Ford, Toyota, & BMW SECRETLY got bailout money!

[CRUZE]

http://jalopnik.com/5704575/ford-bmw...vernment-money

In the depths of the financial collapse, the U.S. Federal Reserve pumped $3.3 trillion into keeping credit moving through the economy. It eventually lent $57.9 billion to the auto industry — including $26.8 billion to Ford, Toyota and BMW.

The Fed on Wednesday was forced to reveal the identity of the companies it aided during the crisis, after contending to Congress that keeping their identities and the details of such lending secret was essential. Much of Wall Street, and corporate giants such as General Electric, Harley Davidson and McDonald's, took advantage of the Fed's help. We've done the math on how the Fed propped up the auto industry.

While Chrysler and General Motors had to go to Congress to beg for cash in 2008, every other automaker's finance arm was having trouble as well. Typically, once they lend money to a buyer, they sell the loan, get the cash upfront, then pump the proceeds back into the business. They also take out short-term loans called commercial paper that keeps the day-to-day business afloat. The crash cut the circuit, raising the chances the automakers couldn't make loans to buyers and keep selling new vehicles.

That's where the Fed stepped in. In normal circumstances, the Fed only lends money to banks, leaving the decisions about who should get credit to them. But when the financial markets started to collapse in late 2008, the Fed set up several programs to lend money directly to corporations, a highly unusual step.

According to the data, from October 2008 through June 2009 the fed bought $45.1 billion in commercial paper from the credit arms of four automakers - Ford, BMW, Chrysler and Toyota - along with GMAC (the former General Motors credit arm). Of those, Ford sold the most, with $15.9 billion.

The Fed also lent $13 billion to investors who bought bonds backed by loans to new car buyers from automakers and banks. The Fed made clear that while investors got the loans, the move was meant to keep the lenders in business; the credit arms of Ford, Chrysler, Nissan, Volkswagen, Honda and Hyundai all benefited directly. According to the Fed, the commercial paper loans have been paid in full, while some $2 billion remains outstanding on loans for bond investors.

Ford spokeswoman Christin Baker said the two programs "addressed systemic failure in the credit markets, and that neither program was designed for a particular company, or even a particular industry." Ford Credit had said it was taking part in both programs.

BMW told Bloomberg that the Fed lending "supported our financial profile and offered us an additional funding source, especially at times when the money markets and capital markets did not function properly and efficiently."

The secrecy surrounding the details of the loans only masked how much aid corporate America and Wall Street needed. While General Motors and Chrysler took the brunt of the blowback for relying on government handouts, the reveal of the Fed numbers show that a far bigger slice of the U.S. auto industry needed help.

[ChevyMgr]

This does not surprise me. The Ford lovers who have been bad mouthing GM will be eating some crow now.

[70AARCUDA]

...nobody LIED, they all just "...MIS-SPOKE the TRUTH..." (wink,wink)

[montana]

...nobody LIED, they all just "...MIS-SPOKE the TRUTH..." (wink,wink)

That's how they do it. No lies, undisclosed info, leave things out. Its outrageous at the amount of money spent on the auto industry but hopefully some good will come out of it.

[CRUZE]

This does not surprise me. The Ford lovers who have been bad mouthing GM will be eating some crow now.

This is exactly why I laughed when I read this story.

-CRUZE

[CRUZE]

...nobody LIED, they all just "...MIS-SPOKE the TRUTH..." (wink,wink)

-CRUZE

[CRUZE]

That's how they do it. No lies, undisclosed info, leave things out. Its outrageous at the amount of money spent on the auto industry but hopefully some good will come out of it.

This is why I give props to GM. They were truthful and paid it all back before they were suppose to.

-CRUZE

[Aeroscout977]

Did no one read that article? It went to the credit arm of the corporations which then went to people looking to finance their cars through the companies themselves. Then as the people paid off their cars those companies bought back the commercial paper loans from the FED. It was basically a government loan to the consumers just to keep the system as a whole going.

[USA-Adam]

How many people on this forum don't understand the fundamental differences between a treasury loan and a federal loan? Quite a few, by the looks of it.

This was NOT government money. The Federal Reserve isn't even owned by the federal government - so how is it government money? The only entity lying here is Jalopnik - not Ford, not McDonalds, not BMW, not Toyota.

It was taxpayer money, yes, but once again - I REPEAT - it was NOT government money! The Federal Reserve has a mixture of public and private aspects. But it isn't government money.

Moreover, the Federal Reserve can actually "create" money (ever heard of inflation?) and it controls the flow of currency through the elastic money supply our country has. It can be expanded or contracted based upon the economic conditions at hand.

This was a reaction to unprecedented economic decisions, not the government stepping in to save a company - like they DID DO with GM and Chrysler. Bankruptcy is so much different than what the Fed did - it's not even funny. I would expect nothing less from Jalopnik.

Again - this was an economic decision to keep credit markets healthy, and it was not aimed directly at Ford, BMW, Toyota, GM or anybody else. I guess few here bothered paying attention to what happened to short term commercial paper (i.e. unsecured low interest loans) during that time period. They basically stalled out completely during the 2008 epic failures of the credit markets. I mean, we're talking no activity. CPs were virtually worthless tools at that point (unsecured, remember?) - so no one was willing to hand them out. The Fed HAD to step in and do something to get things moving again. The Fed has literally billions and trillions in assets.

Also, did you all even bother realizing that these were loans to CREDIT arms of companies? Did Toyota come close to needing a bail out? What about BMW? No. They didn't. This has nothing to do with financial solvency. This was about getting credit markets moving again. That Ford was involved is just something y'all pray on because of the situation GM was in. GM is a good company that is making nice cars, but you have to admit - they were mismanaged for decades and a bailout was what it took to keep them afloat. Was Ford lucky? Absolutely. Lucky to have a forward-facing CEO who borrowed before credit markets folded. Lucky to get the liquidity necessary to weather the storm. But they made it through. This is a petty attempt at trying to make Ford look bad.

If you do not understand how the Fed works - don't be ashamed - LEARN!

Read up on wikipedia. It's been proven more reliable than encyclopedias, actually ... and it isn't hard to understand.

Federal Reserve System - Wikipedia, the free encyclopedia