The Unique Treatment of GMAC Under TARP
The Congressional Oversight Panel's March oversight report, "The Unique Treatment of GMAC Under TARP," finds that Treasury's early decisions in its rescue of GMAC resulted in missed opportunities to increase accountability and better protect taxpayers.
In an unusual divided vote in late 2008, the Federal Reserve approved GMAC's conversion to a bank holding company. When as a result of this decision GMAC was included in the government-run stress tests a few months later, Treasury committed itself to a full bailout strategy: taxpayers would provide any necessary new capital identified by the stress tests that GMAC couldn't raise in the private markets. If GMAC had not been included in the stress tests, Treasury might have had options other than committing new public capital, such as orchestrating a bankruptcy or isolating the auto financing business, which could have putt the company on a stronger economic footing.
The Panel is also deeply concerned that Treasury has not required GMAC to lay out a clear path to viability or a strategy for fully repaying taxpayers. Despite a $17.2 billion TARP investment, there is still no clear business plan for GMAC. Treasury has not given due consideration, for example, to the possibility of breaking apart GMAC and merging the auto finance part back into GM, a step which would restore GM's financing operations to the model generally shared by other automotive manufacturers.