And now, as predicted, GM and Chrysler (cash-conduits for the UAW) are back for more. The only surprise is that they managed to squeeze the third one into 2008.
As Treasury Bails Out GMAC, Is It Overdrawing Federal Bailout Funds? – BusinessWeek
GMAC might not be the end of it for auto financiers and manufacturers: Within a couple days, a Treasury official says, the agency will post guidelines for loans to auto companies generally. No word yet on how broad eligibility might be.
The federal government’s latest bailouts of GM and GMAC will be the Third (of 3) Detroit Bailouts in UAW, as opposed ot the First (of who knows how many) Detroit Bailouts in 2009:
In another curious twist, the GMAC bailout appears to include a loan to let General Motors increase its stake in GMAC — even as Federal Reserve banking rules appear to require it to shed ownership.
Of the $6 billion announced tonight, $5 billion goes to purchase preferred shares in GMAC (with an 8% coupon for the government, a nice bump up from the 5% banks are paying).
But the remainder, of up to $1 billion, is a loan to General Motors — a loan that allows GM to participate in a rights offering from GMAC. That rights offering, of course, is being presented as part of a make-or-break strategy by GMAC to refashion itself into a bank holding company and avoid bankruptcy. The Federal Reserve approved GMAC’s application to become a bank holding company on Christmas Eve — but GM, and co-owner Cerberus, has to give up control of of the lender to comply with bank ownership rules.