No help or wrong help for Detroit 3974In general, this hasn't been true for a long time. If people consistently pay for their cars, lenders are willing to loan them far more than they (the lenders) could...
Stern if My
Ah, but you see there's something different between you and Chrysler at that time.
The bank isn't loaning you money on the value of your CURRENT buttets. They are loaning you money based on the value of your FUTURE buttets. As long as you alive and healthy, and of working age and not just about ready to retire, the bank is viewing your warm body as being able to produce in the future, and that production is worth something. You don't need the banks's money to go dig a ditch, and that ditch digging is worth something to someone, which makes it worth something to the bank.
With the Chrysler loans, the only future buttets were the ability to sell cars. The banks (and most people) didn't believe Chrysler could do this at that time, and theres no guarentee that if you give a company a pile of money that they are instantly going to be able to go out and sell a whole bunch of product. The bank wasn't so much worried about Chryslers credit rating, after all it wasn't like if the company got money in the future that they would be able to run away from the banks. Nor were they concerned much with Chrysler's current buttets - because there's no guarentee those buttets would be available in the future when the time came to pay back the money. That is why they needed the US Governments guarentee.
No they wouldn't. Business credit is a totally different animal than personal credit. When a bank contemplates a loan to a business they don't concern themselves that much with the businesses credit history, in fact they don't care even if the business is deeply in debt. All they care about is if the future value of the business is going to be more than the money that is owed to the bank. If it is, and if the bank wants it's money, the business isn't going to be able to get out of paying the money back, simply because it is impossible to conduct business without the aid of a bank - the bank always has a big bat they can hold over the business.
Individuals, by contrast, can get a big fat loan and then suddenly decide they are going to quit their job and go get a job that pays under the table, and they are going to do cash only, and so on. It's a lot harder for a bank to get it's claws into an individual if that individual is determined to keep money away from the bank.
Ted
