GMAC

[dougjp]

I'll just post this link and let the comments fly. I can understand why this happened, however there is so much involved here behind the scenes AND setting dangerous precedents for the future, that I think this is one of the saddest evenings that there could be. Time will tell.

http://www.thetruthaboutcars.com/feds-grant-gmac-bank-status-gm-and-cerberus-must-:censor:-off/

[articsteve]

GMAC receiving bank status is really just an additional or "back door" auto bailout loan, but without the massive public exposure.  Much too complicated for joe da plumber and hockey moms to digest. 

dangerous precedents for the future, that I think this is one of the saddest evenings that there could be.

It's a GEORGE W. BUSH  SH*T STORM of biblical proportions.  This is only about the 2900th "saddest evening" and more to come. 

[Honda Owner]

This is actually a pretty clever move on the Bush administration's part. It will allow GMAC to resume lending to people who should have never been lent money in the first place, people with 500 fico scores. In the near future, look for GM to resume leasing so they can clean the backlog of SUVs and pickup trucks. Most of the people (in the USA, anyway) cannot swing bank financing on these units.

Basically, this will allow tax-payer dollars to clear up some of GM inventory. Actually not a bad idea given the times. However, will this allow GM to continue lending to people with bad credit? Will they fall back on pumping out gas guzzling SUVs and leasing them to people who otherwise could not afford them? We have cheap gas again, just in time, too. I don't think this is a coincidence.

And not the date of the announcement. December 24!!!

[initial_D]

Merry Christmas, GM Dealers!

[dougjp]

However maybe not a happy new year, yet?

This, " Still not clear if GMAC cleared hurdle for bailout", was in the news 8 hours ago, as a follow up to an early AM press release, and surprisingly there is no further word on the outcome yet:

http://www.google.com/hostednews/ap/article/ALeqM5jJPN7qLHnYLcpayecFvBaKuG4WIwD95B5EE00

My guess? Get ready for more rules to be broken for them as they are allowed banking status regardless, creating the precedent for endless exceptions and bailouts in every kind of business. If true, how are they ever going to explain this to the taxpayers and businesses? Instead the Treasury and/or the Fed should do this one as a prepackaged bankruptcy, they need the experience, however its very doubtful they would face the problems now when they can put them off until they are bigger another day.

Economically what has happened in the US up to now (and will happen here after the usual recession timing lag in Canada vs. the US), leads to the next step, which is higher taxes and reduced services, well described here:

http://online.wsj.com/article/SB123007128576831281.html?mod=googlenews_wsj

[articsteve]

Deadline past.  GMAC could not meet the equity requirements as lame as they were.

0% financing for the past 8 years gets you Chapter 11.  MBA students will pay 10s of thousands to study that one. 

[mpsrent]

Missing the 75% deadline is not good news for GMAC or GM.

[safristi]

,,,BANCOSAFTANDER   is open fer bidness....................

[dougjp]

Well gag me with a maggot, wouldn't you know, Rules Changed again! Billions fall like pennies from heaven, ain't it grand? No medicine required, life is easy. Everybody just put in more time, eat a whole lot more sewage (debt) and get much sicker! The perfect storm, anyone else want money for nothing? Line up, we will give it out as fast as we can. Why? Because we won't be around for long, when it all blows up, big time as it surely will, the other guy will get blamed! Nothing else is important but that!

http://news.yahoo.com/s/nm/20081230/bs_nm/us_financial_gmac_3

[Careener]

From TTAC
"So if you add GM’s $14.4b, Chrysler’s $4b, GMAC’s $28.8 and the Department of Energy’s $25b retooling loans, you end up with a $72.2b Detroit bailout “plan.”

All of this with no business plan. Merry Christmas indeed.

[tpl]

Just this morning on the BBC


US offers $6bn bail-out for GMAC
GM vehicles
GM says that GMAC's falling ability to offer finance has dented sales

The US Treasury has unveiled a $6bn (£4.1bn) rescue package for GMAC - General Motors' troubled car loan arm, co-owned by Chrysler's owner, Cerberus.

The move - to encourage GMAC to offer funding to would-be vehicle buyers - is the latest aimed at easing the severity of the economic downturn.

