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.”