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Wednesday, March 04, 2009

Thaddeus McCotter And Gary Peters Write to Ben Bernanke and Timothy Geithner

SEARCH BLOG: AUTOMOBILES

Michigan Representatives Gary C. Peters and Thaddeus McCotter have written the following letters to Ben Bernanke and Timothy Geithner regarding the failure of TALF funding to enable automobile dealers to buy vehicles from manufacturers. If dealers can't get credit to buy vehicles, manufacturers can't sell the vehicles.

The government lends billions to keep GM and Chrysler operating and then their customers are unable to seal the deal.

Just a little detail someone forgot to address.

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FOR IMMEDIATE RELEASE
March 4, 2009

CONTACT: Jameson Cunningham
Office: 202-225-8171
Cell: 202-288-2147

PETERS CONTACT: Cullen Schwarz

Office: 202-225-5802

Cell: 202-641-3781

PETERS AND MCCOTTER URGE ACTION TO PROVIDE GREATER LIQUIDITY IN AUTO MARKETS

Chairman Frank and other House Financial Services Members Join in Calling on Fed and Treasury to Provide Access to Credit for Auto Dealers

Washington, D.C. – Congressmen Gary Peters and Thaddeus McCotter today called on the Federal Reserve and U.S. Treasury to act further to provide enhanced liquidity to promote domestic auto sales. In a letter to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner, Peters and McCotter said that while the effort to promote liquidity in consumer markets through the Term Asset-Backed Securities Loan Facility (TALF) was welcome, providing greater access to domestic auto dealers is also needed. The letter, authored by Congressman Peters and McCotter, was also signed by House Financial Services Committee Chairman Barney Frank and other Committee Members.

“If auto dealers can’t get financing, they can’t sell cars and our auto industry cannot recover,” said Congressman Peters. “The international credit crisis has crippled all sectors of the auto industry around the world. To protect millions of American jobs, we need a comprehensive approach to help the industry weather the global credit crisis. That means not only providing support to the Big Three and their parts suppliers and allowing consumers access to car loans, but also providing credit for dealers to keep cars moving on and off showroom floors. Efforts to protect jobs by supporting parts of the domestic auto industry could prove unsuccessful if we do not address the challenges facing all sectors of the industry.”

“As our American auto industry’s working families continue to endure a painful and perilous restructuring process, we look forward to working with the Federal Reserve and Treasury Department to help these working families and our auto industry survive and, one day, thrive,” said Rep. McCotter. “If the American auto industry receives an enhanced bridge loan but cannot sell their cars, our communities will greatly suffer. I appreciate that Federal Reserve Chairman Bernanke is willing to revisit the issue and make sure our working families keep their jobs, their homes, and their dreams for their children. I hope both the Federal Reserve and Treasury Department speedily find a way to ensure adequate financing for auto dealers is available. We must forestall this credit crisis by keeping men and women working in the auto industry employed; thus, removing financing barriers for auto dealers is essential.”

Yesterday, the Treasury Department and Federal Reserve announced the implementation of the TALF, through which up to $200 billion would be loaned to eligible owners of AAA-rated securities backed by auto, credit card and student loans to allow lenders to make more of these loans. However, rating agencies appear reluctant to rate loans to auto dealers as AAA, shutting dealers out of the program.

Full text and signatories of the Peters/McCotter letters:



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“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)