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GMAC On Brink of Insolvency



June 24 (Bloomberg) -- The 300 bankers gathered at New York's Waldorf-Astoria Hotel last month faced a stark choice: Accept Sam Ramsey's plea to restructure $60 billion of GMAC LLC's debt or risk pushing the lending arm of General Motors Corp., the largest U.S. automaker, to the brink of insolvency.

``There was not room for slippage,'' said Ramsey, 49, a former Bank of America Corp. executive who joined Detroit-based GMAC in September and became chief risk officer two months later. He pulled it off as banks led by New York-based JPMorgan Chase & Co. and Citigroup Inc. provided GMAC and its Residential Capital LLC mortgage unit with the biggest restructuring package since the credit-market rout began a year ago.

Whether that's enough to ride out the worst housing slump since the Great Depression remains in doubt. Moody's Investors Service cut GMAC's credit rating one level to six rankings below investment-grade last week as ResCap burns through cash after losing $5.3 billion in the past six quarters.

``ResCap presents a very significant risk,'' said Mark Wasden, the lead GMAC analyst at Moody's. ``There is no easy exit from their difficulties right now. We think the company will yet again find itself in need of additional cash.''

http://www.bloomberg.com/apps/news?pid=20601109&sid=aFREd.COhlF4&refer=home
 

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Lucky GM reduced its exposure to GMAC.
GMAC was a cash cow for many, many years and could have remained one if it had been properly managed. What were the financial managers doing there? Throwing money out the windows?

A viable GMAC, even with GM owning a reduced stake, could have helped save GM. Instead, because of the financial wizards, more billions are lost.
 

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Lucky GM reduced its exposure to GMAC
But the problem here is that GM still its exposed to 49% of GMAC mess and if they go down they will ask for more money to GM or they will take GM down with them, right now this is like the perfect storm, high gas, lower sales , ur financial arm in crisis, burning cash at incredible rate, Im my guts I want GM and Ford to succeed but the trick here is the time and GM is running out of it and that what worries me
 

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Even when Chrysler was a death's door during the mid '70s recession Chrysler Financial still made money.
Of course there wasn't a major housing implosion going on at that time, but you have to wonder how badly it's been mismanaged.
 

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GMAC was a cash cow for many, many years and could have remained one if it had been properly managed.
Due to the low credit rates these financial institutions were making money hand over fist, throwing money at anybody who asked for it. They didn't care about credit-worthiness of the buyer because they just repackaged the loan and sold it off as an investment, with a high rating thanks to complicit ratings agencies. Now that the sh?t has hit the fan and nobody is buying up all these repackaged loans, the banks are left with all these crummy loans that in many cases aren't going to be repaid. Now it's payback time. http://idioms.thefreedictionary.com/You+reap+what+you+sow

Finance has taken over as our country's largest industry (replacing manufacturing which replaced farming). Any time that has happened to a country in the past it has signified the beginning of the end of that country's financial and political dominance. If interested, a good read is Bad Money by Kevin Phillips.
 

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Finance has taken over as our country's largest industry (replacing manufacturing which replaced farming). Any time that has happened to a country in the past it has signified the beginning of the end of that country's financial and political dominance. If interested, a good read is Bad Money by Kevin Phillips.
I agree completely. When or are we going to learn?
 

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In mentioning a GMAC meltdown, I'll bring up one item, having to do with my laughable attempt at the mortgage business last year. It was CMG's Home Ownership Accelerator, which is similar to the loans Macquarie does overseas, and did here until fairly recently. Essentially, it was a HELOC that you were encouraged to place your entire paycheck into to be able to pay your home off quickly. Based off the figures of my last deployment, I could have paid my condo off in about seven years with this type of loan. That possibility was no joke. The loans were serviced by GMAC. It seems that the company that created this particular loan is out of business, as the web pages come up blank in Firefox, and come up "cannot display the page" in IE7. Despite fairly stringent requirements (680 FICO, 90% LTV, among others), this plan probably fell victim to declining real estate values, and contributed to GMAC's problem.
 

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GMAC has been a basketcase for years - their financial reporting has been near criminal and their mortgage business some of the most dangerous in the industry. GM overall is not looking good. Still hooked to GMAC, GM won't be pulled under if GMAC goes under, but GM will have hit an iceberg that has all the potential of sending it to the bottom should GM continue to offer lukewarm products elsewhere.
 

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I've always wondered if the company holding your loan goes under, would it be possible to pick up your own debt at pennies on the dollar?
I guess if you set yourself up as a financial institution of some sort you could then bid on the debt, but I guess you would not be able to bid on a specific property, just a group of them. I would also assume it is in the other institutions interest to outbid you if they knew what was going on as the interest they could earn on the loans would probably be more than you would be willing to bid as the cost of the loan required plus interest payments on that would more than likely have you end up where you started at.

Be a very nice thing if it were possible but I don't see us being that lucky!
 

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Lucky GM reduced its exposure to GMAC.
If only that was true...
GM will take a huge hit if this happens both financially and corporate image.
 
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