Wednesday, October 28, 2009

GMAC Needs More Dough. Again.

As if $12.5 billion weren't enough, GMAC is knocking on the Treasury's door, looking for another $2.8 to $5.6 billion. You know, just to tide things over until the next bubble kicks in. I'm still a bit perplexed as to why we are bending over backwards to keep GMAC afloat. Sure the auto finance concern has $181 billion in assets, but it can hardly be described as a systemic risk to the market. While it is true that GMAC provides crucial financing to the auto industry, which the government is now firmly invested in, I just don't understand why the bankruptcy option wouldn't work here. Essentially what we are doing is bailing out GMAC's creditors instead of forcing them to take a hit, like they should be doing for having made such a lousy investment.

What is so irritating about this particular bailout is that we have moved past the point of worrying about a global financial meltdown. The economy, although still fragile, seems to have stabilized, and now we're just randomly picking and choosing who deserves money from the government and who doesn't. Why is cheap financing for the auto industry more important that, say, providing cheap loans for small businesses? CIT was allowed to fend for itself and will likely wind up in bankruptcy soon. But GMAC, no GMAC, we have to continue to shovel money into because everybody has to buy cars. How on earth did it become a national priority that everybody needs cheap financing to buy a new car every couple of years? I know that in the grand scheme of things, another $5 billion or so is insignificant, but I still consider it to be a nice chunk of change that could be better spent on at least 50 other things that are more important for the future of this country.

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