Since the TARP has a very big checkbook and a very broad mandate (it can buy any kind of dud loan it chooses to, plus bona fide assets), it has become a magnet for industries that have belatedly recognized that it could provide a handout. The latest is the poster child for rust-belt hardship, the auto industry, which is looking for a place to dump less than stellar car loans.

As reader Steve, who sent us this item, wrote:

The pigs are racing to the trough — this time, there’s not even a pretense that the loans are good or that market liquidity is hurting pricing.

From Reuters, “Finance companies want US to buy bad auto loans“:

Finance companies are preparing to seek authority from the U.S. Treasury Department to sell bad auto loans to the government as part of Washington’s sweeping plan to restimulate credit markets and boost the flagging economy. “The onus is now on us to make the case for our companies to be able to sell non-mortgage related assets to the government,” Bill Himpler, executive vice president of the American Financial Services Association, said late on Tuesday. The group represents a range of finance companies, including major auto affiliates like Ford Motor Credit Co, the financial services arm of Ford Motor Co, and GMAC LLC, controlled by Chrysler owner Cerberus Capital Management… The $700 billion rescue plan approved by Congress last month and now in the process of being implemented by the Bush administration enables the Treasury to buy up bad auto loans, if it deems that doing so is critical to the health of the U.S. economy. “We’re in the process of putting together our case … that auto paper is key to financial market stability,” Himpler said.

Yves here. If you believe that, I have a bridge I’d like to sell you….

He said the association would try to “cast as wide a net as possible” to ensure that companies holding loans that consumers failed to pay back would be eligible to improve their books and extend credit to new borrowers. Auto loans traditionally perform well but defaults are starting to pick up because of overall credit market turmoil, the financial services group said. GMAC has begun giving car loans only to buyers with the best credit scores as the global financial crisis strains its access to capital. Another priority of the association is to persuade the U.S. Federal Reserve to expand eligibility for short-term loans, called commercial paper, to auto financing companies.

A separate article, in Bloomberg (again via Steve), discusses how General Motors may reduce overseas production due to “limited access to funding.” One has to wonder whether the emphasis on funding is to support the message to the officialdom that Big Auto needs a helping hand, or whether one could just as easily attribute the cutbacks to a faltering economy and worries about high fuel prices.

From Bloomberg: