with nine already agreeing to participate in the program, as it seeks to reverse a collapse in trust among institutions that is blocking lending. Treasury Secretary Henry Paulson urged financial institutions to start offering cash again to prevent further company failures.
While the cost of three-month dollar loans has dropped in the wake of the measures, it’s still 305 basis points more than the Fed’s target rate. The difference was a record 332 basis points on Oct. 10. It was 82 basis points on Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy, and 11 basis points on July 31, 2007, just before the start of the credit squeeze.
Retail Sales Slide Signals Deepening Recession -The eroding U.S. economy drove retail sales into their longest slump in at least 16 years, even before this month’s market collapse signaled a deepening recession.
Consumer purchases fell 1.2 percent in September, extending the decline to three straight months, the first time that’s happened since comparable records began in 1992, Commerce Department figures showed today. In another sign of weakening demand, prices paid to U.S. producers fell last month on lower fuel costs.
Sales are slowing just as merchants prepare for the holiday selling season, on which they depend for the largest share of their revenue. San Francisco Federal Reserve President Janet Yellen said yesterday the U.S. may already be in a recession, and stocks dropped amid concern that the government’s plans to inject capital into banks won’t halt the economy’s decline.
GMAC LLC, the financing arm of General Motors Corp., has “limited if any access to funding” for its mortgage and auto-lending units, Chief Executive Officer Al de Molina said in an e-mail to employees.
GMAC may trim auto lending in some international markets, de Molina said in the e-mail yesterday. The Detroit-based company is considering “strategic initiatives” for insurance businesses, he said.
“We’ve pursued a `self-help’ approach that on some days is akin to hand-to-hand combat,” de Molina said in the e-mail. He said the lender’s Residential Capital LLC unit is “perhaps the most challenged operation.” GMAC doesn’t comment on employee communications, spokeswoman Gina Proia said.
GMAC is restricting auto lending to buyers with credit scores of at least 700, who represent about 58 percent of U.S. consumers. The move this week added to the global credit squeeze that threatens to choke economic growth as companies and consumers find it harder and more expensive to borrow. Plummeting auto sales and record foreclosures have resulted in $5.4 billion in losses at GMAC over the past year and led credit agencies to reduce the debt to junk.
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