17% of GMAC assets are financed using Govt loans

By PETER EAVIS

As any parent knows, it rarely pays to play favorites.

The Treasury looks set to plow another $2.8 billion to $5.6 billion of capital into lender GMAC Financial Services to meet stress-test requirements. That raises a question: Why hasn't GMAC already had to raise this money from private investors?

After all, plenty of troubled banks have recently raised capital. Granted, GMAC isn't a public company, which makes selling equity harder. But it has selling points. New loans look profitable. In addition, the lender already has a hefty capital buffer, reducing the risk of future dilution. Its Tier 1 common ratio is 6.1%, substantially above the 4% required for large banks under a stressed scenario.

However, private investors may be unnerved by GMAC's shaky-looking funding. Subsidiary Ally Bank makes heavy use of high-rate CDs, which can be flighty. GMAC is issuing government-guaranteed debt. And 17% of its assets are financed using loans from the government-sponsored Federal Home Loan Bank system. Bank analysis firm Institutional Risk Analytics says regulators don't like that ratio going over 15%. The message here is that private creditors still seem reluctant to lend on an unprotected basis to GMAC.

The Treasury didn't step in to save CIT Group when credit markets became unfriendly. And CIT is arguably more important to the economy than GMAC, because it provides loans to an array of businesses, rather than one dysfunctional sector.

Prior commitments within the Treasury's bank-rescue plan may force it to provide more money to GMAC. But that creates a problem: Now GMAC knows it has favored status, it just has to wait for the next pile of cash to arrive.

Why is GMAC Paying Dividends While It Begs the Taxpayer

Cody Willard

Let me get this straight:

GMAC, which was owned by private equity gambling firm Cerberus (which is run by former Goldman dudes and even Dan Quayle), used to be the lending and banking and gambling arm of GM. The company was founded in 1919 to help finance cars for buyers of the GM brand.

Over the years, the guys at GMAC got ever greedier and by the time the idiots at Cerberus gambled some $7 billion of their investors’ money on buying GMAC, the company was headlong into wasting its investors’ money on horrible businesses like “wholesale financing” and jumbo mortgages. They also gambled their depositors’ and investors’ and lenders’ money in those toxic mortgage assets like CDOs and so on.

Well, Cerberus and GMAC and GM went to their cronies in the Republican/Democrat Regime in power a couple years ago and begged for billions of dollars in loans and cash infusions because they’d made so many stupid investments and loans over the years that the company couldn’t even pay its utility bills without access to taxpayer largesse.

The company was insolvent. So Bush and his cronies gave the guys at Cerberus/GMAC billions of dollars of welfare. Then when that wasn’t enough, Obama and his cronies gave the guys at Cerberus/GMAC billions of dollars of welfare.

Turns out that wasn’t enough either. So after getting a million dollars for free from the government some 12,000 times already (that’s another way of saying $12 billion), Cerberus and GMAC and its other investors are back with hat in hand begging the Republican/Democrat regime to give them another 5,000 million dollars or so ($5 billion…$5,000,000,000).

It’s outrageous that this company hasn’t been forced into bankruptcy and that we’re ignoring 200 years of rule of law in order to prop up a company that obviously has no idea how to allocate capital and maintain a self-sustaining business.

And you really wanna be outraged? How about the fact that just last week, seven days before they came begging for billions of dollars of more welfare money, the company declared its dividend payouts. Yes, GMAC is asking your representatives to give them your money against your will in a time when we can’t even get health care millions of needy children, so that GMAC can send its owners $44 million next month. (GMAC is also going to pay the Treasury a couple hundred million dollars of taxpayer money…Peter pays Paul, see? Running in circles… but that’s not even the real issue this time!)

GMAC Owners Get Free Money…AGAIN!

Think about that. The government is literally taxing you so that they can give your money to people who were rich enough and powerful enough to risk their own money on GMAC.

How can any liberal be okay with that? And how can any conservative be okay with that?

I’m at war with all Republicans and Democrats in power who have created this horrid system of redistributing wealth upwards to corporations and their owners, lenders and other investors.

I’ve got a call and an email into GMAC asking them to clarify who exactly got this $44 million dividend windfall totally paid for with your taxpayer money. Holding my breath for their reply. Any bets on whether they actually will tell us?

GMAC Asks for Third Bailout

American lender GMAC is asking for a third injection of taxpayer cash from the U.S. government, a Treasury Department spokesperson confirmed Wednesday.

GMAC is the former lending arm of General Motors and remains an important provider of financing for GM and Chrysler dealers to pay for vehicles for their lots. It's also a significant player in the U.S. residential mortgage market.

GMAC lends to GM and Chrysler dealers so they can buy cars for their lots. (Canadian Press)

It has received two packages of bailout money totaling $12.5 billion already, and the government holds 35 per cent ownership. While other banks have been able to raise capital from private investors, GMAC has been forced to go back to the government.

If the cash were approved, GMAC would be the only company to receive three bailouts. The move would also represent a further entrenchment for the U.S. government into the auto industry.

The government also owns a majority-stake in GM and a smaller stake in Chrysler. The Treasury spokesperson declined to comment on whether the government's ownership stakes in the two automakers make it more willing to again help GMAC.