Fed Grants GMAC Bank Status– Provided GM and Cerberus Piss Off
Thanks to its enthusiastic participation in the sub-prime mortgage market and billions in low-interest, low-FICO score auto loans, GMAC was headed for bankruptcy. There was only one way out: convert to a bank and suckle on the federal teat labeled Trouble Asset Relief Program (TARP). Only… GMAC couldn’t convince enough of its investors to swap debt for equity to meet the Fed’s regs for the transformation. To forestall GMAC’s C11, and the domino destruction of General Motors, the Fed did what comes natural to our August federal institutions these days: they changed the rules. The Wall Street Journa l reports that The Fed has granted GMAC bank status– despite its failure to meet the letter of the law. As the Fed’s statement clearly indicates, they’re making it up as they go along. “As part of the approval, the Fed is requiring GM and Cerberus Capital Management LP to reduce their ownership stakes in Detroit-based GMAC. GM must reduce its ownership interest in GMAC to less than 10% in voting shares and total equity. Cerberus, which owns Chrysler, must reduce its interest to a maximum of 14.9% in voting shares and 33% in total equity.” And that ain’t all…
“In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the Board has determined that emergency conditions exist that justify expeditious action on this proposal in accordance with the provisions of the BHC Act and the Board’s regulations… the Board has also waived public notice of this proposal.”
So, quick and dirty it is. Apparently, I’m not the only one who thinks this thing smells, as noted in the footnote:
“A commenter requested that the Board hold a public meeting or hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. The Board has not received such a recommendation from the appropriate supervisory authorities.”
Accountability. What happened to it?
So far, GM is due to score an unknown percentage of the Department of Energy’s $25 loan program, $13.4b in direct TARP loans and multiples of that amount for its former cash cow GMAC. And the rest. Suprised?
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Agenthex "That’s rather ironic you can’t respect the outcome of a constitutional process." Exactly, where do you find the Constitutional authority, in Article I, Section 8, for Congress to pass laws that benefit a special welfare case like the auto companies? Assuming that away, the TARP law Congress passed explicitly authorized the funds for banks and financial institutions, it even specified the definitions of those institutions. So, where does the president, charged with faithfully executing the laws, have the authority to use TARP funds in a manner explicitly denied in the law? Constitutional government has given way to "rule of man". With regards to your later comment, the US has a very specific Constitutional government with limited and defined powers, not "laissez faire", but it was quite successful while it lasted. Ended with FDR's reelection in '36
If you want to be a strict constructionist, you should try to be consistent. If the executive is acting rogue, your precious constitution has contingencies for that. I can't really help it that your fellow men are idiots, but governments need to set up with the right assumptions. Also, you should be reminded the US was only a nominal power back in your good old days. In general, I'm not sure what is it about the internets that brings out people who think simple ideologies would work in modern states. You'd think more readily available information would make people more sophisticated. -- That said, nothing from the scumbags that run the top level of government now should surprise anyone. I'm surprised we don't get more freepers trying to defend their terrible admin. Or maybe they're just trying to distance themselves from their self-constructed dystopia.