Thanks to its enthusiastic participation in the sub-prime mortgage market and billions in low-interest, low-FICO score auto loans, GMAC was headed for bankruptcy. There was only one way out: convert to a bank and suckle on the federal teat labeled Trouble Asset Relief Program (TARP). Only… GMAC couldn’t convince enough of its investors to swap debt for equity to meet the Fed’s regs for the transformation. To forestall GMAC’s C11, and the domino destruction of General Motors, the Fed did what comes natural to our August federal institutions these days: they changed the rules. The Wall Street Journal reports that The Fed has granted GMAC bank status– despite its failure to meet the letter of the law. As the Fed’s statement clearly indicates, they’re making it up as they go along. “As part of the approval, the Fed is requiring GM and Cerberus Capital Management LP to reduce their ownership stakes in Detroit-based GMAC. GM must reduce its ownership interest in GMAC to less than 10% in voting shares and total equity. Cerberus, which owns Chrysler, must reduce its interest to a maximum of 14.9% in voting shares and 33% in total equity.” And that ain’t all…
“In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the Board has determined that emergency conditions exist that justify expeditious action on this proposal in accordance with the provisions of the BHC Act and the Board’s regulations… the Board has also waived public notice of this proposal.”
So, quick and dirty it is. Apparently, I’m not the only one who thinks this thing smells, as noted in the footnote:
“A commenter requested that the Board hold a public meeting or hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. The Board has not received such a recommendation from the appropriate supervisory authorities.”
Accountability. What happened to it?
So far, GM is due to score an unknown percentage of the Department of Energy’s $25 loan program, $13.4b in direct TARP loans and multiples of that amount for its former cash cow GMAC. And the rest. Suprised?
“Accountability. What happened to it?”
Americans voted against it in 1980.
Is anyone surprised? Another changing of the rules to bail out the mismanaged, greedy, stupid and fraudulent, while the rest of us who play by the rules and run honest businesses, and don’t look for handouts keep getting more of our money taken. I sincerely hope everyone as outraged by this as I am sure many are will never, ever consider buying another car from the 2.8, ever. This is one more nail in the financial coffin of the U.S.
well Bush gave GM a spoonful of sugar, and the medicine must go down. now the Fed is handing tuppence, showing GMAC it cares. they will be able to offer the little dealers bags of crumbs.
Surprised? Nope.
They are making a show of pushing Cerberus out – but not really.
Bloomberg and a couple of other sources quote Cerberus as saying they will ‘distribute their percentage to their shareholders’.
That ought to be an interesting ‘distribution’.
How soon does the 2nd pot of $350b have to be approved for GMAC to tap into it? They need to make a payment to GM so that GM can meet some supplier obligations at the beginning of the year, I thought.
I am surprised. And I feel foolish that I am surprised.
What is this country becoming? Bleeding the survivors to keep the dying alive. So we all become sick. Even those of us who have been hardworking and frugal just to survive through times like this. What a reward.
This is the walking dead and we as the Tax payer will prop them up till hell freezes over.Vote? why in the hell should we do that anymore? we have no voice.This has to go down in history as one of the biggest rip offs ever that the American tax payer has been forced at gun point to endure, I only hope that there is a back lash in this Country that says go F!!! your self Detroit,I have said this before here on this forum, I will never buy a UAW built car again.I will go as far and say, if your are honest and believe in that, why would you buy a car from someone that has stolen from you,there is no question here that is what happen.America,stand up and tell them to f!!! off!!
hltguy’s post says best what I think.
I look down and no longer can see bottom. And at the same time, the lifeboat sprung some serious, possibly life threatening leaks. I hear the thunder of pig’s racing towards the trough. Anyone with the ‘right’ connections or a loud voice can no longer be turned down. Whoever grabs first survives. And lawyers and the courts? OMG….
This is a desperately sad evening indeed.
Robert-
It’s not a safe bet GM will get any money from the DOE loan program; so far they have rejected every single loan request that they have received, including those from the Big 3.
Droid800 :
You’re kidding right? What is the D.O.E. going to do, KEEP the money? I don’t think so.
To say that I am totally disgusted, would be so much understatement that it would make a Brit blanche.
To say I’m surprised would be a lie.
To have me next say I have to wonder at what point the middle 30% of the US population goes to Washington DC and has a lynching party with about 500 “intvitees” as well as the state capitals and bank HQ’s, would not be unexpected by those who know me.
Just leave me out of it.
I’m one of those “crazy” people who’ve been crying in the wilderness since 1979, that we all need to wake up and vote Libertarian (or, later, Constitution Party), go back to accountability of money (as in real money which can’t be inflated away which steals from savers), and I’ve been ignored and mocked for all that time.
