United Liberty

GMAC wants another bailout in addition to the billions they’ve already received from the federal government:

GMAC, the financial lifeline for General Motors Co., Chrysler Group LLC and their dealer networks, is asking the U.S. Treasury for more federal aid beyond the $12.5 billion it’s already received, because it remains billions of dollars short of a capital reserve requirement all bank holding companies must meet.

The request, which is subject to ongoing negotiations, comes as GMAC is caught in a financial game of chicken with Chrysler Financial that could drive some large Chrysler, Jeep and Dodge dealers out of business or force them to sell their operations.

Chrysler Financial, which Treasury has demanded go out of business by the end of 2011, is asserting its first-lien rights on loans to Chrysler dealers. At the same time GMAC, due to its capital shortfall, has asked those same dealers to pay additional collateral on the vehicles they order from Chrysler Group. Many of those dealers borrowed $10 million or more to expand their showrooms, and can’t sell the property for anywhere near what they owe Chrysler Financial.

It’s unclear whether additional taxpayer aid to GMAC would alleviate that problem.

The government already owns 35% of GMAC as a result of the government-financed bankruptcy restructuring of General Motors.

It is time to end this. No more bailouts for companies that cannot sustain themselves and it is time to get the government out of owning businesses (and they had no authority to do it to begin with).

Here’s a bargain for you.  General Motors’ current market value is about $500 million.  In a breathtaking abuse of executive power, the Bush administration “loaned” GM $13.4 billion from the Troubled Asset Relief Program (“TARP”) in December, 2008, plus an additional $4 billion in February, 2009.  (Congress had not authorized the money to be “loaned” to GM.)  On June 1, 2009, the Obama administration announced that it would invest an additional $30 billion in GM.  About $41.2 billion of the “loans” will be converted into equity in GM, making the United States the principal shareholder with 60% of GM’s stock.  You, the United States, have paid $41.2 billion for $300 million worth of GM stock.  Congratulations!  You overpaid for GM stock by 137 times its value.  

The failure of the U.S. auto industry has been a dominant news story over the last few months. Today, GM filed for bankruptcyand it appears Chrysler will emerge reorganized soon after Judge Arthur Gonzalez rejected opposing arguments. Over a couple of articles, we will discuss some of the basic nuts and bolts of bankruptcy, a few of the key opponents of the Chrysler reorganization, and some general comments on the entire process.

I swing back and forth between being happy and chagrined to see Republicans acting like Republicans again, but when I see a quote like this from Newt Gingrich, my first thought is “Say what?”

Gingrich thrashed Republicans for allowing increased spending during the Bush administration and for not doing enough to block President Barack Obama’s early initiatives.

“Remember, everything Obama’s doing, Bush started last year,” Gingrich said. “If you’re going to talk about big spending, the mistakes of the Bush administration last year are fully as bad as the mistakes of Obama’s first two, three months.”

Newt, we’re thrilled to have you on the right side, but you supported the TARP bailout.

More details are emerging on what the Obama Administration intends to do with GM and Chrysler:

In surprising findings to be outlined at the White House on Monday, President Obama has concluded that neither GM nor Chrysler as they now exist deserve more bailouts. But the White House is sparing them for a month or two, and is promising American consumers that the government will stand behind warranties if the automakers fail.