Earlier this month the White House agreed a $17.4bn bail-out GM, Chrysler and Ford to help stave off collapse.

GMAC recently gained approval to become a bank holding company.

This gave it access to emergency government funds offered to other financial institutions.

Fewer loans

Under the terms of the rescue, the US Treasury will buy $5bn in shares in GMAC, and will increase a loan to one of GMAC's co-owners, GM, by an extra $1bn.

This increased loan will help fund GM's purchase of shares as part of GMAC's reorganization as a bank holding company, and comes on top of the bail-out for the car industry.

The Treasury said it was dipping into the $700bn financial bail-out fund which was approved by Congress in early October to fund this rescue.

GMAC's solvency is considered crucial to GM's own survival.

The car loans firm has lost $7.9bn over the last five quarters as the credit crisis has raised its borrowing costs sharply and the value of many of its assets plunged.

GMAC has traditionally provided the bulk of financing for car buyers at GM dealerships and the loans that dealers rely on for their inventories of GM cars and trucks.

But its ability to provide both kinds of financing has been sharply limited over the past several months because of the broader credit crisis and as GMAC's ability to borrow has lessened.

'Act quickly'

GM's US sales plunged 41% in November and the carmaker said the squeeze on GMAC's own financing was on reason for the downward spiral in sales.

GM said earlier this month, that while GMAC had been able to provide financing to nearly half of GM car buyers just a year ago, that share had dropped to 6% now.

In a statement, GMAC said it intended "to act quickly to resume automotive lending to a broader spectrum of customers".

GMAC agreed to restrictions on dividend payments and executive pay as part of the equity injection.

The bonus pool available to its top 25 executives has been cut by 40% from 2007 levels.

GM and Cerberus will both see their holdings in GMAC reduced as a result of GMAC becoming a bank holding company.

GM will end up with 10% stake, while Cerberus will have a 30% share in GMAC.

[mmret]

"to act quickly to resume automotive lending to a broader spectrum of customers".


 

Such a broken company.

[safristi]

  wot I wanna KNOW is how they KNEW "MY SPECTRUM wos BROADER than last year!!!!...................do they have Gym Cams and Golf Cams..........

[neil]

wot I wanna KNOW is how they KNEW "MY SPECTRUM wos BROADER than last year!!!!...................do they have Gym Cams and Golf Cams..........

I know as a fact this has dented sales.  Canadian dealers are still advertising 0%, but factually are virtually doing no business through GMAC.  GMAC will only finance 105% of invoice of the vehicle, max 60 months.  105% including tax, warranties and accessories.  Do the math and significant down payment is now required to qualify a GMAC loan in Canada.

GM offered an incentive credit, massive, for consumers to finance on extended terms +72mo or longer.  $5k on Cobalts, Impala's for example.  Consumers then use the rebate with Canadian Commercial lenders through the dealer.  The foolish thing is the credit is only available if you finance, if you go in with a cheque, no rebate.

[BillyMaxer]

wot I wanna KNOW is how they KNEW "MY SPECTRUM wos BROADER than last year!!!!...................do they have Gym Cams and Golf Cams..........

I know as a fact this has dented sales.  Canadian dealers are still advertising 0%, but factually are virtually doing no business through GMAC.  GMAC will only finance 105% of invoice of the vehicle, max 60 months.  105% including tax, warranties and accessories.  Do the math and significant down payment is now required to qualify a GMAC loan in Canada.

GM offered an incentive credit, massive, for consumers to finance on extended terms +72mo or longer.  $5k on Cobalts, Impala's for example.  Consumers then use the rebate with Canadian Commercial lenders through the dealer.  The foolish thing is the credit is only available if you finance, if you go in with a cheque, no rebate.


True and the only way to beat the system is to borrow through them , pay for 3 months, which is the min. before you can pay it off, then if you happen to have the cash, pay it off  and you get the full benefit of all incentives.I just bought a new truck and this was how I was told to do it. Do not pay in full if you have cash, borrow, make 3 payments, pay it off and there is nothing they can do, you already have the extra $5000.00 or in my case $5700.00