial institutions to weaken lending standards and woo borrowers who mightn’t be able to pay.

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