People get the government they deserve. I’ve decided, after October 5th, to opt out and won’t bother voting any more. Since I cannot seem to persuade oh maybe more than a handful of others to see it Ron Paul’s way, I give up, and will just have to suffer further with the ilegitimate government the rest of you voted in, just as I’ve suffered the Carter, Reagan, Bush, Clinton and Bush administrations since 1976.
“This has to go down in history as one of the biggest rip offs ever that the American tax payer has been forced at gun point to endure”
Wait til 20 January…The Republicans are amateurs. Heck, FDR will be considered an amateur compared to the thieving parasites coming in.
Guys,
The vast majority of people hearing about this won’t have a clue what it means to them. Also, there is no accident that this news came out on Christmas Eve when attention is elsewhere. Yet another money grab that rewards the incompetent politically connected.
I’m one of those “crazy” people who’ve been crying in the wilderness since 1979, that we all need to wake up and vote Libertarian (or, later, Constitution Party), go back to accountability of money (as in real money which can’t be inflated away which steals from savers), and I’ve been ignored and mocked for all that time.
People get the government they deserve. I’ve decided, after October 5th, to opt out and won’t bother voting any more.
That’s rather ironic you can’t respect the outcome of a constitutional process.
.
Wait til 20 January…The Republicans are amateurs. Heck, FDR will be considered an amateur compared to the thieving parasites coming in.
You must be one of those people who enjoy the results of the many failed laissez-faire governments.
I’m sure those people in Washington are amazed what they are getting away with.
The people who caused this mess are being rewarded. Big time, and in a big hurry. As though the people in Washington realize the ship is sinking, and want to make sure the captain and crew are first in the lifeboats before the passengers realize what the crew is doing to them.
It started with bailouts throwaways to banks. Now we get to steal free money from the public simply by declaring anything a bank.
American Express? You’re a bank. GMAC? Poof, you’re a bank. Anyone else? No prob, here you go. But hurry before everything collapses.
I’M A BANK! I’M A BANK!
Now give me some money…
Weeks ago, I saw a TV commercial for an entity called “GMAC Bank”, soliciting investments.
The writing was on the wall…
Cash wise, GMAC’s hookup with the Fed could turn into a much bigger bailout then what is going directly to the manufacturing divisions.
I wonder how long it will be before the Mainstream Media (always a few months behind) picks up on this “Secret Bank Bailout” as it might be called, of the Big 2.8’s finance companies?
agenthex – there has not been a laissez-faire government since Herbert Hoover’s administration. Not. A. Single. One.
MikeInCanada – what is this Secret Bunko Bailout you speak of? Wait, misread that.
I’ll be very interested to see just how much GMAC and ChryCo Finance borrows from the Fed once they have the chance to do so.
I just can’t help but think that it will be equal to, or far greater then the $17bln the Bush administration handed out last week.
Perhaps they can use the money to pay back the $4bln the Canadian Govt has just given out (Merry Christmas!) If so, please delete my previous posting and forget I ever mentioned this….
Remember it’s the incoming administration that wants to raise the taxes on the rich?? They would then get back all of this money that the outgoing administration is giving away!
agenthex – there has not been a laissez-faire government since Herbert Hoover’s administration. Not. A. Single. One.
Sure there are. They’re just not the model western democracies that libertarians and the like would like to hold up as shining beacons.
Agenthex
“That’s rather ironic you can’t respect the outcome of a constitutional process.”
Exactly, where do you find the Constitutional authority, in Article I, Section 8, for Congress to pass laws that benefit a special welfare case like the auto companies?
Assuming that away, the TARP law Congress passed explicitly authorized the funds for banks and financial institutions, it even specified the definitions of those institutions. So, where does the president, charged with faithfully executing the laws, have the authority to use TARP funds in a manner explicitly denied in the law? Constitutional government has given way to “rule of man”.
With regards to your later comment, the US has a very specific Constitutional government with limited and defined powers, not “laissez faire”, but it was quite successful while it lasted. Ended with FDR’s reelection in ’36
If you want to be a strict constructionist, you should try to be consistent. If the executive is acting rogue, your precious constitution has contingencies for that. I can’t really help it that your fellow men are idiots, but governments need to set up with the right assumptions.
Also, you should be reminded the US was only a nominal power back in your good old days.
In general, I’m not sure what is it about the internets that brings out people who think simple ideologies would work in modern states. You’d think more readily available information would make people more sophisticated.
—
That said, nothing from the scumbags that run the top level of government now should surprise anyone. I’m surprised we don’t get more freepers trying to defend their terrible admin. Or maybe they’re just trying to distance themselves from their self-constructed dystopia.