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  • New Year, New Federally-Owned GMAC

    If President Barack Obama’s New Year’s resolution was for the federal government to stop taking majority ownership in private corporations, he’s off to a bad start (or he decided to get one more in before 2010).

    Yesterday, the government indicated it will provide $3.8 billion in additional aid to GMAC and increase its stake in the company from 35% to a whopping 56%. As The Washington Post reports, the federal government now has ownership stakes in GMAC, Fannie Mae, Freddie Mac, General Motors, and American International Group – and holds large stakes in Citigroup and Chrysler.

    And the grand tally of government (read: “taxpayer”) investment in GMAC? $16.3 billion.

    Where is the money going? It’s going to pay for GMAC’s billions of dollars in losses it suffered after it moved into the subprime lending business (away from its traditional lending to car buyers and dealers at GM and Chrysler).

    From the Detroit Free Press:

    All the money will essentially go to shoring up GMAC’s ResCap unit, the arm best known for Ditech.com and other subprime mortgage lending that generated $1 billion in profits in 2004 but has since suffered several billion dollars in losses as U.S. housing prices collapsed.

    GMAC said Treasury’s move, along with a $3.3-billion write-down in mortgages at ResCap and Ally Bank, should allow it to explore a sale or other action for ResCap and return to profit by the first quarter of next year. It had asked the government last month for more time to decide what to do with ResCap.

    The additional funding for GMAC isn’t shocking. GMAC and the Treasury Department were reported to be in advanced talks regarding additional funding in late October. The Washington Post notes that the big surprise here was the decision for the federal government to increase its ownership share in the firm:

    The Treasury Department has said for months that GMAC would need more federal money, but the decision to increase the government’s ownership stake came as a surprise, cutting against the grain of the Obama administration’s recent efforts to wind down its bailout of large banks.

    Never fear, though. “Treasury officials said the government intends to stick to its policy of leaving day-to-day business decisions about financing to GMAC management,” The Washington Times reports.

    But then, there is the fact that the government will appoint four directors to GMAC’s nine-member board. And the Obama Administration’s pay czar will dictate the level of GMAC executives’ pay.

    Old habits die hard.

    Posted in Economics [slideshow_deploy]

    15 Responses to New Year, New Federally-Owned GMAC

    1. Eat more ham. Dallas says:

      GMAC mortgage's business model was built on high-risk lending. GMAC differentiated themselves in the market by offering, stated-income, no-income, stated-asset and other high-risk products.

      GMAC SHOULD NOT BE RECEIVING ONE DIME OF TAXPAYER MONEY!

      The inmates are indeed running the asylum.

    2. Ben Harrison, Hemet says:

      Meglomaniacs and Narcistics disorders go hand in hand. Truman, a democrat, said the buck stops here. Clinton, a democrat, said the buck never got to him. Obama, a democrat, "says" the buck is spent and none of my appointees, vetted or not do not tell me anything I do not want to hear.

    3. Larry Wise, Knoxvil says:

      GMAC… Now primary ownership by USA, Not Good. As a bond holder in a company that paid good interest I'm wondering what the value of my bonds will be at the end of 2010. I need the interest to live on, but don't need for the value to drop. Going to watch this one close. My retired friends from GM haven't done very well.

    4. dennis, round rock, says:

      It's been downhill since July 20th, 1969.

    5. Betty Hanicke, Kansa says:

      This is proof that the government bureaucrats are not capable of managing anything profitably. Most of our congress people have never run a business and know nothing of how the free enterprise works which is the bedrock of our American experience and the reason we have such a big middle class. The government should stop paying money that we don't have into these companies and let them go chapter 11 so they can reorganize without interference from the feds.

    6. Tim Az says:

      Just more cash for union votes in the coming election. I,m not sure they can survive long enough to effect the 2012 election. Especially if health scare is defeated and they must continue to pay for their own health care. What am I saying the government now owns them so we will foot their healthcare bill no matter what. Problem solved on the backs of Americans once again.

