Congress roasts GMAC, suggests future stimulus in jeopardy
In the recently released “January Oversight Report: Exiting TARP and Unwinding its Impact on the Financial Markets,” the Congressional Oversight Panel looked over the entire $700 billion TARP bailout. Among many topics across our nation’s economy, they paid particular interest to charges that GMAC received “special treatment” from the Treasury when they were labeled “too big to fail.”
Boosting market confidence
But at what cost? Yes, the Treasury has said that it would be counterproductive to support GM and Chrysler but not also support their financing arm in GMAC. Auto loans have to flow and credit must remain liquid for a full economic recovery. Yes, there is a short-term psychological impact behind the government backing a major player in the U.S. auto market. But these reasons appear ephemeral when one considers that GMAC’s current business plan equates to a bad investment. The panel found that they were still going to lose $5 billion in Q4 2009. Oh, and the Treasury never did publicly say that GMAC was too big to fail.
Soft-balling GMAC doesn’t help the American taxpayer
Apparently, GMAC was subjected to a second round of stress tests (unlike everyone else). This allowed them to “benefit from post-May improvements in its financial position and in related sectors of the economy.” Why GMAC received the extra special treatment – why it was too big to fail while others were not considered such – is still unclear. The Congressional Oversight Panel ultimately calls for the Treasury to come clean on why GMAC got all the extra help in light of their continued floundering performance in the marketplace. Perhaps Mr. Geithner will be more forthcoming this time.
Related Video (Better Days for GMAC):[youtube url=”http://www.youtube.com/watch?v=WUn5P_uTg3s”] [apply_button]