GMAC's chairman, bilked by Madoff, wants to run a bank

GM can't build cars, and GMAC can't hang on to their money.

Welfare comes to the rich. The poor have government welfare. The rich have government welfare. The unions live off government ...and people wonder why the middle class is upset.

Lost another (billion) to DITECH!..............

I found a great company which can save you a lot of unsecured debt heart and headache. You may think that this is "too good to be true" as I did. Well, it IS true and it is good, too, as well as legal. You will be using the laws of this land to your benefit instead of being tricked by the banks holding your credit cards or your other unsecured bills. The Banks got a bail out and they didn't have preconditions (like pay off the credit card accounts held by credit card holders . . . which would have been VERY nice). I figure Bank of America got enough from the Government to use their Bail Out money to write off my pittance (comparatively). And you can too. Third post down following link.

Karl Denninger nails GMAC and the corrupt fed enablers Bernanke and Paulsen:

http://market-ticker.org/archives/704-Regulatory-Fraud-by-Idiocy,-Example-9463.html

“....GMAC reduced the credit score necessary to get a loan from 700 (very good) to 621 (not very good.)

The median (average) FICO score in the United States is (according to myfico.com) 723. That makes 621 quite crappy.

Worse, here was what GMAC did:

“Within hours, GM was offering no-interest loans for as long as five years to counter this year’s 22 percent drop in sales, caused in part by the inability of its customers to get financing.”

Oh, and the terms?

“GMAC will pay an 8 percent dividend on the Treasury’s $5 billion of senior preferred equity. The company will also issue warrants in the form of additional preferred equity that will equal 5 percent of the preferred-stock purchase and pay a 9 percent dividend if exercised.”

So let me see if I understand this.

The government “buys” preferred equity that pays an 8% coupon. GMAC must pay that 8% coupon (9% if the government exercises the warrants)

GMAC turns around and loans out money at 0% which it has to pay 8% to acquire, and at the same time decides that it will make loans to people with credit scores significantly worse than average, when before they would make loans only to people with scores that were slightly better than average.

And we wonder how we got into this mess?

Loaning money out at a lower rate of return than it costs you to acquire - isn’t that kind of like “we’ll lose something on each sale, but make it up on volume?”

Oh, and then while we’re at it, let’s make lots of loans to people who have credit significantly worse than the average credit score in the United States, instead of just making loans to those who are at least average in their handling of credit.

The Federal Reserve approved GMAC’s bank holding company application with this as the background and without constraint to prevent this intentionally-losing strategy from being conducted.

In one sentence:

The Federal Reserve and Treasury approved an application that contained as it’s essence an intentional money-losing business strategy, enabling the literal looting of the public treasury under the false pretense of an “investment”.

Clown Bus Economics.

Fair enough assessment, Silverleaf. I appreciate the "make it up on volume" comment.

If you'll recall, it was this same GM/GMAC incentive strategy that helped to shorten the post 9/11 downturn. They came out with the first 0% financing, and shortly thereafter, all of the other manufacturers followed suit in one way or another. It spurred sales and got the money flowing again.

It is not a long-term strategy today, any more than it was in 2001-2002. But, when industry-wide sales are off 40%, somebody's got to do something.

I give GM and GMAC a lot of credit for being the first TARP recipients to step up and address the issue of MONEY FLOW and LIQUIDITY. For all of the talk by Paulsen that the TARP was urgently needed, not one of the bank recipients turned their money around. The banks have sat on the money and only used it to cover their asses. GMAC has been the only company so far to put the TARP funds to use in their intended purpose.

The banks have sat on the money and only used it to cover their asses.

I've read that they're taking the freshly printed paper money that they've we're given themand are putting it in options on hard assests like metals.

You think maybe we're being set up for Weimar/Obama Dollars this year?

GM can't build cars, and GMAC can't hang on to their money.

And why do we have to read this on someone's blog instead the big media? Too busy covering Brittany?

not surprised look what we got to run this country