The U.S. Department of the Treasury announced this afternoon that it is providing an additional $3.8 billion in capital from taxpayers to GMAC to keep it solvent.
Treasury under its financial health check assessment, the so-called Supervisory Capital Assessment Program (SCAP), said last May that additional capital of $5.6 billion would be needed for tottering GMAC, which was suffering from bad loans and collapsed residual values for leases of General Motors vehicles, as well as failed loans in the collapsed real estate markets.
GMAC now has the capital buffer required under SCAP, which is needed to meet the worse-than-expected economic scenario after the economic stimulus program proved ineffective at turning the economy around. The $3.79 billion cash infusion was less than the $5.6 billion originally anticipated by the Federal Reserve due in large part to lower-than-expected losses from the General Motors bankruptcy filing.
In November, GMAC announced that its head had departed and a new CEO, Michael A. Carpenter, was coming in from the financial services industry and taxpayer subsidized Citigroup. The appointment of Carpenter, with disputed accounts of whether the previous CEO, Alvaro de Molina, was fired or had resigned, raised questions about the reckless practices of Wall Street, which is responsible for the ongoing Great Recession and the collapse of the global banking system.