GMAC to Receive $3.79 Billion More in Bailout Funds

When will the bailouts end? More importantly, why are we continuing to throw good money after bad? Reckless, to say the least.

From Automotive News:

GMAC Financial Services said today it will get $3.79 billion in additional aid from the U.S. government, on top of the $12.5 billion already received since December 2008.

GMAC, in a statement released late this afternoon, said that with the infusion it achieved the capital levels required by the Federal Reserve to meet the company's "worse-than-expected economic scenario."

GMAC said the $3.79 billion cash infusion was less than the $5.6 billion originally expected by the Fed in May 2009 because of lower-than-expected losses related to the General Motors Co. bankruptcy proceedings, which concluded in July.

As part of the latest bailout, the government also increased its equity stake in GMAC from 35.4 percent to about 56.3 percent, the statement said.

One person told the Wall Street Journal today that the measure has been crafted to return the company to profitability in the first quarter of 2010.

GMAC provides financing to GM and Chrysler dealerships and customers -- and its stability is crucial to keeping financial pipelines open for those dealerships.

The new capital will likely allow GMAC to avert placing its ailing mortgage unit, Residential Capital LLC, or ResCap, into bankruptcy, the Journal reported, citing people familiar with the matter.

"As we have previously stated, GMAC has been conducting a strategic review of its business and evaluating options to address the challenges at ResCap and the mortgage operations," said GMAC spokeswoman Gina Proia in an e-mail statement.

"Critical objectives in the process would be to take actions that position GMAC for improved financial performance and to repay the U.S. government," she said.

GMAC did not detail any specific actions.

The U.S. Treasury confirmed Nov. 9 that it was discussing the need for additional assistance with GMAC. Then on Nov. 16, the company replaced CEO Alvaro de Molina with financial industry veteran Michael Carpenter.

It could take several years before the company can repay the U.S. government and sell the government's stake to private investors.

As part of its original debt restructuring a year ago, GM and private equity firm Cerberus Capital Management LP were forced to reduce their respective 49 percent and 51 percent stakes in GMAC.

With the latest moves, GMAC said Cerberus' stake will be 14.9 percent, third party investors will own 12.2 percent, an independent trustee for GM will own 9.9 percent and a GM affiliate will own 6.7 percent.

GM sold a controlling stake in GMAC to Cerberus in 2006.

GMAC has scheduled a conference call for 4 p.m. on Tuesday to discuss the latest bailout.

Carpenter, in a statement, said the latest actions would help the company strengthen its business -- particularly its auto finance operations.

"By protecting the financial performance and strength of our core automotive finance operations, we expect to increase the pace at which we can fully repay the U.S. taxpayer," he said. "These actions will also allow GMAC to pursue strategic alternatives for ResCap and the mortgage business."

GMAC Needs More Bailout Funds Claims Fed

How do you feel about banks that receive free money so they can stay afloat? Usually, this forum focuses on alternate energy vehicle developments and technological advancements, but when we find out that GMAC is standing in line with their hands out, it tends to provoke our ire.

GMAC is notorious for their 0% interest loans and they use this marketing tool to entice consumers to purchase big gas hogs they could not otherwise afford. Vehicles like Tahoes and Yukons and Escalades and Hummers with bloated price tags and pathetic mileage ratings are scooping up the free money from GMAC that you and I ultimately get the tab for. Maddening.

From Automotive News:

GMAC Financial Services, which has received $12.5 billion in federal aid, is negotiating for a fresh infusion of taxpayer funds because it has not raised enough capital to survive a deepening recession, the Federal Reserve said.

The auto lender is the only one of 10 large banks ordered in May to raise capital that had not met its goal, the Fed said Monday.

"The one exception, GMAC, is expected to meet its remaining buffer need by accessing the TARP Automotive Industry Financing Program and is in discussions with the U.S. Treasury on the structure of its investment," the Fed said in a statement.

The U.S. Treasury and Fed ordered the banks to take stress tests last spring in a bid to reassure jittery investors that they would be able to withstand a deepening recession.

GMAC was ordered to raise $11.5 billion in the six months following the stress test results in early May, with a deadline of Monday. The firm quickly received a $7.5 billion federal capital injection and has sold U.S.-backed debt. The investment came on top of emergency government aid GMAC received in December to keep it out of bankruptcy.

GMAC has indicated it will need less funds than were expected at the time of the tests in May, the U.S. Treasury said Monday. Department officials have said they knew it was likely the government would need to contribute more capital to GMAC because as a privately held firm, it had little ability to sell shares.

GMAC's owners include General Motors Co. and private-equity firm Cerberus Capital Management. Among other lending, it provides financing to buyers of vehicles made by GM and Chrysler Group -- two automakers partially owned by the government after their federally sponsored bankruptcies earlier this year.

Worse than ‘adverse’?

Regulators had told the banks to increase capital based on projected losses under various economic scenarios, including one labeled "adverse" that envisioned a 10.3 percent unemployment rate next year.

