GMAC will need more bailout cash to counter losses WASHINGTON — The Federal Reserve said Monday that GMAC is the only one of 19 stress-tested banks that needs more capital to withstand losses if the economy softens. GMAC, a crucial player in the U.S. auto industry, has been unable to raise the $11.5 billion regulators said it needed after stress test results were announced in May. The Fed says the finance company is expected to close the gap with more money from the $700 billion fi nancial bailout. GMAC, already the recipient of $12.5 billion in taxpayer infusions is negotiating with regulators over how much more it will receive. GMAC provides wholesale fi - nancing to many General Motors and Chrysler dealerships to pay for the vehicles on their lots. The company also operates a mortgage lending unit — Residential Capital — which has been pummeled by the housing market downturn. It runs an insurance unit and an online banking unit called Ally Bank. The test results in May found that 10 of the 19 largest banks needed an extra cushion of capital to withstand deeper losses they would see if the recession worsened. They were given six months to raise a total of $74.6 billion of capital. The Fed said Monday that they have raised a total of $77 billion.
GM repays government loans early BY KEN THOMAS AND TOM KRISHER The Associated Press
WASHINGTON — Fallen giant General Motors Co. accelerated toward recovery Wednesday, announcing the repayment of $8.1 billion in U.S. and Canadian government loans five years ahead of schedule. The Obama administration crowed about the “turnaround” at GM and fellow bailout recipient Chrysler LLC, saying the government’s unpopular rescue of Detroit’s automakers is paying off. Much of the improvement comes from GM slashing its debt load and workforce as part of its bankruptcy reorganization last year. But the automaker is a long way from regaining its old blue-chip status: It remains more than 70 percent government-owned and is still losing money — $3.4 billion in last year’s fourth quarter alone. And while its car and truck sales are up so far this year, that’s primarily due to lowerprofit sales to car rental companies and other fleet buyers. Chrysler, now run by Italy’s Fiat Group SpA, said Wednesday it lost almost $200 million in the first quarter. But it said it boosted its cash reserves by $1.5 billion, reducing the likelihood that it will need more government aid. “This turnaround wasn’t an accident of history,” said White House economic adviser Larry Summers. “It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler — and indeed the auto industry — a lifeline, if they could demonstrate the will to reshape their businesses.” Vice President Joe Biden said President Barack Obama “took a lot of heat” to keep GM alive. “And this has even exceeded our expectations.” Biden said GM is now in a better position to “make what the market demands: energy-efficient vehicles for a cleaner world.” .................>>>>................>>>>..................http://www.dailygazette.net/De.....r00900&AppName=1
Grassley Slams GM, Administration Over Loans Repaid With Bailout Money A top Senate Republican on Thursday accused the administration of misleading taxpayers about General Motors' loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money US Senator Charles Grassley (R-IA) answers questions during the 2009 Reuters Washington Summit in Washington, October 19, 2009. REUTERS/Jonathan Ernst (UNITED STATES POLITICS) A top Senate Republican on Thursday accused the Obama administration of misleading taxpayers about General Motors' loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money.
Sen. Chuck Grassley's charge was backed up by the inspector general for the bailout -- also known as the Trouble Asset Relief Program, or TARP. Watchdog Neil Barofsky told Fox News, as well as the Senate Finance Committee, that General Motors used bailout money to pay back the federal government.
"It appears to be nothing more than an elaborate TARP money shuffle," Grassley, the ranking Republican on the Senate Finance Committee, said in a letter Thursday to Treasury Secretary Timothy Geithner.
GM announced Wednesday that it had paid back the $8.1 billion in loans it received from the U.S. and Canadian governments. Of that, $6.7 billion went to the U.S. treasury.
But Grassley said in his letter that a Securities and Exchange Commission form filed by GM showed that $6.7 billion of the tens of billions the company received was sitting in an escrow account and available to be used for repayment. He called on Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep.
"The bottom line seems to be that the TARP loans were 'repaid' with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the administration have claimed in their speeches, press releases and television commercials," he wrote.
Vice President Biden on Wednesday called the GM repayment a "huge accomplishment."
But Barofsky told Fox News that while it's "somewhat good news," there's a big catch.
"I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn't from earnings. ... It's actually from another pool of TARP money that they've already received," he said Wednesday. "I don't think we should exaggerate it too much. Remember that the source of this money is just other TARP money."
Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through "a liquidation of its ownership interest."
Grassley criticized this scenario in his letter.
"The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government's ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment," he wrote.
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
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