The big news, really, is that GMAC needs $11.5 billion (and will need $4 billion more if it takes on Chrylser financing). Can you think of anyone who would loan GMAC $11.50 right now, not to mention $11.5 billion? Who should they even ask? Well, I can think of one guy. Can you guess?
OK, him too, but I’m not allowed to blog about Tim Geithner anymore, am I? Keep guessing.
Getting warmer, but who knows if he’ll be able to stay awake long enough to count out the money (which, yes, he might have on hand).
You don’t even know who that is, do you? It’s OK; you’re not alone. Hint: It’s Gary Locke. He’s the Commerce Secretary.
Give up? The auto task force guy with the power of the purse on this one might actually be this guy:
That’s Steven Rattner, the Car Czar. Not really sure why he’s so far in the back during this Shame on You Chrysler Lenders speech, since he’s apparently the guy who fired Rick Wagoner at G.M. and heavily rumored to be the guy who told Chrysler’s non-complying creditors the White House would destroy them if they didn’t cooperate. (He’s also, according to that first link, the guy who’s eyeing Tim Geithner’s parking space at Treasury — or at least was before his own possible scandal popped up). Rattner is also the guy who will be poring over G.M.’s you-have-60-days-to-get-it-together filing, which is due at the end of this month.
Also due 30 days from now (June 8, to be precise)? A plan from each of the banks listed above that needs to raise capital about how, exactly, those banks plan to raise that needed capital by November. I’m guessing GMAC’s plan can be summed up in two words: Government bailout.
So my thought is this: How can GMAC make any kind of plan without including the viability of GM (and Chrsyler, for which it might be taking up sales financing for) in its plan? And if it includes those pieces of the puzzle, doesn’t that make Rattner the point man?
This seems like a good thing. Rattner’s the one who spear-headed the Chrysler effort, which ended, you may remember, with not much government concession to bondholders. Rattner has shown that he’s willing to see a car company fail. It can’t be that hard for GMAC to imagine that he wouldn’t mind watching a car company’s finance wing fail, too.
And though Treasury has said that they will support GMAC as needed, I’d guess that’s a reassurance meant more for its counterparties than for GMAC itself. This is a bank that probably needs to go into receivership. It’s a bank that, as Floyd Norris writes, “concluded, disastrously, that a good way to offset possible losses on auto loans was to get into mortgage lending.” Going forward, what are the prospects for GMAC to revive?
I’m not convinced that a GMAC failure would be the same systemic threat that a failure of Citi or BoA might be. First, I don’t think it would send a confidence shock through the system if GMAC went down — in fact, I think it’s more shocking that it’s being allowed to stand.
Second, GMAC does provide financing for dealerships to buy new inventory, and then provides financing for customers to buy that inventory — but if a contraction in that particular market is going to happen anyway (and it certainly seems it will, as part of Chrysler’s bankruptcy deal will include dealership closings), why not just hand GMAC off to the FDIC now? Why not call this bank, and all of its attached pieces, a failure?
If anyone’s going to have a come-to-Jesus meeting with this bank, Steven Rattner seems like the guy to do it. He’s probably got the clearest picture of GM’s predicament right now, and I hope that qualifies him to deal with their semi-detached financing arm, too.
SATURN SMITH 