GMAC Stalled in Bid to Become Bank

General Motors' lending arm, GMAC LLC, which sought federal aid and applied to become a bank holding company, has not garnered enough capital to qualify for that status. It fell short of the $30 billion in regulatory capital demanded by the Federal Reserve, and the Fed says it won't approve the conversion unless the goal is met.

This now leaves the future of the auto and home lender in jeopardy. GMAC is the primary lender for General Motors Corp. dealers. The company had said its recovery hinged on becoming a bank and gaining access to the government aid money. If GMAC does not get approval to become a bank holding company, it may face bankruptcy.

GMAC applied for a banking holding company charter November 20 and had plans to exchange $38 billion in notes issued by the company and ResCap. To get bank holding company status the lender has to raise $2 billion in new capital and have a minimum of $30 in total regulatory capital.

Finger-Pointing At Freddie Mac and Fannie Mae

Deciding who should shoulder the blame of the U.S. housing crisis and resulting financial fallout is what four former executives from Fannie Mae and Freddie Mac faced during a hearing led by Rep. Henry Waxman, chair of the House Oversight and Government Reform Committee.

The collapse and subsequent government takeover of the mortgage finance behemoths Freddie and Fannie was a crucial move made by federal regulators. Between the two, they own or guarantee about half of the $11.5 trillion in U.S. outstanding home mortgages and are the engines running a complex process of buying, piecing together and then selling those mortgages as investments.

Freddie Mac asked for $13.8 billion in government aid in November after a huge quarterly loss. Fannie hasn't asked for any help, but has quietly said it may need help in the future.

The four former CEOs of the mortgage finance giants testified before the panel. Two of them, Fannie Mae's Franklin Raines and Freddie's Leland Brendsel, were booted out of their positions after accounting scandals. The last two CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron, were removed from their positions after the government's takeover.

Documents released by the House committee shows Fannie and Freddie's executives ignored warnings on risky mortgages. Mudd and Syron's emails and internal documents show that they disregarded recommendations to stay away from riskier types of loans. Rep. Waxman says their irresponsible decisions are now costing taxpayers billions of dollars.

Government Bailout of Big Three Auto Makers Close

A "Car Czar" would take over running a nationalized car industry and will dictate how the Big Three automakers are managed if the bailout of the industry is voted and approved by Congress. The White House and congressional Democrats reached an agreement on Tuesday evening on the $15 billion plan to bail out the automakers. Stipulations will force them to restructure or fail.

One of the provisions would allow the "Car Czar" to recommend bankruptcy restructuring if the automakers fail to make the required concessions, and would withhold future loans if progress on a turnaround is stalled. The automakers have until March 31 to present their plans for restructuring, and plans to build more fuel-efficient cars.

Congress may vote on the bill today. Lawmakers have said they fear if the automakers collapse it would send the U.S. economy further down into a deeper, longer recession. GM has lost almost $73 billion since 2004 and has faced a 22 percent drop in U.S. sales in 2008. It has already stated it will run out of money this month without government aid.


About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.




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