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The Treasury Department is increasing its aid to the automobile industry by throwing an extra $6 billion to the already-promised $17.4 billion. The additional funding is, per Politico, "chiefly to help the financial arm of General Motors Corp.": "Treasury will purchase $5 billion in senior preferred equity from GMAC LLC, and up to $1 billion more will be lent to GM itself so the automaker can participate in a rights offering at GMAC, which has wanted to reorganize itself as a bank holding company." The NY Times, which calls GMAC a "crucial source of automobile sales financing," adds that the company's transformation into a bank holding company allows it "borrow money at low rates" from the Fed. The hope is that GM's auto sales can be spurred, but one investment manager told Bloomberg News, "Philosophically, I'm not very happy about the fact that the government has to save an auto-finance company because management ran it into the ground."
Feds Add $6 Billion to Auto Bailout, Takes Stake in GMAC
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I agree. Jake is making the Extra Extras more thick than say 3-4 bold ones.
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Part of that 'transformation' should include the injection of new leadership. Throwing water on a fire isn't going to solve the problem unless you know the source of the fire. This is part of the reason why some members of Congress were so reluctant to bail out the automakers. I agree that the industry is important, but the root of the problem must be investigated more thoroughly.
Wow, finally the gov't gets a stake. I hate that we've been handing out money to these failures with no equity stakes involved. Let's see some of these banks and corporates nationalized. That will motivate their peers to toe a much straighter line, hoping to avoid their own nationalization.