Tuesday, December 30, 2008

$17.4 Billion of your dollars.....

By, Terry Bankert

The bailout of General Motors has raised a legitimate question: What good will it do if customers can’t get the financing to buy vehicles?

I support the bail out bascially because from Flint we have very little option. We should still question. Did you know GM's US sales dropped 41% in November.

The car maker explained the drying up of GMAC's own financing was the principal reason for the crash in sales. Personally I think you can tell a General Motors executive is lying by the movement of its lips. Its too bad there is not a crime for incompetence.

We learned last night our government is now shelling out cash to keep the industry afloat. A $5 billion stake in GMAC, the financing arm of General Motors to prop up the company was announced by Treasury. Our government will lend GM as much as $1 billion so that it can buy more equity in GMAC. GMAC finances about 80% the wholesale purchases of GM's cars by dealers world-wide.

The tax money will come from the Troubled Asset Relief Fund , TARP,the 700 Billion Dollar tar pit our government has set aside to rescue the American financial system pillaged by the greed and incompetence of Wall Street (code for Rich guys and Gals).Remember this is in addition to $17.4 billion in previous emergency loans. General Motors and an outfit called Cerberus Capital Management owned GMAC.

Watch Bush he is no above helping a lot of rich guys on the way out . Did you know John Snow, a top player at Cerberus, was the Bush administration's Treasury secretary before Henry Paulson. Monday evening surprised some (main stream media) but for most of us was not entirely unanticipated.

On Christmas Eve the Feds allowed GMAC to become a bank holding company, an action that permits it to receive TARP funds. The strings: GMAC had to convert 75% of its debt to equity by last Friday at midnight. However, earlier Monday the company refused to say if it had met the goal by the deadline.

What? The people giving our tax money to these private business people said they would not do it unless GMAC raised new capital, which the company tried to do through a debt-equity swap that expired Friday. GMAC’S goal was to raise $30 billion by converting 75% of its issued debt into preferred-stock holdings.

The bondholders of GMAC are not cooperating. Last week, less than 60% of bondholders had signed on and the offering had been extended four times. The government's role in the industry is becoming open-ended, the Treasury Department said Monday it had set up a separate program within the Troubled Asset Relief Program with no limits.

Okay lets recap.
1.We give $717 Billion dollars to the auto industry which is failing.
2.The industry cannot retun to prospeity without financing so we are bailing out a desperately floundering finance company.
3.We allow the troubled finance company to become a bank. It cannot be any worse than any of the other monoliths that are failing.
4.This done on the condition that it had to convert its debt to equity and it will not tell us if has complied.
5.We still gave them the money.

These numbers are so big we are numbed and no longer question.

Just who is watching this evolve that we can trust to understand and tell us the truth? The Republican Treasury has scrambled to spend the first half of the TARP pot of gold.

It seems the only accountability congress imposed was that in order to receive the second $350 billion the administration will need to submit a report to Congress explaining how the funds will be used. Outgoing Republican Treasury Secretary Henry Paulson said that the remaining amount will need to be tapped, though it is not clear whether he will do it.

Do you wanna bet on that one?

Part of the deal with the auto makers is that they would be forced into bankruptcy by the end of March if they did not come up with viable restructuring plans.

We could be throwing good money after bad.

At this point we have no other choice.

But, just who can we rely on to be telling us the truth?

Posted here Terry Bankert
See- http://www.forbes.com/topstories/2008/12/30/gmac-washington-tarp-markets-equity-cx_bw_1230markets01.html - http://news.bbc.co.uk/2/hi/business/7804228.stm


Sphere: Related Content