Raj Date

Over the past weeks, the politically powerful auto dealer lobby has besieged members of the Senate, requesting a special exemption from a new consumer protection regulatory framework.  Although it is not especially clear why it is relevant to the debate, the dealers have insisted, through the use of a widely distributed chart, that auto credit performance has been rock-solid through the crisis.  They have also argued that they are “Main Street” stalwarts unconnected to “Wall Street” miscreants.

Data integrity matters; but the integrity of communication about data matters just as much.

This two-page briefing document illustrates the dangers of the deceptive use of data.  First, it replicates auto dealers’ presentation of data to Senators; second, it uses precisely the same data to create a similarly deceptive message, but to the opposite purpose; and, finally, it illustrates how an unbiased analyst might present the same data.

Moreover, the document illustrates that Wall Street firms (through the ABS and unsecured markets) in fact fund more than 70% of dealer-originated loans and leases.  Together, the funding partnership of Wall Street and auto dealers has been quite successful, accounting for more than half the market.

As it turns out, none of this especially relevant to whether or not auto dealers -- the dominant participants in the $850 billion auto finance market -- should be subject to the same set of rules as smaller participants like community banks and credit unions.  (For an unequivocal point of view on that question, please read Cambridge Winter Center’s research note entitled “Auto Race to the Bottom”).  But the presentation does, hopefully, illustrate a point that, over the long term, might be just as important:  Beware of lobbyists bearing charts.

On a related note, Cambridge Winter was forced to send a letter to Under Secretary of Defense Clifford Stanley, clarifying what otherwise could have been a misleading citation by Senator Brownback, the sponsor of the proposed auto dealer exemption in the Senate.