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U.S. Takes Controlling Interest of GMAC

Latest U.S. taxpayer bailout costs another $3.8 billion.

by on Dec.30, 2009

GMAC was unable to raise the capital needed from the still ailing private markets, so our Treasury became the lender of last resort.

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.

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Bailouts!

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.

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GMAC Needs Another, Yet Another, Bailout

Financial services provider to Chrysler and GM remains ill.

by on Nov.17, 2009

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Wants less cash?

GMAC Financial Services (GMAC) is under scrutiny today after an announcement late yesterday that its head had departed and a new CEO, Michael A. Carpenter, was coming in from the financial services industry.

The bank holding company remains in trouble over bad loans in the housing and auto markets.

The appointment of Carpenter, with disputed accounts of whether the previous CEO, Alvaro de Molina, was fired or resigned, also 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.

What this means for car buyers or U.S. taxpayers is not immediately clear — beyond the obvious observation that the credit markets are still not fixed and more raids on the U.S. Department of the Treasury are forthcoming.

This is wreaking havoc with the economy, which has the highest unemployment rates since the Great Depression, and as the Obama Administration privately contemplates another stimulus programs to fix its previously failed stimulus program that was an attempt to fix the failed economy under the Bush Administration.

Carpenter, 62, has only served on the GMAC board since May of this year. His previous experience includes CEO positions at Citigroup’s Global Corporate & Investment Bank, Salomon Smith Barney, Travelers Life & Annuity and Kidder Peabody. During his 35-year career, Carpenter has also held senior positions at GE Capital, General Electric and Boston Consulting Group.

The Obama Administration has thus far been unable to implement any reforms whatsoever in financial regulation more than one year after the collapse of the Lehman brothers or AIG, among others, last fall.

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Perhaps most troubling for taxpayers, who have already bailed out bankers and irresponsible financial institutions with almost a trillion dollars in borrowed money — that is trillion — is that the board of GMAC also said that it had asked the Treasury to postpone its decision on an additional injection of capital.

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GMAC Fails U.S. Treasury Stress Test and Could Fail if the Recession Continues

The source of credit for GM and Chrysler needs its own bailout?

by on May.08, 2009

GMAC logo

Color that logo red, as GMAC losses mount -- and it is named one of the weakest banks by the Feds.

Add another worry to the long list already attached to struggling automakers. GMAC, the storied company that supplies dealer and consumer financing for vehicles at General Motors since 1919, is in need of an additional $11.5 billion in capital, according to the U.S. Treasury Department. This amount doesn’t include the additional capital GMAC will need to take over Chrysler’s wholesale and retail financing needs when it emerges from bankruptcy.

Treasury, the agency that has been printing increasing amounts of money by issuing staggering amounts of debt in a desperate attempt to halt the Great Recession, released a list of financial institutions that failed its stress test yesterday afternoon.

GMAC was among the troubled institutions. In fact, GMAC had the biggest problem with liquidity of any bank for its size. That finding came just as the lender revealed that its first-quarter losses had jumped to $675 million, up from $599 million a year ago. The numbers actually would have been worse but for $631 million in after-tax gains from retiring some of its debt.

This means that GMAC now has until November 9, 2009, to increase common shareholder equity by $11.5 billion, of which $9.1 billion must be new capital. Ways to do this could include issuance of new common equity in a depressed market for such, or issuance of mandatory convertible preferred shares, or the conversion of existing equity into a form of “Tier 1″ common equity.    (more…)