Is GMAC too big to fail?

Youpolls ^ | Oct. 28, 2009 | WSJ

[DBlake]

In a stark reminder of how some battered financial firms remain dependent on government lifelines, GMAC Financial Services Inc. and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, people familiar with the matter said.

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government's 35.4% stake in the company could increase if existing shares eventually are converted into common equity.

[HamiltonJay]

NO

You never bail out a finacial company, the key to lending is you must not only borrow competently but LEND competently as well. You don't bail out those who engage in incompetency on either side of the equation.

[bt579]

Enough is enough. Let it fail.

[PGalt]

BUMP! BUMP!

[clintonh8r]

Let that piece of crap fail.

[wayoverontheright]

I could be wrong, but I believe this has more to do with Chrysler than GM. The tarp monies that GMAC received were conditional upon their willingness to take over the Chrysler dealer floor plans. This is being done right now, and requires big bucks. This request was anticipated by the government because Chrysler could not have merged with Fiat without these assurances.

Unlike GM, GMAC has always been profitable, until the credit bubble burst, created when the Community Reinvestment Act was "strengthened" under Clinton.

GMAC's current troubles can be equally attributed to government's intervention into the financial markets and a degree of mismanagement, not just mismanagement, IMHO.

[Old Professer]

I thought GMAC was retained by Cerberus?

[steve8714]

GMAC the financing arm of the UAW. Of course they’re too big to fail.

[wayoverontheright]

At one time, Cerberus owned 51 percent of GMAC. This controlling stake by a bank entity is what enabled GMAC to qualify for bank status itself, and receive TARP funds. It was only later that the FIAT-Chrysler deal occurred.

Cerberus, of course, owned Chrysler too, and no doubt was in the smokey back room with Obama's goons and Fiat when this whole thing was shoved down everyone's throats.

I'm not sure to what extent Cerberus is still involved in GMAC, my only point was that I think this particular request was pre-ordained when the Chrysler deal went down.

GMAC publicly stated that they would have "significant monies to lend" until the Chrysler-Fiat deal occurred and it was announced that they would be taking over the entire Chrysler dealer network's floorplans. This represented a significant chunk of change that no one could have counted on.