GMAC has $2.52 billion loss and ResCap unit may go bankrupt

November 5, 2008 by · Leave a Comment
Filed under: Stock Market News 

With continued losses and the real estate market still falling until it finds a price level that stabilizes.  Thiis type of news will continue to be in the news until the excessive leverage is worked out of the system.  With the continued losses at GM, I don’t see this unit getting any additional funding from the parent.  Last I heard, they were trying to get classified as a bank so they will be eligible for bailout funding.  I think that is a mistake if it happens and they should fail like any other company that got too aggressive and now are in dire straights.  

News:

Finance company GMAC LLC lost $2.52 billion in the third quarter, hurt by slumps in the housing and auto markets, and said its Residential Capital LLC mortgage unit may fail.

GMAC has been in the red for five straight quarters, losing $7.9 billion over that time. ResCap lost $1.91 billion in the third quarter, and has lost $9.1 billion in eight straight quarterly losses.

Despite halting many risky loans and cutting 10,000 jobs over two years, ResCap is struggling to maintain sufficient capital and liquidity. GMAC excused $197 million of its obligations in the third quarter, and more in October.

“Absent economic support from GMAC, substantial doubt exists regarding ResCap’s ability to continue as a going concern,” GMAC said.

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