Wednesday, December 30, 2009

Whatever it takes, Uncle Sugar provides 

I suppose, compared to the open vault for Fannie and Freddie. $3.5 billion (or is it $5.6 billion) more money for GMAC feels like peanuts. Treasury Secretary Geithner said on December 10:

"We said if you do not go raise capital from the private markets, if you are unable to, we will put capital into you because it is important to the stability of the system," he told a congressional oversight panel. "It was never going to be possible for GMAC. They are in a unique and difficult situation."

Geithner said the new investment in GMAC would likely be "a little lower than we anticipated."

With Fannie and Freddie, it may be about the risks to the housing market, or it may be (as Nick Timiraos argues) a possible back-door to refinance mortgages with principal reductions. Ed Morrissey points me to this discussion with Ed Pinto with other explanations. Calculated Risk suggests this is much ado about nothing; if most of Treasury was taking the week between Christmas and New Years Day off, they simply waited to the last minute to do unilaterally what would have required Congressional action after January 1. I would rather have Congress vote on giving Fan/Fred carte blanche, but there you are.

But there doesn't seem to be any such reasoning for GMAC. Perhaps Saturday Night Live was on to something when it suggested the company answered all the questions on Geithner's stress test with the answer "taxpayer bailout." "[T]hat did turn out to be the right answer to 30" of the 50 questions.

With the new loan, taxpayers are now the majority shareholder.