Question

We discussed several types of Finance Companies, choose one type and describe its business operations.

Major Types of Finance Companies

Sales finance institutions:
Ford Motor Credit and Sears Roebuck Acceptance Corp.

Personal credit institutions:
HSBC Finance and AIG American General

Business credit institutions:
CIT Group and U.S. Bancorp Equipment Finance
Equipment leasing and factoring

Answer 1

Finance Companies

?Activities similar to banks, but no depository function

?May specialize in installment loans (e.g. automobile loans) or may be diversified, providing consumer loans and financing to corporations, especially through factoring

?Commercial paper is key source of funds

Captive Finance Companies: e.g., Ford Motor Credit Corp.

?Highly concentrated–Largest 20 firms: 65 percent of assets

Use the Course Hero app!

Install Here
[Mobile Graphic]Home
St. John's
FINANCE
FINANCE 651
Chap003

Chap003 - CHAPTER3 Financial Services Finance Companies...

SCHOOLSt. John's
COURSE TITLEFINANCE 651
TYPE
Notes
UPLOADED BYGrandIceSeal9070
PAGES26

[Info icon] This preview shows pages 1–10. Sign up toview the full content.

View Full Document [Right Arrow Icon]
CHAPTER 3Financial Services: Finance Companies
[Image of page 1]

[Info icon] This preview has intentionally blurred sections.Sign up to view the full version.

View Full Document [Right Arrow Icon]
Overview ?This chapter discusses finance companies–Activities of finance companies–Competitive environment–Size, structure, and composition–Regulation –Global issuesCh 3-2
[Image of page 2]
Historical Perspective?Finance companies originated during the Great Depression–Installment credit–General Electric Capital Corporation–Competition from banks increased during 1950s?Expansion of product lines–GMACCh 3-3
[Image of page 3]

[Info icon] This preview has intentionally blurred sections.Sign up to view the full version.

View Full Document [Right Arrow Icon]
GMAC?Controversial approval by the Fed of GMAC as a bank holding company–Allowed access to $6 billion in government bailout money–Fed required GM to reduce its holdings in GMAC to less than10 percent, from 49 percentCh 3-4
[Image of page 4]
Finance Companies?Activities similar to banks, but no depository function?May specialize in installment loans (e.g. automobile loans) or may be diversified, providing consumer loans and financing to corporations, especially through factoring?Commercial paper is key source of fundsCh 3-5
[Image of page 5]

[Info icon] This preview has intentionally blurred sections.Sign up to view the full version.

View Full Document [Right Arrow Icon]
Finance Companies (continued)?Captive Finance Companies: e.g., Ford Motor Credit Corp. ?Highly concentrated–Largest 20 firms: 65 percent of assetsCh 3-6

Major Types of Finance Companies

?Sales finance institutions:–Ford Motor Credit and Sears Roebuck Acceptance Corp.

?Personal credit institutions:–HSBC Finance and AIG American General

?Business credit institutions:–CIT Group and U.S. Bancorp Equipment Finance–Equipment leasing and factoring.