But joblessness may already be exceeding that level. On Friday, Labor Department data revealed a 10.2 percent unemployment rate for October, and the White House said it would likely rise further before the jobs picture improves.

Nonetheless, the Fed said the stress tests were designed to ensure that the banks would stay sufficiently capitalized through 2010 and continue lending to creditworthy borrowers. The tests calmed investors enough to draw new investment into banks and sparked a stock market rally over the summer months.

The Fed's announcement that GMAC was still negotiating for government capital comes four days after Treasury assistant secretary Herbert Allison said the Treasury Department needed more deliberation over the structure of the investment and it might be delayed past the Monday deadline.

Treasury Secretary Geithner Says GMAC Will Receive Substantial US Aid

Want to hear more lovely news? Our misguided Treasury Secretary, Timothy Geithner has stated that the US government will continue spending good money after bad. Is it really that important that we keep GMAC afloat? How many readers feel that it is time for GM and GMAC to go bye bye? Let's allow better companies to fill the void left by these loser corporations.

From Automotive News:

U.S. Treasury Secretary Timothy Geithner said on Friday that the Obama administration will provide "substantial support" to troubled lender GMAC, a vital provider of financing for the domestic auto industry.

"We're going to provide substantial support to GMAC," Geithner said in an interview with Reuters Television. "It's likely, again, that GMAC will need to take additional capital from the government and we'll be prepared to provide that."

The Treasury and U.S. banking regulators said on Thursday that GMAC needs to raise $11.5 billion to fill a capital hole it could face if the economy were to deteriorate further.

After "stress tests" were performed on the 19 largest U.S. banks, the Treasury and the Federal Reserve concluded that 10 of them need to raise a combined $74.6 billion of capital to build a protective buffer and ensure they could keep lending even in the face of mounting losses.

Geithner said there were some signs that credit conditions were easing and fears of a catastrophic financial meltdown waning. But he said there was still "a long way to go" before credit conditions could be considered normal.

GMAC, partly owned by General Motors, has taken $5 billion in capital from the government already. In addition, the Treasury Department has lent GM $884 million to support GMAC's lending activities. Under the restructuring of Chrysler LLC, GMAC is assuming the business of Chrysler Financial.

As part of the GMAC bailout, GM and private equity firm Cerberus Capital Management LP were forced to reduce their respective 49 percent and 51 percent stakes in GMAC.

Cerberus-owned Chrysler has entered bankruptcy proceedings, and GM has until June 1 to show it can come up with a workable restructuring plan, underlining the importance of GMAC to the struggling U.S. auto industry.

"Financing is critical to this (restructuring) process, and that requires that GMAC have the ability to provide loans that Americans need to buy cars," Geithner said in explaining the Obama administration's rationale for supporting the lender.

GMAC CEO Proves Exactly What is Wrong With Our Society

Alvaro de Molina, CEO of GMAC and perennial lottery winner



Ready to get ticked off? Only two months ago, GMAC received $6 billion in bailout aid under the auspices of TARP (Troubled Asset Recovery Program, aka banking bailout bill). Today, we see how this evil banking company shows its appreciation. Alvaro de Molina received $11.2 million in 2008 ALONE for his fabulous work that necessitated his company needing $6 billion in FREE money.

First of all, is anyone really worth this kind of money? Wouldn't it be nice if all of us could get paid these sums as reward for driving a business into the ground? Obviously, de Molina is not alone as we read daily about the atrocities of CEO's who receive inordinate sums for shipwrecking their companies. I truly am worn out by these stories and wonder what it will take to stop this madness.

From Automotive News:

Auto financier GMAC LLC, the recipient of a $6 billion federal bailout in December, today said CEO Alvaro de Molina was awarded $11.62 million of compensation in 2008 -- which doubled his total compensation from 2007.

De Molina was awarded a $1.2 million salary, $5.81 million of stock awards and $4.8 million of other compensation, offset by option awards of negative $194,000, reflecting the application of an accounting standard.

GMAC said de Molina's compensation was $4.93 million in 2007. He became CEO on Sept. 5 of that year.

GMAC has in recent quarters suffered operating losses in its auto and mortgage units, but in December won its government bailout, as well as bank holding company status that allows it to tap lower-cost funding.

GMAC reported de Molina's compensation in a summary table included in its annual report filed with the U.S. Securities and Exchange Commission.

Differing calculations

Some pay consultants and governance experts tabulate executive pay differently, saying the summary total may be imperfect because it counts options and stock as part of pay when they vest rather than when they are awarded.

About $2.26 million of de Molina's compensation came from the use of corporate aircraft. GMAC said it no longer provides aircraft for business or personal use.

The bailout required private equity firm Cerberus Capital Management LP and General Motors to slash their respective 51 percent and 49 percent stakes in the Detroit-based lender.

In the annual report, GMAC said there remains substantial doubt about the ability of its mortgage lending unit, Residential Capital LLC, to survive. GMAC said it might take a $3.1 billion charge if ResCap were to file for bankruptcy protection and its investment in ResCap equity fell to zero.