The New York Fed has released further details of one of the many world-saving acronyms: TALF. As we noted before, this program is going to get the US government into the business of lending money to car dealers to finance the cars on the showroom floor. Which doesn't sound like a great business to be in.
Not surprisingly, the "collateral haircuts", i.e. the amount that the government will knock off the supposed value of the cars in deciding how much to lend against them, is pretty high. Example: for a subprime retail car loan (i.e. an actual customer with not great credit), the government will impose a haircut of 9% when that loan comes to them for financing (there's a technicality here related to the life of the security which will contain the loan). For a dealer loan, the haircut is 12% -- the highest of any loan type that can come under this program.
One way of thinking about this is that things are so bad in the car industry, even the shaky customer has better credit than the dealers.