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

Robert Farago
by Robert Farago

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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]

Robert Farago
Robert Farago

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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.

  • Wjtinfwb Funny. When EV's were bursting onto the scene; Tesla's, Volt's, Leaf's pure EV was all the rage and Hybrids were derided because they still used a gas engine to make them, ahem; usable. Even Volt's were later derided when it was revealed that the Volt's gas engine was actually connected to the wheels, not just a generator. Now, Hybrids are warmly welcomed into the Electric fraternity by virtue of being "electrified". If a change in definition is what it takes, I'm all for it. Hybrid's make so much sense in most American's usage patterns and if needed you can drive one cross-country essentially non-stop. Glad to see Hybrid's getting the love.
  • 3-On-The-Tree We also had a 1973 IH Scout that we rebuilt the engine in and it had dual glass packs, real loud. I miss those days.
  • 3-On-The-Tree Jeff thanks. Back in 1990 we had a 1964 Dodge D100 with a slant six with a 3 on the tree. I taught myself how to drive a standard in that truck. It was my one of many journeys into Mopar land. Had a 1973 Plymouth duster with a slant six and a 1974 Dodge Dart Custom with 318 V8. Great cars and easy to work on.
  • Akear What is GM good at?You led Mary............................................What a disgrace!
  • Randy in rocklin I have a 87 bot new with 200k miles and 3 head gasket jobs and bot another 87 turbo 5 speed with 70k miles and new head gaskets. They cost around 4k to do these days.
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