Tales from Bailout Nation

So what’s it called when lending institutions make loans to people without the necessary collateral or cash flow to pay off the loan? Of course, we all know that this is called a “sub-prime loan”.

So what has GMAC, the “financing affiliate” of General Motors (which received money from the federal government so it could qualify as a bank holding company so it could in turn…. receive more money from the federal government via the TARP program to the tune of $6 billion) done with all that just-referenced jack the feds have thrown at them:

The New York Times reports that GMAC has begun making loans to borrowers with credit scores as low as 621, a significant relaxation of the 700 minimum score the company adopted just three months ago as it struggled to survive. America's median credit score is 723. GMAC's lowered standards will increase the number of people eligible for its loans by an estimated 50 million.

You just can’t make this sort of stuff up in the Bizarro World of Bailout Nation. You read that correctly. The very lending practices that have buried us under the mess in which we currently reside is being repeated… with a vengeance… but this time as underwritten and tacitly encouraged by the federal government.

And this mere single star among a constellation jaw-dropping you-won’t-believe-this bailout stories, illustrates perfectly the increase in malfeasance, incompetence and all-around bad acting when the government becomes more involved in the private sector rather than less involved.

In a more perfect world, an institution that is this reckless with its own money would be allowed to fail. In Bailout Nation, however, not only is reckless behavior forgiven, it is rewarded and then doubled-down with your tax dollars as a certainty that the sinking ship of GMAC won’t be allowed go under.

A vicious cycle with no end in sight.

H/T: George Will