TAXPAYERS CONTINUE TO OWN 74% GMAC

Some eye-opening reporting being done by SIGTARP (Office of Special Investigator General of TARP). You can spend hours looking over reports, investigations, testimony, etc. done by this group. you can also download the reports in the pdf format.

I am going to post part of another investigation next. The following is part of the subject line above and i have posted the link to read the whole report (don't know why it decided to be double-spaced) below:

General Motors Acceptance Corp. (“GMAC,” which has been rebranded as Ally

Financial Inc., “Ally”) is the second largest remaining TARP investment, with

$14.6 billion in TARP funds owed, for which taxpayers own 74% of the company.

As part of the auto bailouts of General Motors Corp. (“GM”) and Chrysler LLC

(“Chrysler”), the Federal Government made a coordinated rescue of GMAC,

once the auto financing subsidiary of GM. According to Treasury, Government

assistance began flowing to GMAC at the end of 2008 to keep financing available

to creditworthy GM dealers so they could continue to order cars, a function

deemed necessary to sustain the auto industry. Treasury made three sequential

TARP investments in GMAC through TARP’s Auto Industry Financing Program

(“AIFP”), continuing to justify its necessity because of GMAC’s ties to GM and

the auto industry. However, Treasury’s rescue of GMAC was markedly different

from the other auto bailouts because GMAC was the only company in the auto

bailout whose business extended beyond the auto industry. GMAC was one of the

nation’s largest subprime mortgage lenders. Taxpayers were not just bailing out an

auto finance company, they were bailing out one of the nation’s largest lenders of

subprime mortgages.

GMAC’s TARP assistance was also markedly different because Treasury

never required GMAC to submit a viability plan outlining how it would resolve

substantial liabilities that led to historic losses. Treasury required GM and Chrysler

to submit viability plans and quickly planned for Chrysler Financial Services

Americas LLC’s liquidation. Treasury’s lack of a plan that would address the

subprime mortgage component going into the GMAC investment may be the

primary reason why still today, four years later, GMAC, now rebranded as Ally,

remains in TARP. By continuing to stand behind GMAC and provide repeated

bailouts of a subprime lender, Treasury underlined the moral hazard encompassed

in TARP – GMAC was too big to fail.

Although the Federal Reserve Board (“Federal Reserve”) required some

restructuring of GMAC as a bank holding company, which was agreed to by

Treasury, neither it nor Treasury addressed GMAC’s subprime mortgage liabilities

through its subsidiary Residential Capital LLC (“ResCap”), where most of its losses

occurred. By not working to fully restructure Ally and ResCap, as it did with GM

and Chrysler, Treasury was merely postponing the resolution of the company’s

substantial mortgage liabilities, and finally in 2012, ResCap filed bankruptcy.

Taxpayers invested in GMAC because of its auto financing business, but

GMAC also has used TARP funds to cover losses in its subprime business.

 http://www.sigtarp.gov/Audit%20Reports/Taxpayers_GMAC.pdf