GMAC seeks more taxpayer dollars
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TEXT OF INTERVIEW
Stacey Vanek-Smith: GMAC is asking for another big shot of taxpayer dollars. GMAC is best known as the former financing arm of General Motors. It branched out into other areas of finance just in time for the sub-prime lending boom — and bust. GMAC has already gotten about $12.5 billion dollars of taxpayer money.
And now it’s reportedly in talks with the Treasury Department to get at least $3 billion more. Here to talk about that with us is our very own Ashley Milne Tyte. She joins us live. Good morning, Ashley.
Ashley Milne-Tyte: Good morning.
Vanek-Smith: So what exactly is happening with GMAC?
Milne-Tyte: So remember those stress tests last spring, where the government wanted to seejust how sound various banks were? This is banks that had received bailout money?
Vanek-Smith: I do.
Milne-Tyte: Well, 19 banks had to do the test. And most either passed with flying colors, or they were able to raise extra capital. GMAC was the only one that couldn’t manage to raise the capital the government thought it needed to keep lending money in a lousy economy. So at that point, the government gave them another $7 billion, but they still need to come up with actually more than $5.5 billion by early November. And GMAC’s the only recipient of bailout money that’s gone for a third round of government funding.
Vanek-Smith: So do you think this is going to work? Do you think the government is going to give GMAC more money?
Milne-Tyte: It looks like it. What isn’t clear at this point is what sort of form that injection of cash will take. It could in the form of preferred stock in GMAC. But it does look like the money will come.
Vanek-Smith: What are people saying about this? What are you hearing?
Milne-Tyte: Well I talked to Christopher Whalen of Institutional Risk Analytics a little earlier and he thinks this is a mistake.
Christopher WhalenThe real endgame here is political. The Democrats know they have to keep GM and United Autoworkers on life support, at least through next year’s election, or they will start to lose House and Senate seats in the Midwest.
So as you can hear, he’s very skeptical. He says the problems at GMAC won’t be solved by pumping more money in. He thinks that the company basically needs to be restructured for it to have any chance of successfully lending again.
Vanek-Smith: Are there likely to be strings attached? Are we hearing anything about the government planning to oust management, things like that?
Milne-Tyte: So far no. Reports seem to indicate that the government won’t push for any changes at the top. But of course, that all could change. We’re not quite sure yet what’s going to go down.
Vanek-Smith: Ashley Milne-Tyte in New York, thank you.
Milne-Tyte: You’re welcome.