    7. Pingback: New Years Day Open Thread « VotingFemale Speaks!

    8. Al, The Villages, Fl says:

      Sorry, but I'm in favor of letting the Goverment Motors, GMAC, Chrysler et al fail. I don't believe, in this time and in a nation with such potential and talent, that a company should be run by the government nor should we, the people, support them. The gov, especially when run by progressives, will destroy the companies, just like it's trying to destroy this nation.

    9. Everett - Houston, T says:

      The real problem has not been addressed. When a business gets into serious trouble the only long term "solution" is bankruptcy. This alternative allows an equitable distribution of assets and a restructuring of the cost structure. None of this was accomplished with the farce of a government sponsered "bankruptcy". So, the problem continues and we will see more of the same in the future.

    10. David Boner, Stillwa says:

      Why not get out of the housing market with GMAC! Fannie & Freddie is already too much. However, the administration is going to continue to stick Tax monies into GM because they want to get the votes from the Unions in Michigan. In maybe ten years, GM will began competing with Ford at below fixed costs. Then, they might possibly turn the useless investment over to the Union or they will allow it to go bankrupt as should have already been done! GM is like a cat who only has 4 lives left!

    11. Kyle Keithley Dallas says:

      Ben Harrison NAILED it! Isn't facizm the one where you see "private" ownership & gov control? Iguess the real question remains; why are there no masses in the streets, why do we sit still for this?

    12. Becky Lynch Mentor O says:

      These progressives have been at their transformation for a very long time. It's practically undetectable. They've trained and influenced many minds through hollow marketing and redefinition of preciously treasured terms like "transparency", "trust", "change", "hope", "partnership", "collaboration", "regionalism",

      "sustainability"…we are behind but not beaten. Think about who has been in the powerfilled positions. I am concerned most at this time about what has been least discussed or visible, that pesky Financial Regulatory Legislation with Dodd/Frank all over it. We are in a true blitzkreig…the gov is blitzing and we the people are in the process of being kreiged. Taking it all in to make sense for the future…

    13. LW, Newport News VA says:

      Welcome to the "equal sharing of misery" as Churchill said of socialism. We're there, folks.

    14. Earl, QUEENS, NY says:

      HAPPY NEW YEAR!! The new year and new decade are now upon us. If you haven’t made your new year’s resolutions yet, I don’t think it’s too late to do so. Let me suggest a great resolution for everybody – in 2010, 2011, 2012, and beyond…..TO NEVER AGAIN VOTE FOR A LEFTWING STATIST DEMOCRAT ON ANY LEVEL OF GOVERNMENT!!

    15. OPAS says:

      January 1, 2010 Kyle Keithley Dallas Tx writes:

      ….why do we sit still for this?

      Because you vote them back in. YOU fall for their BS. Now they are working your "pea brains" again to vote for "A THIRD PARTY" so you won't vote Republicans into office. VIOLA! YOU fell for it, AGAIN, the Democrats you complain of suckered your poor warped brain AGAIN. WHO do you think puts out this "THIRD PARTY" propaganda? IT IS THE DEMOCRAT PARTY that wants you to vote for a third party. They know their base will vote them back in if they can get enough gullible people to vote for any third party. These people that run on a third party ticket mean well but they are the tool that breaks up the majority voters …. ergo… PELOSI-REID and company are back in Washington, AGAIN.

      What can you do? there are only two parties that win elections, Democrat and Republican. All the others will lose. the QUESTION IS, do you want to cast a vote to save your country, or did you fall for this "Third Paty" propaganda? If you want to protest with your vote then protest vote the Democrats OUT – VOTE FOR ONLY a Republican candidate and you will win your protest against the new Bolsheviks that have taken over your country. Your words of protest are worthless, it is time time that you sacrifice your protest vote for your country.

      DO NOT VOTE FOR ANY THIRD PARTY unless you want to keep PELOSI and REID.

      UNITED we STAND, DIVIDED we FALL.

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