GMAC Gets $6 Billion From Treasury

[Tempest]

http://www.bloomberg.com/apps/news?pid=20601087&sid=asJGlr5r3Uf0&refer=home
Quote:
The U.S. Treasury committed $6 billion to support GMAC LLC, the financing arm of General Motors Corp., widening the government’s effort to keep the largest U.S. automaker out of bankruptcy.

The Treasury will purchase a $5 billion stake in GMAC and lend $1 billion to GM so the automaker can contribute to the lender’s reorganization as a bank holding company, according to a statement issued yesterday. The loan is in addition to $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC.

The fresh capital will enable GMAC to expand lending to car buyers and help save GM. The automaker’s U.S. sales plunged 22 percent this year through November after GMAC ran short on cash and limited loans to people with only the best credit. The Treasury stepped in after Congress failed to pass an auto- industry bailout earlier this month.


Quote:
The Federal Reserve last week approved GMAC’s application to become a bank holding company. GMAC said yesterday that the Fed’s approval didn’t hinge on the debt swap.


Quote:
GM, which sold 51 percent of GMAC in 2006 to a group led by private equity firm Cerberus Capital Management LP, is seeking a permanent federal bailout to avert bankruptcy. Cerberus also owns Chrysler, which it acquired last year.

More money to the car companies. Looks like Cerberus is double dipping.

 

[c3po]

That's great, what happens when very few people buy there cars, are they going to come back and ask for $6 Billion every year.

At the congressional hearings 1 congressman asked GM why are you in the banking business when your main job is building cars.

Any car buyer following this would probably buy a foreign car before they would buy an American Car.

 

[jsharp]

GMAC was always a huge money maker for GM. Then they decided to get into other types of credit. Had they stuck to car loans they wouldn't be in the shape they're in.

They got into other forms of credit because it was profitable for other companies. I've heard GE described more than once as a hedge fund masquerading as a manufacturing company.

 

[BearZDefect]

GE Capital, GEMB. Troublemakers!

But seriously, I don't like 'em.


I once had a credit card whose bank got eaten by GE. Interestingly GE didn't keep it for long before spitting it out for another bank to eat.

Citi ate the bank of another card in my history. Had to close that account to shake them off me.

Dog eat dog, those banks.

Then when they all start throwing up, we now see who gets the bill.

 

[LTVibe]

Auto aid at work; banks sit

Quote:
"Upon qualifying for TARP loans, GMAC wasted no time in pumping federal cash into car loans for consumers," Michelle Krebs, senior editor of Edmunds' AutoObserver.com said in a statement. "This is in stark contrast to the banks who still largely refuse to give consumers loans despite receiving billions from the government to do so."

 

[itchrelief]

Originally Posted By: LTVibe

Auto aid at work; banks sit

Quote:
"Upon qualifying for TARP loans, GMAC wasted no time in pumping federal cash into car loans for consumers," Michelle Krebs, senior editor of Edmunds' AutoObserver.com said in a statement. "This is in stark contrast to the banks who still largely refuse to give consumers loans despite receiving billions from the government to do so."






I agree, at least they're doing something besides fattening up their execs (because the bailouts weren't in the form of debt purchases, most of the executive compensation limits on financial insitutions are now moot).

I just wish they'd let Chrysler go TU, though. They're just going to pump & dump as soon as they can. If they get bailed out, Chrysler should be nationalized. Then let the govt pump and dump to get some of that money back.

 

[Tempest]

Originally Posted By: LTVibe

Auto aid at work; banks sit

Quote:
"Upon qualifying for TARP loans, GMAC wasted no time in pumping federal cash into car loans for consumers," Michelle Krebs, senior editor of Edmunds' AutoObserver.com said in a statement. "This is in stark contrast to the banks who still largely refuse to give consumers loans despite receiving billions from the government to do so."





Yes, the government artificially increasing the availability of credit to increase the sales of a good they want sold. Now where have we seen this before....hmmmmm.... Oh yes, the housing market which caused all of this in first place!!!

We will now have an automotive bubble. Great!

Surly continually doing more of the same that caused the initial problem will fix everything right???

The people in charge of the government and monetary policy meet the definition of insanity. But don't worry, sleep well.

 

[LTVibe]

GMAC has reduced the minimum acceptable credit score from 700 to 621, and according to this article , "...scores of 620 and above are considered good.".

They have to do something to boost car sales, but they are not going to make loans that are too risky.

 

[Joe1]

Quote:
GMAC has reduced the minimum acceptable credit score from 700 to 621


With their money at risk, they are prudent. However, with our tax dollars at risk, they do not have any moral compunctions and are back to making subprime loans.

 

[firemachine69]

621 is actually a very average score, typical to being late for a few payments, going over limit a few times, and trying to over-extend their credit (in the past). Remember, your credit score goes back to seven years. I read in a business journal a while back that this type of person *seems* to be a high risk, however, that person typically is out to prove that they can indeed pay off their debts without being insolvent (to something like 98%). Remember, 700 is perfect, and not many people actually have that kind of score. Not carrying any kind of credit load tends to place someone around the 640 mark. Because they choose not to have any credit debt, that should dis-qualify them from acquiring a car loan?

 

[LTVibe]

Originally Posted By: Joe1
Quote:
GMAC has reduced the minimum acceptable credit score from 700 to 621


With their money at risk, they are prudent. However, with our tax dollars at risk, they do not have any moral compunctions and are back to making subprime loans.


620 and above is not considered subprime, and GMAC is taking on acceptable risk in order to try and save GM.

At least the auto lenders, unlike the housing lenders, will not be forced by the Feds to make subprime loans to unqualified buyers.