Bailout Watch 560: Feds Set to Bail Out, Nationalize GMAC

Robert Farago
by Robert Farago
bailout watch 560 feds set to bail out nationalize gmac


The New York Times reports that the “troubled finance company” known as GMAC is hitting-up Uncle Sam for more, as-yet-unspecified billions. The Gray Lady tells us it’s not a question of “if”, it’s a question of how GMAC and the Treasury can sleaze the deal, so that taxpayers don’t end up owning the company. ‘Cause that would “reignite” the “debate” over the bailouts that have already been given. “GMAC and Treasury Department officials have been locked in negotiations over how to structure the third bailout as it approaches a crucial deadline in early November for shoring up its finances [as a $5.6 billion payment comes due]. The government has injected $12.5 billion into the company and already owns about a 35 percent stake from a broader restructuring of General Motors, its onetime parent.”

The Times seems to forgets the salient fact that the GMAC bailout arrived via an eleventh-hour, Christmas Eve FDIC exemption from banking laws, which allowed GMAC to attach itself to the taxpayer teat. Well, they kinda mention it.

GMAC was one of several firms that sought an emergency conversion into a bank holding company last fall, which qualified it for a host of federal aid programs, including government guarantees of its debt.

To be fair, the paper does point out that GMAC lost $3.9 billion in the last financial quarter. Hey, does anyone remember why GMAC went from GM’s cash cow to a bailout-craving zombie lender and a-rose-by-any-other-name bank called Ally? Something about being up-to-their-eyeballs in the sub-prime meltdown mishegos, methinks. Never mind.

Just for S&Gs, here’s the corporate genesis 411 from formerly GMAC Finance now Ally’s website [sorry, can’t resist]:

We are Ally Bank, built on the foundation of GMAC Financial Services. And with that experience we’ve learned that these times demand change and a new way of doing business. So we’re taking banking in a new direction.

That means talking straight, doing right and being obviously better for our customers.

We’re a bank that values integrity as much as deposits. A bank that will always be open, accountable, and honest. Yes, honest. We won’t deal in half-truths, kindatruths, or truths only buried in fine print. That’s because we don’t have anything to hide. We’re always going to give it to you straight.

Profits they may not have (or may, as they’re using YOUR money to compete), but chutzpah? LOADS. One more factoid: GMAC’s outgoing CEO Alvaro de Molina walked away with $11.6 million. As they sow, so shall they reap. Or is that rape? [thanks to all for the links]

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  • Tpandw Tpandw on Oct 28, 2009

    essen: According to the WSJ article on this mess, the government's decision to bail out (for the third time!) GMAC 'reflects the troubled company's importance to the revival of the auto industry.' So in a way it is about manufacturing jobs. That's why this whole bailout thing (and this isn't a political comment--the bailouts began with Bush) was such a slippery slope. Once the feds started bailing out failing auto companies and those companies which support them it became nearly impossible to quit. The only hope is that eventually the market will recover enough for them at least to break even, but I'm afraid that until then the bailouts will continue.

  • Essen Essen on Oct 28, 2009

    tpandw, I hear what you're saying but money is fungible. Let a responsible lender step in.

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  • Sgeffe As was stated in another comment, the FAA nominee went down in flames. But the NTSB chairwoman certainly didn’t, and she’s certainly not qualified either!Lots of this kind of stuff going on both sides of the aisle—Ben Carson would have arguably made a better Surgeon General than HUD Secretary under Trump, for example.
  • Art Vandelay Interesting, the Polestar 2 I had as a rental utilized Android Automotive which is what GM said it is going to exclusively, yet it still offers Apple CarPlay according to this. Wonder if GM will do the same.
  • Stuart de Baker EVs just aren't ready for prime time for those with a single car and who take road trips. Being able to charge as soon as you arrive at a charging station, and even the chargers working on your car is a crapshoot. In the former case, you could have to wait for nearly an hour while someone else is charging.I also don't find EVs particularly fun to drive (I've driven a Tesla Model S and an Ionic 5.) I LOVE driving my '08 Civic (stick). I love the handling, the feel and responsiveness of the engine, the precise steering (the Michelin Pilot Ultra Sport tires help, but even with the snows on, the car is a joy). I have 152k on the clock, and hopefully another 25 years or so of driving (I was born early in the Eisenhower Administration and I have exceptionally healthy habits), and I'm going to try to keep the Civic for the duration.My Civic causes a less global warming emissions than some of these humongous battery operated trucks.