There's something fishy about this deal.
Posted on 06/12/2012 10:09:50 AM PDT by TopDeadCenter
Ally, which is 74 percent owned by the U.S. government, makes loans to GM and Chrysler customers and finances dealer inventories. The government first bailed out the company, then known as GMAC Inc., in late 2008 as part of the Bush administration's aid to the auto industry. The Obama administration provided additional funding in May and December 2009.
ResCap had been a drain on Ally's finances for years, struggling to make payments on its heavy debt ever since the bottom fell out of the U.S. housing market in 2007. In regulatory filings before the bankruptcy, Ally said that deterioration in the U.S. housing market had led to fewer sources of money for ResCap, which was highly leveraged due to mortgage defaults.
Buffett has said that he believes the U.S. housing market will recover because more families continue to be formed, but he's not predicting when residential construction will rebound.
This investment could be related to Buffett's long-term optimism about the housing market, but it could also simply be a bid to pick up assets that are selling for less than they are worth.
(Excerpt) Read more at news.yahoo.com ...
There's something fishy about this deal.
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