GOVERNMENT INTELLIGENCE: TREASURY "Annouces Resturcturing" OF GMAC BAILOUT

GOVERNMENT DOLES OUT $3.8 BILLION TO GMAC,

MISSPELLS TWO WORDS IN HEADLINE

I kid you not. And just in case someone from the U. S. Treasury comes back and checks their spelling, I've copied and pasted the announcement below (page down). Notice the headline:

"Treasury Annouces Resturcturing of Commitment To GMAC"

Do they not have spellchecker? They misspell not just one word, but two, and in the headline, no less! Is there no one who proof-reads their news releases prior to their being released? Equally embarrassing is the fact that it's sat on their website for two solid days without anyone catching the obvious error (like the media, for example). What do you expect from a governmental department that is led by a confirmed tax cheat (Timothy Geithner)?

These are supposed to be the folks that pay attention to details, like decimal points. No wonder our nation's finances are a disaster. I hope the bureaucrats that are wanting to control our personal medical records are this accurate, careful, and detail-oriented (LOL)! I'll bet they can spell, "B-A-I-L-O-U-T"!

My comments about the actual announcement, absent my spelling rant, follow the screen shot the Treasury's announcement, copied directly from their site:

	December 30, 2009 TG-501 Treasury Annouces Resturcturing of Commitment To GMAC WASHINGTON – The U.S. Department of the Treasury today announced that it is acting on its previously announced commitment to provide capital to GMAC as identified in May as a result of the Supervisory Capital Assessment Program (SCAP). In May, SCAP identified an additional capital need of $5.6 billion for GMAC, which Treasury's internal forecasts have assumed would need to be provided by Treasury. Due to a variety of factors, including that the restructurings of General Motors and Chrysler were accomplished with less disruption to GMAC than banking supervisors initially projected, Treasury will commit $3.8 billion of new capital to GMAC rather than the $5.6 billion originally announced, resulting in a $1.8 billion reduction in Treasury's previously forecasted TARP expenditures. Prior to today's actions, Treasury had invested $12.5 billion in preferred stock of GMAC. Treasury owns $13.1 billion in preferred stock in GMAC, through purchases and the exercise of warrants, and 35 percent of the common equity in GMAC. Today, Treasury is also restructuring its investment in GMAC to protect taxpayers and put GMAC in a position to raise private capital and pay back taxpayers as soon as practicable. The details of the restructuring are as follows: · To best protect the taxpayers' investment in GMAC, the $3.8 billion of new capital will be provided in the form of $2.54 billion of Trust Preferred Securities (TRUPs), which are senior to all other capital securities of the Company, and $1.25 billion of Mandatory Convertible Preferred Stock (MCP). In connection with providing this capital, Treasury will also receive warrants to purchase an additional $127 million of TRUPs and $63 million of MCP which it will exercise immediately at the closing of the transaction. · Treasury will also convert $3.0 billion of its existing MCP, which was invested in May 2009, into common equity to boost the quality of the capital supporting GMAC. Treasury's equity ownership of GMAC will increase from 35 percent to 56 percent due to this conversion. Corresponding with this increase in ownership, Treasury will have the right to appoint two additional directors to the GMAC Board of Directors. Four of nine directors will ultimately be appointed by Treasury. Treasury intends to nominate its new directors in time for GMAC's annual meeting at the end of April. · To enable GMAC to meet its SCAP requirements for Tier 1 capital, Treasury will exchange $5.25 billion of preferred stock into MCP, in substantially the same form as Treasury's existing MCP. As a result of this transaction and the conversion described above, Treasury will hold $11.4 billion of MCP in GMAC. · In connection with the transactions, Treasury will acquire a "reset" feature on the entirety of its MCP holdings such that the conversion price under which its MCP can be converted into common equity will be adjusted in 2011, if beneficial to Treasury, based on the market price of private capital transactions occurring in 2010. · As further protection for the taxpayer, GMAC will continue to be subject to a variety of other covenants and requirements, including the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act (EESA) and, as an ongoing recipient of "exceptional" assistance, GMAC remains subject to the oversight of the Special Master for Executive Compensation, Kenneth Feinberg. These actions fulfill Treasury's commitments made in May to GMAC in a manner which protects taxpayers to the greatest extent possible. These actions offer the best chance for GMAC to complete its overall restructuring plan and return to the private capital markets for its debt financing and capital needs in 2010. We are pleased that we could complete this restructuring of our investment with $1.8 billion less capital than was projected in May. Treasury made its investment pursuant to EESA's Troubled Asset Relief Program (TARP) and in particular, the investment was made under the Automotive Industry Financing Program which was implemented to provide stability to the American auto industry. http://treas.gov/images/usg_capital.gif

There actually are some important considerations regarding the announcement (other than the wizards in our Treasury Department can't spell):

1) This bailout is in addition to the billions of dollars spent on the bailout of General Motors. GMAC was the financing arm of General Motors that conveniently converted, with the government's blessing, to a "bank holding company", in order to qualify for government bailout money.

2) The government is increasing its ownership of GMAC (an acronym for what was formerly known as General Motors Acceptance Corporation) from just over one-third (35%) to a majority ownership position (56%).

3) They are "investing" an additional $3.8 billion of your dollars (an "investment" no one in their right mind would ever make) in GMAC. Then, almost simultaneously, GMAC announced that they would funnel $2.7 billion to their bleeding mortgage arm, Residential Capital (ResCap). I wonder where GMAC got that money, hmmm?

4) According to a Reuters article today (my emphasis), bond rating agency Moody's said after the additional bailout:

"It remains uncertain if additional deterioration will occur in these portfolios and whether ResCap can return to profitability."

"The company has been unprofitable on a quarterly basis for three years, its liquidity position is tenuous, capital insufficient and franchise impaired."

""Should parental support be discontinued, we believe ResCap would eventually default on its obligations and unsecured creditors would face substantial losses."

I like that Moody's uses the term, "parental support". Maybe even the bond rating agencies are catching onto the nanny state. Of course, they're referring to GMAC as the parent, but since GMAC gets their money from the government, we know who the real sugar daddy is!

Moody's assigns ResCap a credit rating of "C", only one notch above default, with a "stable" outlook. It's interesting that they would still keep the "stable" outlook label, rather than an "improving" one, even after the cash infusion. One would think "stable" is good in most circumstances, but when a company is at risk of default, stability is not a good thing.

5) In other words, there is still a significant chance of default, according to Moody's, even with the additional taxpayer-funded bailout money. Will the government allow them to default, should their condition worsen, or will they continue to throw "good money after bad"? I think the government's track record on this matter is clear.

6) Most importantly, The Constitution doesn't empower the government to bailout anything or anyone.

What the hell. What's another unconstitutional bailout. At least the Obama administration can claim that they haven't bailed out anybody in 2010!

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GOVERNMENT INTELLIGENCE: TREASURY "Annouces Resturcturing" OF GMAC BAILOUT