Please sir, may have I some more?
GMAC is back in line at the Treasury Department, empty bowl in hand. The bank is asking the government for a third bailout — somewhere between $2.8 and $5.6 billion. That’s on top of the $12.5 billion GMAC has been given since December.
The willingness by Treasury officials to deepen taxpayer exposure to GMAC reflects the troubled company’s importance to the revival of the auto industry. Founded in 1919, GMAC has $181 billion in assets and is a major financier for 15 million borrowers and thousands of General Motors and Chrysler car dealerships in the U.S.
The reason GMAC qualified for government assistance in the first place is that it asked to become a bank holding company, and the government granted the wish. Of the banks that did the Treasury’s “stress tests,” GMAC is the only one so far that has come back for more gov’t money. Private investors have ignored GMAC completely.
The real reason behind this bailout is GM. In an age when cars are still purchased on credit, someone has to front the money if automakers are going to move inventory. For GM, that means GMAC, which in turn means taxpayers.
Taxpayers are lending themselves money to buy cars (via GMAC). To buy houses (via Fannie, Freddie and very soon FHA). To buy anything and everything that has to be financed.
My question: When are we actually going to pay for any of it? Also: When we realize we can’t, what’s going to happen to the economy?
Not only that, but the taxpayers are at the back of the creditors line, in the event that GMAC goes under. For this latest bailout, we will (once again) be getting preferred stock. At Clusterstock, Henry Blodget says:
Instead of a preferred security, which is subordinate to all GMAC debt, we want a SENIOR BOND. A bond that will be paid off FIRST in the event that Tim (Geithner) finally gets the boot and GMAC collapses.
We also want a big helping of WARRANTS to compensate us for the risk we’re taking. In addition to interest, we deserve upside–the same upside that any private-market savior would demand.
How about it, Tim?
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