• Mar 12th 2010 at 1:58PM
  • 24
"The panel is deeply concerned that Treasury has not required GMAC to lay out a clear path to viability or a strategy for fully repaying taxpayers." This, according to a Congressional Oversight Panel that was created as a watchdog for the U.S. Treasury's Troubled Asset Relief Program (TARP) funds. The fix? Potentially breaking GMAC up into units and merging its auto lending business back into General Motors.

As a refresher, the Treasury invested $17.2 billion in TARP funds into GMAC, after which the financial company lost $8.3 billion on its Residential Capital unit in 2009. For it's part, Treasury has responded to the panel in a statement, saying, "Treasury continues to be a reluctant shareholder and to manage its investment in GMAC in a hands-off commercial manner consistent with the administration's established principles that guide Treasury's management of financial interests in private firms."

And since we've heard from the congressional panel and Treasury, why not from GMAC itself? Again, from a statement as reported to Automotive News: "We appreciate the panel's responsibility to analyze history; however, GMAC's management team is focused on the future. That includes continuing to provide the highest level of service to auto dealers and consumers in support of our auto partners, returning GMAC to a high level of profitability, and repaying the U.S. Treasury."

At this point, there's no clear indication on how Treasury or the congressional panel will proceed. Regardless, this is an issue that we'll be keeping a close eye on in the coming weeks. Stay tuned.

[Source: Automotive News – sub. req'd. | Image: Craig Jones/Getty]

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    • 1 Second Ago
      • 5 Years Ago
      I still can't get used to seeing Chrysler commercials with references to GMAC in the fine print. What an upside-down world. I thought it was a huge mistake for GM to sell off part of it to Cerberus to start with.
      • 5 Years Ago
      Given it's been such a big money sink, I think the idea of breaking it up bears merit.

      However, giving it to GM doesn't make sense to me, given that Cerberus (Chrysler) owns the largest stake.
      • 5 Years Ago
      Too bad they didn't take this route before they spent OUR money on bailing the sunzuhbeeches out... someone needs to go to jail for fraud, and I'm thinking some (R)s and (D)s need to be the first to go...
      • 5 Years Ago
      GMAC needs to be sold off, not broken-up-and-re-merged-with-GM.
      • 5 Years Ago
      The fact that Houses continue to foreclose ain't helping GMAC much either.....
        • 5 Years Ago
        All evidence in these cases is anecdotal. It's not like there's a controlled experiment here. No one even knows what the variables are, so how could you hold all but one constant anyway!

        Yes, indicators over the last 24 months have been downward, that's because we're in a recession! Anyone can create a model that explains the past as you have done. The difficulty is telling the future or even what is going on right now. You say we're doomed, but that doesn't make it so.
        • 5 Years Ago

        A whole 0.8% increase, in that article.

        We'll see how well that withstands the test of time. A snap-shot is anecdotal at best.

        How many months of the last 24 months have seen far larger declines? .8% isn't enough to declare any sort of trend change, and can barely be called a fluctuation.

        No statistical analysis shows an absolutely arrow-straight, non-wavering line over time.

        It doesn't negate the principles of economics, and it doesn't show any fundamentals of the economy that have changed direction to lead anyone to think that the underlying market forces will change.
        • 5 Years Ago
        That is true.

        The fact that the government won't stabilize their role in the economy, and won't stop spending future money makes business skittish, not knowing what they'll be able to do in the future.

        Skittish business under more and more taxation and regulation, tend to not hire people, and if it is bad enough, tend to lay people off.

        More people laid off tend to retrench their budgets, and not spend personal cash.

        People not spending cash is called low consumer confidence, and hurts the service and retail sectors, big-ticket items, and many other things.

        Lower demand makes business even more skittish, and forces even more layoffs.

        Fewer people employed pay less taxes.

        Less tax revenue to the government means that the government has to borrow even more, and print even more, to continue spending even more... (Because they are the only ones who feel themselves to be outside of the bounds of economics... although really, they are not.)

        Printing, borrowing, and spending more money dilutes the money supply that people hold in their wallets.

        Less valueable money diminishes peoples buying power, both unemployed, and employed.

        Less valuable money being spent is passed on as a cost through business, and businesses cannot lower prices to stimulate demand. If it is bad enough, it raises prices and reduces demand further.

        The more that necessities like gasoline, food, household energy, and other necessities cost, and the less that the average american has to spend due to lower income buying power, or lack of income... means that they tend to default on their mortgages, and their car loans.

