I know this is The Truth About Cars, not the inside baseball truth about the finance companies that prop-up the domestic automobile manufacturers. Dot com. But we’ve been following this story because, well, if GMAC had gone down, GM would have gone down and GM still makes cars. Well, after the holidays. And the shenanigans involving the federal government’s rescue of GMAC have been nothing less than shameful. First, Uncle Sugar signals GMAC in no uncertain terms that if the bankruptcy-bound lender doesn’t convert 75 percent of their debt into equity they can go ahead and fail. Then, on Christmas Eve, before we learn the results of that d-for-e swap, the Fed says, never mind, you can be a bank. We’ll just use our “emergency” (as opposed to superhero) powers to bend our own rules. And still GMAC doesn’t reveal the success or failure of the swap, claiming they needed time to tabulate the results. And now… we know. Surprise! Not. The Wall Street Journal reports “Struggling finance firm GMAC LLC said Wednesday that bondholders tendered $21.2 billion in notes in its bid to raise capital for its new status as a bank-holding company. The lender’s goal had been to raise $30 billion by converting 75% of its issued debt into preferred stock holdings. The offer expired Friday after having been extended four times.” So they received prior approval AND a $6b federal (that’s your taxes) investment and they STILL missed the legally mandated target by $8.8b. One rule for you, one for former U.S. Treasury Secretary and current Cerberus Chairman John Snow.
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In keeping with my Christian beliefs I am really hesitant to use the “H” word, but the morally (not to mention “fiscally”) bankrupt way these decisions are being handled has me at my boiling point. I guess I’ll leave the people out of it and just say that I “HATE” the bailout.
@ RF
What happened to the Fed requirement that GM drop to 10% ownership and Cerberus 33%?
How can that work if the necessary bond holders haven’t agreed? I’m guessing that those same bond holders could withdraw their acceptance if the $30b equity threshold wasn’t reached.
This bond/equity high finance chess does my head in.
+1 at the pic comment. Why do I care that GMAC missed the deadline.I knew from the beginning that they were going to miss, and since the government went ahead and bailed them out anyways, who cares?
Well, you see, since October 7th 2008, when the United States of America ceased to exist, (the day the Federal Reserve – which is neither – bailed out their rich buddies on Wall Street by cranking up the printing presses), we no longer are a nation of law.
Except, hey, Joesixpack? Just you try missing a car payment, a house payment, a child support payment or try not paying your taxes and see what happens.
One rule for “them” and another entirely different set of tens of thousands of rules for “us”.
What was it that Thomas Jefferson said we the people should do in this circumstance? (I’ll give you a hint – Bostonians got it started by tossing some TEA into a harbor).
menno,
I’m starting to come over to your side. This is theft.
@PeteMoran:
As I understand it, the dilution for Cerberus is also a gem. To reach their lower equity level in GMAC, they are to give their excess equity to….their investors!
UPDATE: A GMAC press release describes the swap as “consummated.” Kinky. And probably the least satisfying “consummation” since the Minelli/Gest wedding night. Gory financial details are included in the release.
Now I know that many, including me, (maybe esp. me) have been maligning the loss of America in all this. But this story brought to my mind the Golden Rule. And for those who may be misinformed as to what the Golden Rule is, basically, he who has the gold makes the rules.
It makes me wonder. Is it really any different now than it has been, and my feeble little mind is just now catching up? Or is all this just recent application of the rule?
Hey, where is my “Landcrusher called it” headline?
Landcrusher :
Due to popular demand, TTAC no longer gloats.
Bah! More people should take stock of their prognostication records. It would do us all good.