Auto Bankers

When is a bank not a bank? One answer: When it is a car company. The Big Three automakers have long made car loans, but now they are lending money to other businesses, giving out mortgages and helping consumers finance everything from washing machines to vacations. The three auto giants all have financial subsidiaries that have become huge companies in their own right. With $75.4 billion in assets, General Motors Acceptance Corp. ranks among the largest U.S. financial institutions. In the past two years the assets of Ford Motor Credit Co. have grown 64%, to $31.3 billion, and Chrysler Financial Corp.'s assets have more than tripled, to $15.9 billion. Proclaimed Chrysler Chairman Lee Iacocca at last week's annual shareholders meeting: "We are no longer just a car company. We are a major financial institution."

The swift growth has come largely through acquisitions. Last year, for example, GM bought Norwest Mortgage of Minneapolis and Philadelphia's Colonial Mortgage group for $335 million. That made GMAC the nation's second-largest mortgage lender, with $22 billion in commercial and home loans on its books. Also in 1985, Chrysler acquired E.F. Hutton's commercial lending subsidiary for $125 million, and Ford paid $493 million for San Francisco-based First Nationwide Financial Corp., the holding company for the eighth-largest savings and loan in the U.S.

The auto companies believe that these operations are natural extensions of their traditional car-loan business. GMAC, which has 8 million customers with car and truck loans, last week announced that it will mail letters to many of its Michigan borrowers, suggesting that they also apply for a home mortgage.

The finance subsidiaries have contributed more than their share to the balance sheets of the Big Three. GMAC, which reaped $1 billion, or some 25%, of GM's $4 billion net earnings in 1985, is expected to account for fully one- third of this year's profits. At Ford, the credit arm pitched in 17.5% of earnings in 1985, and is projected to reach 26% this year. Chrysler Financial is expected to contribute 17% in 1986, up from 9.4% in 1985.

The automakers' financial forays have alarmed traditional bankers, who complain that they are unfairly hobbled by federal laws and regulations. For example, the law generally restricts interstate branching by banks. But nonbank competitors, such as GM and Ford, can offer loans anywhere they please. Says Donald Senterfitt, president of the American Bankers Association: "We are living in a financial-services world that is half slave and half free, and the banks are the slaves." His solution: speed up banking deregulation.