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You'll never see that money again

A new report says the bailout of GMAC was wrong on so many levels, it's hard to know where to begin. But for future reference, it's important to note what happened.

The Congressional Oversight Panel's report says taxpayers will probably never see at least $6 billion of the $17 billion bailout. It also strongly questions why GMAC was rescued in the first place. From the New York Times:

In one passage, the report concluded that GMAC became "one of the five largest wards" of the government even though it was "a company that apparently posed no systemic risk to the financial system, that did not seem to be too big to fail, too interconnected to fail, or indeed, of any systemic significance."

So, how did GMAC convince the Treasury? From December 2008:

Analysts had speculated that if GMAC didn't obtain financial help it would have to file for bankruptcy protection or shut down, which would be a serious blow to GM's own chances for survival.

That's debatable. At the time of the bailout, GMAC was majority owned by a private equity firm. GMAC was divested from GM in 2006. GM and GMAC most likely made it appear that GMAC was invaluable to its business because it had created a cozy dominance of the revolving lines of credit used by carmakers. It was widely known that GMAC crushed itself by getting into the mortgage business and still, the government gave it a second helping of billions in May, 2009:

The Treasury has said that the initial bailout was needed to prop up the auto industry, and that the subsequent ones were deemed necessary after GMAC took part in the "stress tests" ordered by the Fed, even though it "might appear that good money was being thrown after bad."

The panel found that "half-hearted attempts at saving an institution from insolvency that lack coordination among regulators" might be more costly than a full bailout or bankruptcy.

Another question: How much did GMAC spend to get its bailout? Take a look at this chart of GMAC's lobbying efforts. Note the figure in 2008, the year of the bailout. From Open Secrets:

Near the end of 2008, GMAC was granted status as a bank so it could qualify for TARP funding. Further note that it's still spending more than a million dollars lobbying the federal government.

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with the 17 billion wasted on gm as well as many others this country could have been turned in the right direction. i have worked in the natural gas pipeline business for 15 years and have worked on a 42 inch line that started in wyoming and is complete to east ohio. and will end in new jersey. and in june of this year i will begin on a 42inch line that will travel from wyoming to the west coast. my point is that you can get a natural gas powered car or lite duty truck right now but they will do anything to talk you out of bying one and if that dont work you get put on a 6 month waiting list. there are natural gas stations in many states already and gas is about 77-1.25 per gallon so if gm chrysler and ford would start producing these autos and the government would spend 17 billion converting filling stations from unleaded to natural gas the whole country would have more money in there pockets to spend on other things thus stimulating the national economy and if the gov is really concerned about the environment it is a win win because nat. gas burns 68% cleaner than unleaded. and it is here in the U.S. so we can keep the 700billion spent on forign oil. any questions.

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