GMAC's Troubles (And Bailouts) Continue

Last week, when you were making sure your champagne was chilled to celebrate the demise of the awful first decade of the 2000's, GMAC also had reason to rejoice. On December 30th, it got its third bailout from the government. Given the timing, you might have missed this news. Well there's some more this week: GMAC expects to post a $5 billion loss. For just the 4th quarter. It's very disappointing to see the government continue to plow money into such a flawed firm.

Let's quickly review the bailout tally for GMAC thus far. Its fresh $3.8 billion bailout from last week adds to its prior $13.5 billion. This also increases the U.S. government's stake to 56.3% -- a majority share. So congratulations American taxpayers: you now own GMAC too.

And how about the firm's recent performance? Its full-year loss is now expected to total around $10 billion.

Since I've already made the argument that GMAC should be allowed to perish, I guess there's not a whole lot else for me to analyze on this front, other than just to shake my head in disgust.

It's doing so poorly mostly because of its terrible mortgage portfolio. Why keep the firm alive? Do we really need it to originate new mortgages? No, we have plenty of other banks to do that. Do we need it for auto loans? No, GM can go elsewhere to get its auto loans financed. Maybe I'm missing something; I still need some help on this one.

The firm doesn't appear to pose systemic risk to the economy. But its failure probably poses significant risk to Washington's fundraising efforts. Luckily for those politicians, the news of the latest bailout was neatly drowned out by the New Year's holiday.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

Why Principals Matter

Nadia Lopez didn't think anybody cared about her middle school. Then Humans of New York told her story to the Internet—and everything changed.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

A History of Contraception

In the 16th century, men used linen condoms laced shut with ribbons.

Video

'A Music That Has No End'

In Spain, a flamenco guitarist hustles to make a modest living.

Video

What Fifty Shades Left Out

A straightforward guide to BDSM

More in Business

Just In