Govt gives GMAC $3.8B in new aid, boosts stake

[cal04]

http://news.yahoo.com/s/ap/20091230/ap_on_bi_ge/us_gmac_treasury

The government gave GMAC Financial Services another $3.8 billion in cash and took a majority stake in the auto lender, aiming to stabilize the company as it struggles with big losses in its home mortgage unit.

The fresh infusion is on top of $12.5 billion in taxpayer money Detroit-based GMAC has already received from the government. The new aid will boost the federal government's ownership in GMAC to 56 percent, from 35 percent, and means the U.S. now holds a majority stake in three companies that it bailed out with taxpayer funds — GMAC, General Motors and insurer American International Group Inc. The government also has taken control of mortgage giants Fannie Mae and Freddie Mac.

Shoring up GMAC has been a major component of the Obama administration's massive effort to rescue ailing automakers General Motors and Chrysler. The lender provides critical wholesale financing to thousands of GM and Chrysler auto dealers, allowing them to stock their showroom floors with vehicles.

GMAC needs much of the aid to prop up its mortgage division — Residential Capital LLC, dubbed ResCap, which struggled with big losses on mortgages gone bad as the housing market collapsed. The company said it would take $3.3 billion in mortgage-related write-downs, part of a $3.8 billion expected charge in the fourth quarter. GMAC is also preparing to sell off mortgage assets in an effort to reduce volatility.

[hughee99]

1. I have a question about mortgage related aid...

Not specifically GMAC, either.

So a loan company writes off the entire amount of a bad loan, they keep the house, they get aid to cover their losses, and then they can sell the "asset"?

If I understand this right, they don't lose the money on the bad loan and they make some money selling the house.

Meanwhile the homeowner is out of a house because they couldn't come up with a few thousand dollars. Wouldn't it be better if the government paid the monthly mortage rather than covering the entire cost of the house? It would cost less (since you'd only be paying the monthly instead of the whole mortgage), the bank still gets their payments, the people can keep their house for another month?

I understand the unfairness that some people would get their mortgage paid for them, while those who just barely get by do not, but shit, if we're going to send the banks the money anyway, why not help more people with the same money?

:shrug:

Unless I'm misunderstanding this whole process.