In brief: Pay czar to identify banks he says overpaid executives

WASHINGTON – The Treasury Department’s pay czar is preparing to criticize Wall Street banks that paid their executives lavishly after receiving taxpayer bailouts.

Kenneth Feinberg will disclose a list of banks today that made payouts he has determined were inappropriate. Wall Street titans including JPMorgan Chase & Co. used poor judgment in paying executives as the global financial system unraveled, Feinberg will say, according to two people familiar with the plans. The people spoke on condition of anonymity because they were not authorized to discuss the matter.

Feinberg has been reviewing pay at all 419 companies that took bailout money before pay curbs were enacted in February 2009. The bailouts started in October 2008 as the financial system teetered amid fears about the plummeting value of mortgage investments.

Feinberg can’t force the banks to return the money. Most of the banks on the list have already repaid the government.

Associated Press

GM buying subprime lender

DETROIT – General Motors is getting into the subprime lending business. And that means taxpayers are, too.

But these car loans aren’t as risky as you might think.

GM, majority owned by taxpayers, is buying a company that makes car loans to shoppers with poor credit. Unlike home loans, though, the risk in subprime auto lending is relatively low and may reward GM. The company hopes to boost sales by making loans and leases to buyers that it must now turn away for lack of financing.

GM will pay $3.5 billion in cash for AmeriCredit Inc., a Fort Worth-based company with 800,000 customers and a $9 billion portfolio of subprime auto loans. GM’s purchase will be made out of its $30 billion cash stockpile, one that is funded in part by the government.

AmeriCredit had already been helping GM with subprime loans, which now amount to 4 percent of the car company’s sales. GM Chief Financial Officer Chris Liddell expects that to grow by a percent or two, a significant number considering that GM is on pace to sell over 2 million cars and trucks in the U.S. this year.

About 40 percent of U.S. customers have below prime credit scores, Liddell said. “Clearly there’s an opportunity to bring more people into our showrooms and help them with finance.”

Associated Press

Refinancing appeal on the rise

NEW YORK – The lowest mortgage rates in decades are just too good for some people to pass up.

Brokers are reporting rising interest in home refinancings as rates on 30-year fixed loans have hit record lows in four of the past five weeks. This week the average rate fell to 4.56 percent, the lowest since mortgage company Freddie Mac began tracking rates in 1971.

Weekly applications to refinance home loans have nearly doubled in July from April, according to the Mortgage Bankers Association.

“If they can get a $100 difference in their monthly payment, they are going for it. I had one guy who was very excited to save $33 a month after refinancing into a 15-year loan,” said Pava Leyrer, president of Heritage National Mortgage in Michigan.

To be sure, the number of borrowers filling out applications each week is still about 40 percent lower than at the start of 2009. Rates were around 5 percent then.

Refinancing a home loan often requires the homeowner to pay thousands of dollars in closing costs. Many people either don’t have the money, or they can’t qualify for a loan. And rates have been low for such a long time that many people may have already refinanced, and it is not in their interest to do so again to save a little bit more on monthly payments.

Associated Press