Tuesday, December 30, 2008

GMAC Bailout: Creating More and More Bad Debts

The almost daily, non-Congressionally approved bailouts continue. Now it is for GMAC Financing. The first paragraph of this New York Times article made me slap my forhead:

GMAC, the automobile financing company, said Tuesday morning that it would immediately resume financing to a wider range of car buyers, a day after the Treasury Department injected billions of dollars into the lender.

In otherwords, make more risky loans. Hmm, now how can this be a bad thing?

Under the financing deal, the Treasury will buy $5 billion worth of preferred equity shares in GMAC, which used to be the financing subsidiary of General Motors and is now owned jointly by G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler.

A Treasury official said on Monday night that the deal had already closed and that GMAC already had the money. In addition, the Treasury said it would lend General Motors $1 billion so that it could purchase additional equity offered by GMAC.

Remember how heavily debated the 1979 Chrysler Bailout was? It was only $1.5 billion dollars. How quaint does that seem?


  1. 100 years ago, there were over 1000 car companies in North America. Did anyone cry when a car company went broke. No, because it meant the more efficient companies would prosper and provide a better product.
    The USA should change their name to the United Socialist States of America (USSA).

  2. You have to wonder how much longer China and Japan will keep lending money to the US. Perhaps this will just continue forever.However, you can`t help feeling that at some point, they are going to realize their loans will not be paid back.

  3. Yes, I agree. The problem is when they decide to cut it off, it'll seem sudden and surprising for most people. Borrow and spend your way out of trouble is the only thing they know how to do.

  4. On the bright side, at least Naomi Klein and her idiotic "shock doctrine" has been disproven by this blatent socialization. Her thesis was that these crises were used to implement evil free-market policies.