The U.S. taxpayer (READ: you and I) now own a majority interest in GMAC Financial Services, which this week received a capital infusion of $3.79 billion from the US Treasury Department.
The additional aid means that the U.S. government now owns 56 percent of GMAC, totaling $16.3 billion. Much of the aid comes as the financial services giant continues to reel from mortgage losses in its Residential Capital (ResCap) unit. ResCap has lost $2.7 billion through the first three quarters of 2009, and lost $9.96 billion in 2008 and 2007.
In an effort to make up the remaining $1.81bn in required capital, GMAC announced plans to write-down roughly $2bn of mortgage assets at ResCap. Does this mean my mortgage is written down as well???
The government also will hold about $14 billion in what amounts to loans that GMAC may eventually repay.
Wait this is my favorite part….Isn’t it fun to watch our leaders give away OUR money.
“We said, if you do not go raise capital from the private markets, if you are unable to, we will put capital into you because it is important to the stability of the system,” Treasury Secretary Timothy F. Geithner told the Congressional Oversight Panel earlier this month. “It was never going to be possible for GMAC. They are in a unique and difficult situation.”
Congressional Republicans criticized the action Wednesday. ”The government should be releasing its grip on financial institutions, not buying more of them,” said Rep. Tom Price (R-Ga.), chairman of the Republican study committee, a conservative House caucus.
The government also announced Wednesday that it will exchange $3 billion of these preferred shares for common shares of GMAC stock which do not pay interest and will not be repaid, though they can be sold for a profit if the company’s share price increases.
Isn’t that awesome…more TO BIG TO FAIL…Ok, it works like this: “Hey Bob you give it a go with that there business you gots. If it don’t work I’ll loan you more money and if you are able, repay me later if it all works out. If not well I ain’t worried it was real important and all. No, nevermind Bob, you just do what you think is best and don’t worry about some of that there money I lent ya to get back on your feet.”
Next time GMAC turns down your short sale offer, ask them if the loan is one of the ones that was written off as bad debt.
- The Bank Slayer
