For several years, I worked as a loan processor, verifying information on applicants for automobile loans through a company owned by Citigroup.
Over and over, I processed loans that I found troubling. My job required me to verify information on loan applicants. I confirmed their employment, insurance coverage, physical addresses and landline phone numbers. Also, whenever I was required to do so (and I wasn't required to do so on every loan), I calculated applicants' incomes.
I saw many loans that went across my desk that I felt were questionable. I saw applicants buying vehicles that they clearly could not afford. I saw applicants buying gas-guzzling vehicles with no apparent concern for escalating oil prices.
Many of these loans did not meet the minimum standards that had been established by the company. Whenever that happened, it was my job to submit the loan to someone higher up — more often than not, the person in authority found a way to get around the standards and allow these loans to proceed.
I admit that I never have been an expert on the ins and outs of personal loan financing. But even I could see that many of the loans that were being approved could never be repaid. I vividly recall processing such a loan once, in which the applicant was earning about $20,000 a year and was making a monthly mortgage payment in the vicinity of $900 a month. This applicant was buying a brand-new SUV, nearly fully loaded, and the monthly payment on the vehicle was going to be in the neighborhood of $550.I turned to one of my co-workers, explained the details of this customer's loan and asked, "What's he going to eat for the next six years? Crackers?"
In spite of what I thought were numerous red flags on this deal, one of the higher-ups found a loophole and the deal went through.
When I began working for the company, it wasn't owned by Citigroup, and the emphasis of the business, I felt, was noble. The stated objective — over and over — was to give a "second chance" to people who had had credit problems in the past, and I was glad to be a part of it because I know many people who have experienced credit problems for a variety of reasons. I was pleased to be able to help people who had weathered serious health problems or the end of a difficult marriage and, as a consequence, found it difficult to get auto loans.
But after Citigroup purchased the company, the emphasis seemed to shift dramatically. The emphasis was no longer on being a place where the customer who had encountered problems with credit could get a fresh start. It was on the almighty dollar and meeting sales quotas — and, if a customer got a loan he/she couldn't repay, that was his/her problem for failing to plan accordingly.
Over the years, enough of those problem loans piled up, and now it isn't just the problem of the individual customers. It's everybody's problem. My understanding is that the company for which I used to work has been downsized considerably — and, at this point, it may have been shut down completely. That wouldn't surprise me. The parent company, Citigroup, certainly has had its share of financial problems lately.
Having worked in auto loans for several years, though, I read with interest an article on CNNMoney.com about General Motors and Chrysler (which is the company with whom my former employer had a partnership) saying they would need nearly $22 billion in additional federal loans because the demand for their cars and trucks has declined so much.
These loans, obviously, will be expensive for America's taxpayers — but the companies contend that it will be even more costly if they are allowed to go bankrupt. That, it seems, is the ongoing debate. It was the topic of the hour just a couple of months ago when the major American automakers came to Congress seeking bailout money — help us, they said, or we will have to go out of business.
Now they're saying it again. American taxpayers do not want to see any company go belly up — but can they be blamed for being skeptical when companies keep coming back with their hands out?
CNNMoney.com reports that, in documents the companies submitted to the Treasury Department on Tuesday, GM and Chrysler said they plan to cut 50,000 jobs worldwide this year — and that even more money may be needed if sales don't improve.
If sales of American-made vehicles have plunged because more Americans have recognized the need for fuel efficiency, should the government be required to come up with ways to help automakers' sales improve?
I presume that even more jobs will be in jeopardy if sales don't improve — whether or not the government ponies up the additional billions. But how long should taxpayers be asked to subsidize a failing industry, merely to prevent the loss of more jobs?
To secure additional government funding, it seems to me that GM and Chrysler (as well as any other American automaker that feels compelled to return to the federal trough) need to make more than merely a verbal commitment to making significant changes in their business practices — and that would include the administration of auto loans.
American automakers need to devote more of their resources to research and development that will lead to the production of more fuel efficient vehicles. It won't mean immediate profits, but it's an investment in the future. The era of making money off gas-guzzling vehicles like SUVs and huge trucks has to end — if it hasn't already.
That's something the federal government should encourage through additional funding for the automakers — but those funds need to be accompanied by a commitment from the government to keep more than a casual eye on how the automakers spend taxpayers' money.
It all reminds me of a message that President Carter repeatedly tried to get across to Americans in the late 1970s. He was ridiculed by his opponents for making his so-called "malaise" speech in 1979 (although he never used that word in the address), but his speech about a crisis in confidence came after a couple of years of trying to persuade the American public to take steps to avoid a catastrophe later.
Americans didn't listen to Carter then — mainly because he was telling them things they didn't want to hear. They preferred to listen to Ronald Reagan the next year, when Reagan told them that government was the problem, not the solution, and that there were easy answers to complex questions.
But now, in the midst of a severe recession with another president preaching the need to develop different energy sources to what may be more receptive ears, it might be a good idea to revisit President Carter's early appeals to the nation.
A clip from one of his 1977 speeches to America is above. Watch it and ask yourself how much better off we might be today if we had listened to him nearly 32 years ago.
