Federal Government Orders GMAC To Raise $13.1 Billion
The U.S. government has ordered GMAC to raise $13.1 billion in new capital. Likely source for that capital? Uh, the U.S. government.
Since GMAC's lending is in weak sectors—auto financing and home mortgages—it's in a more precarious position than other banks.
The bulk of the new capital needed — $9.1 billion — would be designed to bolster the existing GMAC against the adverse scenario included in the federal government's recent "stress test" of major financial institutions. The government is expected to release the official results of the stress tests today after the markets close.
Regulators said that GMAC faced substantial risks of new defaults, particularly in mortgage and consumer automobile lending. GMAC's focus on those areas of business has made the firm more vulnerable to losses during the economic downturn than more diversified banks, said the executive.
Feds Order GMAC to Raise $13.1 Billion to Shore Up Finances [Washington Post]
Post a comment
Comments:
Who is John Galt?
Can they forgive my unvalued equity loan?
So I want to start a 12 month CD with these guys. They currently have the best rate going (2.8). Is this a bad idea? I know it's FDIC insured and all that, but putting my money in the hands of anything having to do with GM right now seems a wee bit risky.
@CreativeLinks: If you're going to start quoting Ayn Rand in the face of the greatest looting by capitalists in the last hundred years, you really need to re-evaluate your ideology.
@Blinky987: If you're gonna moronically agree to pumping tens of billions of taxpayer dollars to reward theiving capitalists then you need to...give my money back.
@Blinky987: no need to be an ass about it. Lots of people ask for advice via comments. it's a good way to get started in looking for information.
FDIC insured. That's all that matters to me. Just keep it under the limit- and remember to include your accruing interest! If you deposit exactly the FDIC insurance limit, your accruing interest will end up being over the limit and therefore uninsured.
(I have a savings account at GMAC. Service has been excellent and the rates are outstanding.)
Cerberus just can't keep its hands out of the govt cookie jar.
If this is the same stress test that is being applied to banks, it doesn't require all that amount in cash. Converting preferred stock to common stock and making some other adjustments will be considered an increase in capital. Still, Uncle is going to take some of a hit. But look at the bright side...getting a loan from GMAC is patriotic.
@Gene Gemperline: Back when many banks in New England were going under, we parked funds in CDs at several of these banks because of the great interest rate(s). Even if they failed before maturity, we still came out whole. As said above, just stay under the FDIC limit.
GMAC is part of GM, right? GM, meaning Government Motors.
GMAC is only 49% owned by GM, since they sold off part of GMAC three years ago to raise funding before this most recent economic collapse. Actually with GMAC GM would be in worse shape than it is in. GMAC owns Ditech.com, which made tons of stupid loans during the housing booms with their "lost another loan to Ditech" ads, just like WaMu saying yes when those "stodgy" bankers said no.
@Gene Gemperline: I have 2 cds with them. The best things about it are 1.) Higher interest rate and 2.) You can opt for monthly checks for the interest :)
No idea why people don't use GMAC more often because of their awesome rates. I just opened a savings account as well a few days ago
Hey Fiat, want to rescue another lousy American car company from the morons who drove it into the ground?
Actually, you might want to re-read Atlas Shrugged. The looters were the people who couldn't cut it in the real world and went whining to the government saying that they weren't given a chance. The government then took from the successful and gave it to those who weren't. In this case, the whiners are the foreclosed and the unions. The ones being sucked dry are every business owner who's getting stuck with an obscene tax bill because "we have to return the country's wealth to its rightful owners." Bollocks! You work at job and you get paid for it. You've been compensated. If you take the enormous financial risk of developing a product and selling it or being someone who invests in the development of a product outside the company walls which may take years, you have earned that profit. Don't give me that crap that the government "lets" you do this and is therefor entitled to the lions share.
I am tired.