GMAC to receive another bailout of $3.8 billion from U.S. government
You have to pay for these 0% APR car financing deals and GMAC found the perfect way, the U.S. taxpayer. It wasn’t enough to bailout GM to save American jobs but now we have to make sure their is financing for these cars even if there is not the demand for them compared to other automakers. How long until we finally let the market forces take their course and let the weak players fail or be taken over?
That means GMAC, like AIG, will get more aid from taxpayers, even though the prospect of repayment is on the wrong side of uncertain. Unlike AIG, GMAC was a disaster before the financial crisis’ darkest days. It finished 2006 losing money. In the third quarter of 2007 GMAC lost $1.6 billion, mostly on bad loans made by its residential mortgage arm. It lost $767 million in the third quarter of this year, $3.9 billion in the second quarter and $675 million in the first.
GMAC already is on the tab for $12.5 billion to taxpayers. Even if the company turns the corned next year, GMAC still faces the prospect of new loans being written into a recession. Profits aren’t going to come fast, and unlike Citigroup Inc. and Bank of America Corp., GMAC doesn’t have an investing public to whom it can sell shares.
The problem is that GMAC is financing customers of two bigger government problems, General Motors and Chrysler LLC. Without a finance company, GM and Chrysler would be at an even bigger competitive disadvantage. The government has driven too far down the road in auto bailouts to end its enabling relationship with GMAC.