GMAC's $6 Billion: Washington Acquires a Car Company

By Tuesday morning there should be some clarification on this, but for the time being the GMAC (GKM) (GMA) debt swap/government investment/bank holding company status just gets curiouser and curiouser.

The word last night was that the government had committed $6 billion to GMAC in the form of a $5 billion preferred equity investment and a $1 billion loan to GM to be used to participate in an upcoming GMAC rights offering. This is in addition to the $17.4 billion already pledged to GM.

At the same time, there is no official announcement that the debt for equity swap that GMAC was trying to engineer had reached the requisite 75% participation level, though the company did say that it was completing the offer which would indicate that the deal had been successful (or maybe not, this is Alice in Wonderland stuff now).

The Treasury also said that it had set up a separate program within the TARP to make investments directed at the auto industry. At the same time, they said that they had spent all of the money allocated in the first half of the TARP. So I guess they have a new program with no funding.

This isn’t the end of aid to GMAC. As a bank holding company it now has direct access to the Fed and is eligible for guarantees of its debt from the FDIC. If you thought that the auto industry was going to have to make it on its own, think again. It’s clear that Detroit is now an official subsidiary of Washington, Inc.

More here.

Comments

[skoobagain]

OK as a little goober I must say that if the government will bail out faltering businesses, unscrupulous lenders, high-flying insurers as well as Cerberus/GMAC and more--why don't they just start referring to the middle class as suckers (perhaps they do already....)? If anything could/should be gained from all of this craziness it is healthcare coverage for us all. There has never been such a moment of opportunity! Yeah that's right: us all.

2008 Dec 30 10:08 AM

[applesauce]

The mother government is running out of teets to feed all the hungry little piglets. Soon the smell of bacon as the dollar gets slaughtered next year.

2008 Dec 30 12:11 PM

[helplessobserver]

It is curious that the courts are watching all this illegality from the bleachers. There are all types of fair trade laws that are being circumvented here. How can a bank compete for a auto loan that is a loser when it is written? Where pray tell is the level playing field?

2008 Dec 30 10:42 PM