Keep Bailing: GMAC Needs More of YOUR Money
By Larry Doyle on October 28, 2009 at 9:30 AM in Auto Industry, Bailouts, Economy, Sense on Cents (Larry Doyle blog)
Turning the corner? No more bailouts? You didn’t actually believe the wizards in Washington, did you? Why?
GMAC is back in line for another injection of YOUR money. Recall that GMAC was bailed out initially during the government takeover of GM. GMAC was then spun off in order for Uncle Sam to effectively provide taxpayer funded consumer auto loans and mortgages.
GMAC is not a public entity and thus not currently able to hoodwink investors and raise equity capital. What’s a cash strapped entity to do? Let’s play some more of that ‘bailout bonanza.’ The Wall Street Journal just reported on this developing story and writes, GMAC Asks for Fresh Lifeline:
In a stark reminder of how some battered financial firms remain dependent on government lifelines, GMAC Financial Services Inc. and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, people familiar with the matter said.
The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said.
The latest infusion would come in the form of preferred stock. The government’s 34% stake in the company could increase if existing shares eventually are converted into common equity.
The willingness by Treasury officials to deepen taxpayer exposure to GMAC reflects the troubled company’s importance to the revival of the auto industry. Founded in 1919, GMAC has $181 billion in assets and is a major financing provider on car purchases from General Motors Co. and Chrysler LLC. The new capital would help firm up GMAC’s balance sheet and solidify its auto-loan business.
Federal officials also are moving to shore up GMAC’s ability to fund its daily operations, with the Federal Deposit Insurance Corp. telling the company Tuesday the agency will guarantee an additional $2.9 billion in debt, according to people familiar with the discussions. The FDIC guarantee will make it easier for the company to sell debt to investors. The FDIC backed $4.5 billion in GMAC-issued debt earlier this year.
The FDIC approval came just four days before the expiration of the regulator’s program that guarantees debt issued by certain banks. It ended months of tense negotiations between GMAC and regulators. Without a deal, the company would have been forced to further reduce its lending volume. New-car loans by the company tumbled 55% to $5.6 billion in the second quarter from a year earlier.
![[Helping Hand]](http://s.wsj.net/public/resources/images/P1-AS238_GMAC_f_NS_20091027184903.gif)
Given these developments with GMAC, why are we allowing Barney Frank and friends to pander to the American public about how plans are being developed to wind down firms rather than bailing them out?
I would recommend we eat our loss on the money already injected in GMAC. Wind it down and let the free market work.
Rest assured, any new money injected in GMAC is nothing more than ‘good money after bad.’
LD
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OH, HELL NO!!!!
Well, now we know why Geithner was chuckling during that Congressional hearing, while Frank said that they [the mighty Congress] were instituting “death panels” for these failing entities.
Insider’s joke on the American public.
Is there no end to this? At some point, I think, most certainly. And when it arrives, it won’t be pretty.
Thanks for the update, Larry.
“Gallows humor”
Does anybody believe that the taxpayers will ever see any significant amount of the money used to bail out these financial “institutions” repaid?
It looks more and more like, as others have said, the ObamacRats want to transfer as much control of the “private sector” into government hands as possible.
This is all Union payback from Obama.
They need to let the companies fail(all of them) and reorganize like every other company in this country.
Then the Union will be thrown out and they can re-build a successful company.
Unions KILL.
I should know. I belong to two of ‘em, and they’ve destroyed the work in my city.
WaPo has the story that Federal Employees are set to receive a pay increase plus better retirement benefits. The pay increase is 3+% and will go to all federal employees and the military.
These pay increases (over and above salary schedule built in increases for longevity and job upgrades are supposed to be COLA increases). So why do we have Fed employees getting COLA increases and Social Security not?
I have no problem with the military getting a COLA increase. With what we are asking them to do, their COL is skyrocketing.
Too bad most Americans are going to be looking at job losses and pay cuts, not pay and benefit increases.
The pay increase is more than O asked for. Any chance 0 will get his pay czar to recommend a veto—-or are pay cuts only targeted for Wall St.?
And employees of the Federal government already get big salaries/benefits compared to their private sector counterparts: http://www.cato-at-liberty.org/2009/08/24/federal-pay-continues-rapid-ascent/ It’s all twisted.
Stop the bailouts. Stop the bleeding of money and out of control growth of government. Force them to a situation where they must produce something of value or let them fail.
I was a young fellow once long ago brand new family, a baby just born and my job went south I had this GMAC bought car and could not make the payments so GMAC seeing my difficulty came and bailed me out by reposssessing my car and destroying my credit for the next seven years.
GMAC can kiss my A$$ and go under ya buncha worthless bass turds.
Ya couldn’t give me a GMAC product. If ya try offer two so I can shat in one and wipe my a$$ with the other.
Yep, let’s keep going with the bailouts and printing the paper:
http://tinyurl.com/yks5z6m
Well, they may as well start flushing money, for all the good our hard-earned dollars are doing now. They should have been allowed to fail along with GM and Chrysler. Those companies were told for YEARS to stop making gas-guzzling dinosaurs. Did they listen–no! Should we have bailed those i d i o t s out–no!. Stupidity should not be rewarded. But then, That One was also (s)elected, so what else should I expect? When did this country move from rewarding hard work and enterprise to rewarding stupidity, laziness, and excessive greed?
Those cute new ALLY BANK commercials with the kids, pony and red truck saying that “even kids know when something is unfair” - or something like that and promising to treat you fairly and honestly?
That’s GMAC.
And if they really wanted to be fair and honest, the first thing they would do is acknowledge they are scamming you with a name change.
I had to add this headline to a financial thread today. Here’s why we’re in trouble:
And at the end of the article:
So that pretty much explains it - the more layoffs, the higher stocks go. Hire them back, and your stock goes down.
I had to add this headline to a financial thread today. Here’s why we’re in trouble:
Deere to recall 452 workers at Iowa plant
And at the end of the article:
Shares of Deere slid $1.50, or 3.2 percent, to close at $45.42 Wednesday.
So that pretty much explains it - the more layoffs, the higher stocks go. Hire them back, and your stock goes down.
P.S. - Sorry, forgot to tell you great post!