{5U}

GMAC: Three Key Questions

You made a lot of very good points.

GMAC is ripe with foul players.

1) Cerberus: Pre-bailout Cerberus owned 51% of GMAC. Dan Quayle is the Chairman of Cerberus Global Investments. It's no shock the Executive Branch caved in on the autos. Cerberus also LBO'd Chrysler. They took excessive risk, stuffed investors with bad paper, and their exit strategy is to be bailed out by the tax payer.

2) CDS World: The most popular trade in the CDS world was to be long GMAC credit and short GM credit. The CDS market dwarfs the cash market. There is hundreds of billions of this trade on scattered throughout bank prop desks and hedge funds. By propping up GMAC, the government is saving additional use of the TARP as the gains from that trade will let them offset the billions more of losses they are hiding on their balance sheets.

3) The UAW. The $400 million lobby (bribe) to the Democrats could be the best trade of 2008. With it, they have opened the spigot to billions of dollars of bail outs. Ron Gettelfinger is a private equity guy at heart. He is spending $400 million of equity to fuel the LBO of America as the world will be stuffed with U.S. Treasuries. Good work Ron!