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Dead Constitution See other Dead Constitution Articles Title: Oversight panel blasts $17.2 billion bailout of GMAC A congressional watchdog today criticizes the $17.2 billion bailout of auto financier GMAC, saying the Treasury Department missed opportunities to protect taxpayers' money. "It is unclear whether the U.S. taxpayer will recoup the investments made in GMAC," the Congressional Oversight Panel, set up to oversee the government's $700 billion bailout, says in a report out today. Government accountants estimate that taxpayers will lose at least $6.3 billion of their investment in GMAC. The congressional panel also found it "baffling" that the government decided to bail out GMAC in the first place, noting that the firm posed no risk to the broader financial system. The panel didn't take a formal position on whether GMAC should have been bailed out. The Troubled Asset Relief Program was originally intended to rescue the financial system after the collapse of Lehman Bros. in late 2008, but was expanded to cover ailing automakers General Motors and Chrysler. Treasury decided that GM needed financial backing from GMAC — which finances auto dealers' inventories and consumers' vehicle purchases — to survive. GMAC, spun off from GM in 2006, was itself struggling with huge losses on home mortgage loans when Uncle Sam came to the rescue. The congressional panel asked why Treasury didn't: •Put GMAC through bankruptcy, wiping out shareholders and letting the firm reorganize, keeping its core auto finance business while perhaps jettisoning the troubled mortgage arm. Both GM and Chrysler went into bankruptcy. •Fold GMAC back into its old parent — a move the panel says would have strengthened GM. •Require GMAC to write a viable plan for a return to profitability. •Require GMAC to explain how it would use taxpayer funds to increase consumer lending. •Come up with an exit strategy for giving up its 56% stake in GMAC. "More than a year has elapsed since the government first bailed out GMAC," the panel says, "and it is long past time for taxpayers to have a clear view of the road ahead." The panel also expressed concern that the bailout reinforced GMAC's dominance in automotive dealer financing, "perhaps obstructing the growth of a more competitive lending market." In a statement, Treasury said, it "viewed the course taken as the least costly and least disruptive of all the options available." Noting that GM dealers receive 75% of their financing from GMAC, Treasury said it would have taken up to six months for another finance company to replace GMAC.
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