Bailout Watch 319: Another Damn GMAC Post

I’m sorry. I know. I should move on. I’d like to move on. But the more I read about the federal government’s $6b “investment” in troubled auto and mortgage lender GMAC, the more deranged the deal becomes. Fans of this series (?) will know that Uncle Sugar now effectively owns GMAC. If I were the head of Ford or Toyota or Honda’s lending unit, I would be mighty pissed. As a journalist, I find the cloak of secrecy surrounding the arrangement, from the timing of the Fed’s pre-approval for GMAC to morph into a bank, to the fine print of how this is all supposed to work. A regulatory filing unearthed by Forbes reveals that GMAC has “amended,” but not canceled, its exclusivity agreement with GM. “Purportedly, GM may now offer incentives such as low-interest loans through other financial outfits with increasing flexibility over the next 24 months. While the filing seemed to imply that private competition may be entering the government-backed lender’s universe, both the auto manufactorer and its banker seemed to indicate that nothing material had changed and the two had only altered their pact to satisfy the Federal Reserve’s demands.” Oh, that’s alright then. Or is it?

The AP provides a little more insight into the GM – GMAC horizontal mambo. Or, if you’re like-minded, raises even more questions.

“In its filing with the U.S. Securities and Exchange Commission, GMAC said General Motors Corp. can now offer financing incentives such as zero-percent loans through other lenders under certain circumstances. [Ed: such as?] Some of the restrictions disappear in December 2010 and all of the restrictions will be gone three years later.

“GM spokesman John McDonald said the automaker doesn’t plan to change its financing incentive agreements with GMAC and hopes GMAC will continue to offer the loans because they have been key to getting more people to buy GM cars and trucks.”

So we bailed out GMAC to save GM– in fact, gave GM an extra $1b to plow back into GMAC– but GM is now free to go off and offer loans from someone else? But they won’t because they like GMAC? Somebody help me out here.

“Neither GM nor GMAC would reveal whether the annual fee for exclusive rights to lend to General Motors dealers and consumers would be more or less than the $75.0 million yearly fee GMAC has been paying since 2006. That was when Cerberus Capital bought a 51.0% stake in the lender for roughly $14.1 billion in cash.”

Uh, we OWN GMAC now. We have a right to a full and unfettered look at the books. (Which is also true of GM and Chrysler, but don’t get me started.) So what gives?