Posted on 10/29/2009 6:57:49 AM PDT by SeekAndFind
It is hardly surprising that GMAC is circling back to the government for a third helping of taxpayer money. GMAC is struggling under the double whammy of bad car loans and the fallout from its misguided foray into mortgage finance at the height of the housing bubble. After the government applied stress tests to the banks last May, it was the only big bank that could not raise the capital it was deemed to need.
Still, GMAC’s return to the public trough — where it expects to get up to $5.6 billion on top of the $12.5 billion it has received since December — should serve as a reminder that much of the American banking system is nowhere near where it needs to be despite hundreds of billions of dollars doled out by the Treasury.
If the federal government’s strategy to save the banks was meant to get them back into the business of lending to American consumers and businesses, it has not worked yet.
GMAC’s sorry state is bad enough news for Main Street. It is the main source of financing for General Motors and Chrysler dealers around the country. That means it is virtually assured to get the additional money it needs for the same reason that the government bailed out the automakers and then gave them the windfall profits of the cash-for-clunkers initiative: too many auto-sector jobs are on the line.
But GMAC is hardly the only hobbled financial institution in the country. Bank of America reported a $1 billion loss in the last quarter and is still limping along, dragged down by its bloated portfolio of bad loans. Citigroup relied on accounting gymnastics and a dubious decision to stockpile few reserves against potential loan losses in order to make a $100 million profit.
(Excerpt) Read more at nytimes.com ...
The mere fact that these banks are still going concerns is because of the government’s willingness to ply them with cash. But neither is lending much.
The banks that do have the financial wherewithal — like Goldman Sachs and JPMorgan Chase, which made combined profits of nearly $7 billion in the third quarter — are not making their money through lending. They are making it from trading complex financial products that few people understand.
Meanwhile, sectors of the economy are being starved of credit.
Banks - borrow from the Fed at near ZERO and have credit cards to consumers at 29.9%. And they can’t make a prfoit?
As much as the Fed says it wants the banks to lend, they really don’t want them to. There is too much money in the system right now and if the banks opened up the flood gates hyper inflation would kick in and all hell would break loose.
What the hey? Auto companies and banks were too big to fail so they had to be taken over to save them. Now big brother is running their businesses and what is happening.
Why would a bank make a risky loan when than can take our increasing savings, leverage and borrow for nothing and buy t-bills that yield .75%?
If there are profits to be made elsewhere, why risk lending?
(Banks Still Not Lending)
I got a loan just the other week.
SAF: Maybe consumers today are paying their credit card balance on time thus avoiding having to pay interest ?
look into how much debt is revolved on cards right now. I see defaults mounting substantially...personally - its an opportunity at back door reparations / creation of a voting bloc when this thing hits the fan and bailouts are made
Plus they appear to be running a program where if one gets a few months behind on their CC, they'll take a 50% payoff.
Wonder if something series is coming down?
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