Posted by
MSagacious on Sunday, February 08, 2009 6:17:44 PM
This past summer, officials from Fifth Third Bank (5/3) running low on capital, traveled around to all the car, boat, and recreational vehicle dealers in this country and told them that, as 5/3 was needing capital, 5/3 would be calling in all the inventory loans (these loans are called “floorplan”) of these dealers. They said they were awfully sorry about having to do this, but could see no other way out as “we just need the capital and don’t know of any other way to get it other than to go out of the floorplan business”.
However, the government flew in to 5/3’s rescue and provided them with a “bailout” through the TARP funds to the tune of $3.5 Billion. Well, “certainly”, thought the dealers, “5/3 will use these funds to keep us from going out of business and killing an entire industry in this county!” And the dealers all rejoiced.
However, though the government “strongly encouraged” the bank to utilize these TARP funds to “jumpstart their lending to revive the weak economy” – leading the dealers to believe that, well, utilizing common sense, 5/3 would continue their inventory loans to the dealers intact as this was certainly allowing an entire industry to survive versus die – the banks apparently misunderstood what the purpose of these funds was.
5/3 NOT having the ability of common sense that the normal American maintains, decided instead that the direction from the government to “jumpstart their lending” REALLY meant that 5/3 should go down to Florida to buy a failed bank instead. After all, that makes much more sense then doing with the Tarp funds what the TARP funds were meant for… right? And 5/3 rejoiced.
So, these dealers, most of who were in a stable, good-standing position with 5/3 before 5/3 called in their loans, now all had to go find financing somewhere else… They all RAN to GE Commercial Financing. Keep in mind, 5/3 actively solicited the loan business from most of these dealers whom they now threw away. GE was inundated. Over the past few months - the result? GE had to put a hold on all current customers from bringing over their inventory from 5/3, stopping the signing of new dealers, and cutting out existing customers in order to finance those with whom they had commitments.
Dealers are going out of business and turning their inventory over to 5/3, the market is being flooded with inventory that will go to auction, resulting in an already sick market being inundated with new inventory being sold for pennies on the dollar at auction – meaning those dealerships who are able to hold on are now competing with the cheaper auctioned items. Those who try to stay with 5/3 long enough to sell out of their inventory have been FORCED to sign new contracts at sharply increased interest rates, and sign that they won't accuse 5/3 of usury. The dealers no longer rejoice. (WAY TO UTILIZE THOSE TARP FUNDS TO REVITALIZE THE ECONOMY, 5/3!!!!)
Oh, by the way, Senators and Representatives don’t really seem to care. Dealers have offered to testify should the government ever decide to do anything about this misappropriation of funds by 5/3… still waiting… not receiving any calls back from our caring and concerned governmental representatives. Surprise. Would a little bit of support by those supposedly representing US be too much to ask?
The Government and the American Banking Industry at its best. Anybody out there have any GOOD news to share… it would be a pleasant interlude.