Long live the days of government handouts with no strings attached.
GMAC has come crawling back to the government yet again, asking for a third lifeline of taxpayer money. The troubled consumer lender, which has already received $12.5B from the government since December, has asked for another $2.8B to $5.6B of fresh capital in the form of preferred stock. WSJ has the details:
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 new capital would help firm up GMAC’s balance sheet and solidify its auto-loan business. GMAC provides the vast majority of wholesale financing for GM dealerships across the country, meaning scores of local distributors would be unable to bring new vehicles onto their lots if GMAC were to collapse.
GMAC begging for more funds is a stark reminder of the bailout rage that swept through the economy in late 2008 and earlier this year. Bloggers, to say the least, are outraged.
“The reason for more dough to GMAC is so GM and Chrysler can continue to finance auto purchases, not as a result of greater than expected losses on its existing portfolio,” Yves Smith writes at naked capitalism. “So this is cash for clunkers under another brand name.”
US stocks fall again, after disappointing reports on home sales and durable sales, and after one particularly influential Wall Street firm cuts its GDP estimate.
DJIA loses 119 (1.2%) to 9763, S&P 500 drops 21 (2%) to 1043, Nasdaq Comp dives 56 (2.7%) to 2060. Since closing at 1098 on Oct. 19, the S&P 500 is down 5%; some might call that a mini-correction. Question is, is there a full-blown one to follow.
But stocks aren’t alone; crude, emerging markets, the euro all drop, as the dollar continues to flex its new-found muscles. Call me crazy, but the dollar these days looks like Gary Cooper in “High Noon.” Standing alone on that dusty street, not a friend in the world, with four very bad men coming to gun him down. The greenback lately seems to trade in opposition to just about every other asset in the world.
The last few days, the dollar’s been beating them them all back. Wonder how long that’s going to last.
Goldman Sachs cuts its forecast for 3Q GDP to 2.7% from 3%. Now, just about everybody expects GDP to come in with a “three handle,” as they say. Dow Jones’ “official” forecast, a consensus of analyst views, is for 3.2% growth. Some bold folks have even pegged it in the 4% range. So given the state of the equities market this week, what do you think stocks will do if GDP comes in in the 2% range? After all, the UK got a nasty surprise, so it certainly could happen here.
GMAC goes back to the government auto shop for another (expensive) tune-up (and what makes them different from, say, CIT?) New home sales disappoint, and the durable goods report really paints a picture of the economy (and it’s not one of those pastoral Hudson River School paintings either.)
(Editor’s note: for maximum effect, this post should be read while listening to King Oliver’s Canal Street Blues.)
In his early comedy films like “Sleeper” and “Take the Money and Run,” Woody Allen always had at least one montage of his characters going through a series of silly, zany scenes, always set to some whimsical Dixieland jazz. There’s Miles Monroe trying to steal giant vegetables, 200 years in the future; there’s Virgil Starkwell on the run; there’s Feilding Mellish, becoming a revolutionary down in South America.
Doesn’t it seems like the actors down in Washington these days are running around in a montage like that?
There’s the Fed chairman, dropping dollars out of a helicopter. Darn, that didn’t work! There’s the President, promising an economy-saving stimulus package. Didn’t work! There’s Congress running around like their hair’s on fire. There’s the Treasury Secretary, and he can’t figure out why the banks’ books don’t add up. There’s the Fed chairman, barely holding on as he sprays dollars through a fire hose. Rats! There’s the President, promising to modify everybody’s mortgage. Not working!Congress is still running around like mad. Back to the Treasury Secretary, who still can’t figure out why the banks’ books don’t add up. Ooh! he yells as he smacks himself on the head.
Plenty of whipsaw action in US stocks yesterday, activity which also featured a sharp divergence in performance of the Dow Industrials and Nasdaq Comp, as well as the market overall. Not the most bullish sign.
Asian markets were weak overnight, and that’s carried into European trading. Selling seems linked to concerns about the vitality of a global economic rebound.
On another matter, and being delicate, there’s a certain settling in the pit of one’s stomach after reading that GMAC has its hand out again, asking Uncle Sam for more scratch. Ah, maybe it’s just a one-off, right? And we continue to think stocks are ignoring what looks like mounting geopolitical risk.
Oil’s lower, US dollar index higher. Durable goods, new home sales reports on the docket today.
S&P futures down 6.40; DJ futures down 39. Ten-year higher, yield at 3.42%.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
Michael Dorff, a professor at Southwestern Law School in Los Angeles, says CEOs are paid for performance – but it’s usually not their own performance. They’re paid millions for the performance of the economy, their industry, their employees, and sometimes just for having good luck. For years boards of directors – often made up of CEOs who believe in […]