        Defaulting on debt causes the banks to further have to write-off credit assets, and sends them back to the government welfare line, to get more taxpayer dollars, because that is where they have gotten them before.

        And the whole death spiral continues, and the effects spread out and reflect on each other like ripples in water.

        It must be broken, and GOVERNMENT is where it shouldn't be housed in the first place. The US Constitution was written to prohibit the government from having this sort of control.
        • 5 Years Ago
        I never said we were doomed.

        I also wasn't extrapolating future activity, nor claiming it as certain.

        I WAS describing what already has, and IS happening, and has happened in every other depression or severe recession this country has had.

        This is history, and current events, not future.

        One can extrapolate with a degree of confidence what will happen, if things don't change, though. It has happened before, in the US and in other countries. Like Germany, Zimbabwe, Argentina, and others... deflation, followed by high or even hyper inflation.

        People really should learn history and economics.
        • 5 Years Ago
        I agree with some of it but the fact is, At this point in time the Government right now is just picking up the mess and trying to fix what the general public created......Nothing in this world is free, there are too many straight A citizens paying for the ones that are taking advantage of how the system works...I am against the national health care its going make things worst...Sure everyone points at how great other countries are with national health care but fail to see how much they get taxed due to it....The heavy pushing on the green movement is costing tooo much to everyone; instead of letting technology evolve at it's natural progressive paste but everyone wants things now..and whose to blame but the general public...The fact that NYC is pushing a 18% tax on sugar drinks to cut down on fat people just goes to show how movements of the general public make things worst...the movement to raise minimum wage, where do you think the employer is going to get the money? raise it's prices, then when everything goes up in price that pretty much cancels out the raise back to where you started.....The government is for the people and when the people fck up the government only solution is to through money at the problem and keep regulating peoples faults......
      • 5 Years Ago
      If their business case sucks...

      How about they fail.

      Maybe that will teach people how to make a sound business case the next time. There is always a next time, whether it be rebuilding, or buyout and replacing the company with another in the marketplace.

      What power does Congress have to split up a company, especially one that isn't a monopoly... which government actually supports more than they oppose. (power, water, cable, electricity, Amtrak, etc...)

      This crap is well too far out of hand.

      Nobody learns anything when nobody risks failure under their own incompetence.
        • 5 Years Ago
        GMAC is GM's primary lending source. If you let them go it will cripple GM dealers in selling cars. With so much invested in GM it would be dumb to just let GMAC go, no matter how much "sense" it makes you "let it burn" pundits. If you want your money back, crippling GM is not the way to do it.

        Autonews will probably let you click one or two stories per day then they'll ask for a subscription.
        • 5 Years Ago
        'Unsecured Creditors - such as banks, suppliers, and bondholders, have the next claim. '

        Bondholders are buying debt, they know they have the least claim when they buy the bonds. That's why bond ratings are so critical.
        • 5 Years Ago
        Huzzah! I don't take a cotton to any of these newfangled thinkin's. Why my Pappy down on the bayou raised all of us 23 youngin's with nuthin but his wit, and 3 dollers a week. did it all by him lonesome with nun of this fancy government puttin thier fancy hands into MY pocket. Heck, All yew liberles better git on outta here, cause I AM what made this Kountry great.

        And I know what a good business case is - mine is covered is cowhide and has a fancy pearl handle on it! Even got my inishals to! Oh, it shur is fancy, and the goverment better not put their hands on it!
        • 5 Years Ago

        This is government, not real life... Government breaks their own rules more than they keep them. They destroyed precedent for bankruptcy with the GM and Chrysler "bankruptcies". The bond-holders got shoved from the first in line, to LAST.

        The government breaking them up, means that the government decides who gets various bits, gives the most viable to GM, since they have stake in GM... and then they pass out the liability to others, or the taxpayers, or both.

        Just another glittering jewel of ignorance, there.

        Glad to see that you are learning nothing. I am sure a government program will protect you from the consequences of your failure to learn anything. Good luck with that one.
        • 5 Years Ago
        I read "breakup" as splitting up the assets and selling them off. Which is chapter 7, i.e. failure. Am I wrong?

        BTw, the article doesn't really appear to be subscription required, I just clicked it and viewed it just fine.
      • 5 Years Ago
      Captain Obvious says the working title of their report is "Duh".
      • 5 Years Ago
      Interesting, the government can't adequately run the government but they feel they can tell everyone else how to run their business. Sounds like Hollywood, "do as I say not as I do".
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