Washington Acquires A Car Company

By tomorrow morning there should be some clarification on this, but for the time being the GMAC debt swap/government investment/bank holding company status just gets curiouser and curiouser.

The word tonight is that the government has committed $6 billion to GMAC in the form of a $5 billion preferred equity investment and a $1 billion loan to GM to be used to participate in an upcoming GMAC rights offering. This is in addition to the $17.4 billion already pledged to GM. At the same time, there is no official announcement that the debt for equity swap that GMAC was trying to engineer had reached the requisite 75% participation level, though the company did say that it was completing the offer which would indicate that the deal had been successful (or maybe not, this is Alice in Wonderland stuff now).

The Treasury also said that it had set up a separate program within the TARP to make investments directed at the auto industry. At the same time, they said that they had spent all of the money allocated in the first half of the TARP. So I guess they have a new program with no funding.

This isn’t the end of aid to GMAC. As a bank holding company it now has direct access to the Fed and is eligible for guarantees of its debt from the FDIC. If you thought that the auto industry was going to have to make it on its own, think again. It’s clear that Detroit is now an official subsidiary of Washington, Inc.


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