The news that GMAC’s mortgage unit Residential Capital (a.k.a. ResCap) might go belly-up (AP via Yahoo) is shocking only because General Motors is the one saying it. What exactly was the captive finance arm of an auto maker doing so heavily into the mortgage business in the first place? Oh well, if Porsche can make a fortune gambling in the markets, why not everyone? The modern mortgage origination, funding and servicing business is so complicated as to be almost inscrutable. To wit: “ResCap said it posted an additional $200 million in collateral with Fannie Mae and sold off the rights to collect payments on $12.7 billion in loans, or 9 percent of the total amount it collects for Fannie Mae. Had ResCap not acted, Fannie Mae could have severely curtained its loan purchases from ResCap.” I really miss the days when home loans were made by banks using their capital plus deposits and were held, service and managed by said same banks. We may yet go back to the future on that one. Meanwhile, GM dropped a second bombshell in the same SEC filing by saying “that Delphi Corp., its former parts-making operation that was spun off in 1999, is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all.” TTAC called it.
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Meanwhile, GM dropped a second bombshell in the same SEC filing by saying “that Delphi Corp., its former parts-making operation that was spun off in 1999, is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all.”
There’s a Double-Secret-Probation-Plan at Ren Cen to get Delphi out of bankruptcy in 2010 – just before the Chevy Volt hits the showrooms…
So the plan is to keep piling on the bad news. March it up the flag pole and make everyone believe that said shortsighted corporations are ‘too enormous to go belly up.’
Many Kudos to you, John Horner, Robert Farago, and the team at TTAC for your prescient and precise editorials and news entries on these matters.
Does Rick Wagoner really think he can spam the airwaves with bad news and not get calls for his resignation? Its like the Wall Street bailout all over again. Hide the true nature of the beast and then demand immediate economic assistance, threatening dire consequences.
Lost another one to Ditech, er, well, just lost Ditech.