By on January 6, 2009

The New York Times’ Dealbook blog takes it to the GMAC bailout with TTAC-like zest today, methodically doling out blame to all sides of the deal. Many of their points have been covered in TTAC’s ongoing coverage of the deal, but the Dealbook post does a good job of summarizing everything there is to hate about the handout. For one thing, there’s the fact that (unlike other TARP packages) the Treasury failed to secure warrants backed by GMAC common equity. This means that we the American taxpayers have no upside to the deal beyond earning back our money with eight percent interest. Furthermore, the warrants that Treasury did receive are worth only five percent of our $5b investment in GMAC, far less than the 15 percent warrants required of other TARP borrowers. Oh yeah, and the $1b that GM received to invest in GMAC is secured only by GM’s stake in GAMC. Not only do these considerations increase taxpayer risk, they also destroy the “our bailout is better/more fair than theirs” relativism that the auto biz rode into Bailout City.

There’s also the fact that the bailout unfairly hurts Ford, currently the most successful American automaker. Sure, GM’s zero percent deals on Trailblazers and Saabs won’t light the sales world on fire, but their tax-subsidized financing terms do punish Ford’s (very relative) success. Oh yeah, and more than a few taxpayers should be a bit upset that $5b bought only zero-percent terms on unlovable SUVs and foreign-built Saabs. So much for the US jobs and eco-makeover arguments for bailout.

Dealbook also points out that “under the Bank Holding Company Act, to be a bank holding company, a company must be ‘well capitalized’ — this generally means that its Tier 1 risk-based capital ratio must exceed 6 percent — and be ‘well managed.’” A quick survey of the bailout and GMAC’s failed debt-for-equity swap prove that this criteria was not met in any real sense. Not that such legal niceties have ever really held much weight since the land of free enterprise became bailout nation.

Speaking of legal niceties, did you know that J. Ezra Merkin is still a member and chairman of the GMAC board? More importantly, did you know that Mr. Merkinheaded also up Ascot Partners, a feeder fund to Bernie Madoff’s ponzi fund? Dealbook says that “Mr. Merkin was also supposedly responsible for Yeshiva University’s investment with Mr. Madoff and subsequent loss of $14.5 million ($110 million if you include the lost profits, but apparently, some inexplicably don’t.” In short, the bailout is definitely helping those who need and deserve it most.

If this isn’t enough to convince you of the stupidity of this politically-motivated bailout, the Dealbook post has considerably more information as well. Or, you can just be glad that the GMAC Bowl didn’t have to switch sponsors, thanks to the generosity of your elected officials. Now, if only Tulsa and Ball State could look past the Bowl cash grab and boycott the game. At this point, somebody’s gotta show some backbone.

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