Your dollars are in his hands. If he cleans up the mess, taxpayers will be paid back.
GMAC reported this morning a record Quarter 4 loss of $3.9 billion from ongoing operations, compared with a profit of $7.5 billion a year earlier.
A net loss of $5.0 billion bought the total full-year net loss to $10.3 billion, compared to net income of $1.9 billion in 2008.
Results for the 2009 fourth quarter and full year were largely affected by losses related to GMAC’s reckless lending practices in its mortgage operations.
“Key steps during the year included: diversifying the profitable automotive finance business with the addition of Chrysler; launching the Ally Bank brand, which is a key part of our funding profile; strengthening our capital and liquidity positions; and implementing major restructuring actions to minimize risk related to the legacy mortgage business,” said GMAC Chief Executive Officer Michael A. Carpenter.
The U.S. Department of the Treasury last December provided an additional $3.8 billion in capital from taxpayers to GMAC to keep it solvent, in addition to almost $14 billion previously forwarded.
Treasury under its financial health check assessment, the so-called Supervisory Capital Assessment Program (SCAP), said that additional capital was 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 real estate markets.
As part of the additional funds, Treasury restructured its investment in GMAC “to protect taxpayers and put GMAC in a position to raise private capital and pay back taxpayers as soon as practicable.” As a result, U.S. taxpayers now own 56% of GMAC’s common equity, and $2.7 billion in 8% coupon trust preferred securities, and $11.4 billion in 9% coupon mandatory convertible preferred stock. Taxpayer ownership could increase to 70%, according to GMAC.
Taxpayers are clearly at risk here, given their already large 50% holding of General Motors Company, which lost $1.2 billion in its latest quarter.
Follow Your Money!
The Obama Administration, facing unanimous Republican opposition, has thus far been unable to implement any reforms whatsoever in financial regulation 16 months after the collapse of the Lehman Brothers and AIG, among others, in the fall of 2008. (more…)