Fed Grants GMAC Bank Status– Provided GM and Cerberus Piss Off
By Robert Farago
December 24th, 2008 -
Former GM captive finance unit GMAC couldn’t convince enough investors to swap debt for equity to meet the Fed’s standard for a swap to bank status. Mired as it is in the sub-prime mortgage meltdown (not to mention billions in low-interest loans to anyone with a pulse), GMAC was, therefore, headed for Chapter 11. To forestall such an event, the Fed did what comes natural to our August federal institutions these days: they changed the rules. The Wall Street Journal reports that The Fed has granted GMAC bank status, despite its failure to meet the letter of the law. Which the Fed changed. “As part of the approval, the Fed is requiring GM and Cerberus Capital Management LP to reduce their ownership stakes in Detroit-based GMAC. GM must reduce its ownership interest in GMAC to less than 10% in voting shares and total equity. Cerberus, which owns Chrysler, must reduce its interest to a maximum of 14.9% in voting shares and 33% in total equity.” And that ain’t all. Reading the fine print of the Fed’s statement is most revealing…
“In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the Board has determined that emergency conditions exist that justify expeditious action on this proposal in accordance with the provisions of the BHC Act and the Board’s regulations… the Board has also waived public notice of this proposal.”
So, quick and dirty it is. Apparently, I’m not the only one who thinks this thing smells, as noted in the footnote:
“A commenter requested that the Board hold a public meeting or hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. The Board has not received such a recommendation from the appropriate supervisory authorities.”
Accountability. What happened to it?
http://www.thetruthaboutcars.com/feds-grant-gmac-bank-status-gm-and-cerberus-must-piss-off/#more-197372