The U.S. Federal Reserve late Wednesday approved a requested by auto and mortgage finance firm GMAC to become a bank holding company, thus making it eligible for government aid. GMAC was spun off from General Motors in 2006 in an effort by the automaker to raise cash. It was since hammered by the credit crisis, prompting it to seek government assistance. Following the Fed’s decision, the struggling company will now have access to a share of the $700 billion Troubled Asset Relief Program (TARP).
American Express, Goldman Sachs, Morgan Stanley, and CIT Group (not to be confused with Citi) all recently restructured to become “banks” and therefore access TARP in the wake of the economic collapse. It’s not yet known how much assistance GMAC will receive, but it could be eligible for up to $6 billion in low-interest loans.
General Motors, which owns 49 percent of GMAC, will be forced to reduce its ownership stake to less than 10 percent, as per Fed and Treasury directives. Chrysler’s parent company Cerberus, will have to divest itself of its controlling stake in the company. The private equity firm will be forced to cut its stake to 14.9 percent in voting shares and 33 percent in total equity. Cerberus will reduce its ownership by distributing interest in GMAC to its investors. No individual investor will be allowed to hold more than a 7.5 percent stake.
“Today’s announcement marks a key turning point in GMAC’s history,” GMAC CEO Alvaro G. de Molina said in a statement to the press. “As a bank holding company, GMAC will be competitively positioned for the long-term to provide financing to auto and mortgage consumers and businesses such as automotive dealers. GMAC has been a leader in these sectors and it is critically important to our company and the broader economy to resume responsible lending to consumers and businesses.”
12/25, 6:47 PM
posted by:
johnnycanuck
It’s a Festivus miracle! Now where are Borat & LLLL#3 to commence the Airing of Grievances?
12/25, 7:03 PM
posted by:
RaineMan
What a bunch of crap… more companies turning into “banks” so they can get blank checks and continue to do whatever they want.
12/25, 8:25 PM
posted by:
Mutant@DCX
…a guy walks into a bank and says “I want to open a f****** account.”
Assistant manager says “That’s no problem but that language isn’t necessary.”
The guy says “I want to open a f****** account.”
Assistant manager decides to call the manager who says to the guy “Can I help you?”
Guy: “I want to open a f****** account.”
Manager: “No problem but that language isn’t necessary. How much do you want the account for?”
Guy: “Six billion dollars”
Manager: “And this f***head won’t help you?”
12/25, 11:12 PM
posted by:
jayjc08
If I had the decision to make between giving $700 billion (that may be inflated to 7 trillion by the time we’re done with it) to a bunch of nutheads who had went money mad and had no self-control over their lending and monetary insurances, or give $20,000 to every taxpayer (the amount it’s going to cost taxpayers)..
Well, if you haven’t guessed which one I’d make by now, I’d call you an idiot.
12/26, 12:42 AM
posted by:
JakeK66
Good one JohnnyC, when are we going to have the Feats of Strength between them?
The Pole is up
Grievences born
With Feats of Strength,
My Ligaments are Torn
Happy Festivus to All the Regulars!
12/26, 8:49 AM
posted by:
howsmydriving
The government is going. about the bailout in the wrong way. Tax credits should be provided to purchasers of enthusiast cars like Corvette, Camaro, Porsche and most BMWs. Severe tax penalties should be imposed on purchasers of SUVs, minivans and Volvo’s.
Strangely, Congress does not endorse this approach.
12/26, 11:10 AM
posted by:
Zcarsales
howsmydriving, what you’re suggesting is that the government use the tax code to enforce social behavior. Taxes, and this is what the original intent was, is to fund items listed in the Constitution. Ever stop and think that the current tax structure might have a hand in this entire financial fiasco that we’re currently enduring?
Fair and equal treatment under the law, the tax law, is what creates a booming economy. It may seem a little deep that we’re getting into civics, but the government is 70 to 80 responsible for the state of the economy.
12/26, 12:01 PM
posted by:
jayjc08
… So I guess it’d be new news that we’re funding things not provided under our constitution?
And however you sugar coat it… the government should not be responsible for 70-80% of the economy. The people who wrote the constitution would have agreed with me there. And lastly, we’d be in a whole lot of a better situation… if we didn’t have to pay interest on our own money. Anybody else find that ridiculous, ironic? Not new news that we’re borrowing and lending more money than we have, out of a private bank either, buddy.
12/26, 12:35 PM
posted by:
carstuff
At least with GMAC the money will go to the dealers to buy floorplan and give out auto loans. Hopefully they will not be passing out bonus’s.
12/26, 4:07 PM
posted by:
yarddog82abn
Back in High School i read a book that was written buy some British guy. It was about the over all meltdown of the BERLIN WALL coming down, and how many German banks ran out to merge with other Bigger World Wide banks for there survival, the book was known as the basis for a Economic Yard Sale, buy dirt cheap and sale at it’s starting point of it’s inflation, IN & OUT business…
To bad I don’t have the cash to play with, this is going to one hell of a yard sale…
12/28, 7:58 PM
posted by:
9DOOREMPIRE
http://www.americanaphonic.com/pages/commonsense.html
12/28, 8:43 PM
posted by:
Get Real
U.S. Government Position:
We can bail EVERYONE out.
We can cut trees and print money.
12/29, 1:06 PM
posted by:
yarddog82abn
@9DOOREMPIRE
Dude you are so right… If we can only get more people to read it we will be in a better position…