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in yet another incredibly mind numbing stupid decision GMAC is increasing their taxpayer funded lending to people with "riskier" credit scores and that SUVs will be selling again. basically on one hand we have a government determined to go "green" and yet a government determined to lend risky money so people can go back to buying the cars that got them into trouble when gas prices were high before simply because gas prices are now low. the government is saying that if they can't lend to the responsible people who don't want to be saddled with new debt in trying times well by golly they will be happy to lend to those less than responsible people. yea, good times!
Those that thought GMAC would horde the money and not lend it may have been wrong.... they decide to do WORSE than just keeping it, but take the government money and make risky loans with it.
They just announced that they are going to lower the credit score required from 700 to 621.
They are also going to offer 0% interest for 5 year loans. Both measures are to try to counter the huge drop in sales over the last year.
So basically.... borrowers start defaulting because of risky lending practices. That hurts the economy so sales go down and they are on the verge of bankruptcy. To survive, they ask the government for money. They borrow it at an 8% rate and then lend it out at 0% (for the first 5 years) with even higher risk than what got them in trouble???
The government signaled yesterday that its financial rescue efforts may have reached their high-water mark, announcing that the much-anticipated "stress tests" of 19 large banks showed that only one, GMAC, was likely to need additional taxpayer aid and that it would begin to unwind assistance for the healthiest firms.
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I can't say I'm surprised.
10 of 19 don't have sufficent capital reserves is quite different form being sound. In fact that means that 10 of the 19 banks will not be aloowed to pay the mojney back because its the feds opinom that the banks could not satnd a downward turn.Whether they get taxpayers money is purely a political decision but At som,e point congress is going to say no more. That means they need to look for priavte investors but no one wants to be aort of a private /governament investmant after chrylser and now what looks like GM investros taking a haircut.
ResCap lost at least $1 billion per quarter since the third period of 2007 and may breach capital covenants in the current quarter, said a report dated yesterday from CreditSights, the debt-rating firm. Detroit-based GMAC could keep ResCap’s “remaining good assets” and leave behind $11.4 billion of debt in a bankruptcy, said the report, which asked whether it was “time to put ResCap out of its misery.”
****************** That's like losing 11. million. dollars. a. day. Seriously, wtf? man? WTF?
GMAC, which finances auto sales, already has $13.4 billion from the Troubled Asset Relief Program, and has been in talks with the Treasury about getting up to $5.6 billion more, because a government “stress test” showed it was still too weak.
GMAC is a piece of ****. They gave my cousin a second mortgage for 100% financing when her credit was highly questionable. Now, she hasn't paid them for a year. I have no respect for people who make such bad business decisions.
the stupidity of the government deciding that it would be a good idea to transfer the losses from the bad businesses to the taxpayers cannot be overstated.
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