Here’s $7.5 Billion. Have a Nice Weekend.

CBUSINESS-US-GM-UAW

GMAC got another big handout from the feds last night. The car finance company, now a bank, received $5.9 billion in December of last year. Along with yesterday’s $7.5 billion from Treasury, the lender will now be permitted to issue debt insured by the FDIC (Federal Deposit Insurance Corporation) to the tune of $7.4 billion. That money will help it finance daily operations, according to the New York Times.

If you want more details, here they are. The good part: Both buyers and dealers need to finance car purchases, and GMAC will now provide a good chunk of that money for Chrysler and GM vehicles. The government badly needed to prime this pump. The bad part: GMAC failed the recent stress tests appallingly, coming up $11.5 billion short of what it needed to withstand a still-worse economy. And it desperately needs new capital. The ugly part: The feds have made a very big commitment to support the auto industry, and they probably aren’t done yet.

What do you think? Is enough enough, or will the government need to do more to get the industry on its feet?

—jgoods

1 Comment

  1. Look at 2007, when about 13.2 million cars and trucks sold in the US market alone. At around 25K per pop, that adds up to $330 billion. Cars far outstrip any other frequency of expenditures for big ticket items, and they are a vital part of our economy. A goodly part of the 330 billion is financed, and represents a big part of the financial market too. Obviously the Obama administration understands that a large-scale collapse of the auto industry in this country will turn a severe recession into a severe depression and wide scale unemployment. Look at it this way: Would you rather pump hundreds of billions of dollars into an industry that employs very few actual people and whose corrupt managments are paying millions in bonuses to the very people who precipitated this collapse, or into an industry that employs hundreds of thousands of Americans and is represented in virtually every communityin the USA? I can’t speak for you, but I’d rather the government invest in American workers rather than financial crack houses like AIG.

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