[doh]

http://www.reuters.com/article/marketsNews/idINN2930256620080429?rpc=44

NEW YORK, April 29 (Reuters) - Finance company GMAC said on Tuesday its first-quarter loss nearly doubled as more customers fell behind on mortgage payments, and that it may not turn a profit this year.

The loss increased to $589 million from $305 million a year earlier. Results included an $859 million loss at Residential Capital LLC, the mortgage unit's sixth straight quarterly loss.

GMAC also said ResCap has "significant near-term liquidity requirements," with $17 billion of debt coming due this year. GMAC said it may provide more funding, sell some ResCap assets, or try to refinance the debt. ResCap has already reduced riskier lending and announcing 5,000 job cuts.

General Motors Corp (GM.N: Quote, Profile, Research) owns 49 percent of GMAC. Private equity firm Cerberus Capital Management LP [CBS.UL] led a group that bought 51 percent of GMAC from the automaker in 2006.

GMAC said that challenging market conditions "have not shown signs of moderation." It said if these conditions persist, the company may not return to profitability before 2009, later than expected.

"While the actions we have taken to date to reduce risk, reduce leverage and streamline the cost structure have produced results, there is still more to do to stabilize ResCap," Chief Executive Alvaro de Molina said in a statement.

Earnings fell 35 percent to $258 million in auto finance and 8 percent to $132 million in insurance. GMAC is based in Detroit, and ResCap in Minneapolis.

De Molina became GMAC's chief executive on April 1, after joining Cerberus last year. He had previously been chief financial officer at Bank of America Corp

 

[windvale]

Live by the sword...die by the sword...

 

[doh]

Around here, GMAC is going to the dealers that have thier mortgages with GMAC, and asking at renewall time for prime plus 6%!

Scotia bank, that carries alot of dealers has writen 6 GM dealers in the past few months.

 

[steinravnik]

Around here, GMAC is going to the dealers that have thier mortgages with GMAC, and asking at renewall time for prime plus 6%!

Scotia bank, that carries alot of dealers has writen 6 GM dealers in the past few months.

Credit markets have tightened all over. GMAC has increased rates to a point at which it can make the loan desirable to sell on the secondary market.

GMAC and Rescap made tons during the mortgage/lending bubble. Now we're on the downside of this cycle. Hopefully they saved some money from the good days, but somehow I doubt it. It was probably all lost on executive bonuses.

 

[tgagneguam]

As others have mentioned in the past in other threads, it seems rather timely that GM divested a majority of its stake in GMAC just prior to the mortgage crisis. Clairvoyance or just plain dumb luck? It might actually just be luck, as I think the divestiture was simply to raise cash. Let's not give the suits too much credit!

 

[tgagneguam]

...GMAC and Rescap made tons during the mortgage/lending bubble. Now we're on the downside of this cycle. Hopefully they saved some money from the good days, but somehow I doubt it. It was probably all lost on executive bonuses.

This is basically how I see it, steinravnik. It's why I am pretty much unsympathetic to the good folks at places like Bear Stearns. When the profits rolled in, they enjoyed lavish(!) bonuses, and I paid no attention to that; it wasn't my business. (To add insult to injury, I believe a large portion of their salaries aren't viewed specifically as payroll income but is paid as dividends. This, in turn, is viewed as capital gains, which is taxed at a much lower rate!)

Now that the chickens have come home to roost, I'm equally as disinterested in the fate of Bear Stearns. Had they saved some money in reserves, like commercial banks are required to do, they wouldn't have had to cry to government to help them out. And Paulson should have turned a deaf ear to the dolts! Of course, in the age of privatized reward and socialized risk, taxpayers came to the rescue. Hopefully, that's the end of that silliness.

 

[sepi]

Just a reminder - GMAC has had to restate its profits because of improper accounting practices in the past. Despite having to do so one time under the "guise of re-establishing proper accounting practices" GMAC had do this once more. GMAC is a poorly run division (former?) of GM. One cannot believe that the parent company would be any better on corporate reporting accuracy if it allowed GMAC to virtually cook its books (or to throw the results in the air and to pick up only what they wanted to report).

I hope GM has to invest more billions into this mess - the fraud of GM is "coming home to roost" (Reverend Bigot Wright)

 

[jbartley]

...looks like GM offloaded half the company at the right time...

 

[steinravnik]

This is basically how I see it, steinravnik. It's why I am pretty much unsympathetic to the good folks at places like Bear Stearns. When the profits rolled in, they enjoyed lavish(!) bonuses, and I paid no attention to that; it wasn't my business. (To add insult to injury, I believe a large portion of their salaries aren't viewed specifically as payroll income but is paid as dividends. This, in turn, is viewed as capital gains, which is taxed at a much lower rate!)

Now that the chickens have come home to roost, I'm equally as disinterested in the fate of Bear Stearns. Had they saved some money in reserves, like commercial banks are required to do, they wouldn't have had to cry to government to help them out. And Paulson should have turned a deaf ear to the dolts! Of course, in the age of privatized reward and socialized risk, taxpayers came to the rescue. Hopefully, that's the end of that silliness.

I'm not happy with the bailout of Bear Stearns but I can sort of see why they did it. If Bear Stearns had been allowed to fail, it would have caused a huge panic, which would have exacerbated the downturn and made it more severe than was necessary.

The problem is that these firms were went unchecked, and everyone just assumed the free market would make it all work. Now these firms have proven their inability to self-govern, and tighter controls are being proposed. I think tighter controls are good.

This whole housing debacle wouldn't have occurred if tighter controls regulating the mortgage industry, securitization industries, even appraisers and realtors had existed. I'm generally a free market guy, but in cases like this more regulation is better because the monetary impact on such a broad spectrum of average Americans is impacted.

 

[steinravnik]

As others have mentioned in the past in other threads, it seems rather timely that GM divested a majority of its stake in GMAC just prior to the mortgage crisis. Clairvoyance or just plain dumb luck? It might actually just be luck, as I think the divestiture was simply to raise cash. Let's not give the suits too much credit!

They should have sold it all. They could have always repurchased a stake once everything crashed and burned.

 

[member12]

This goes back to making bad lending decisions.

It's a good thing that GM dumped them......it's almost like the saw this about to happen.

 

[Kennyboy]

Good move on GM's part back in early 2005 to sell a majority stake in GMAC to a private equity firm. People at that time were questioning GM's move to sell GMAC, especially here at GMi. Now with the housing bubbling bursting and people are defaulting on their loans, it was just dumb luck that GM happen to sell GMAC.

On the issue of Bear Stearns, it think it was a wise move on the Fed's part to allow the sale of Bear Stearns to the other bank, I can't think it of right now. But the Fed allowed Bear Stearns to tank, that will create a ripple effect that will affect other banks.

 

[tgagneguam]

I'm not happy with the bailout of Bear Stearns but I can sort of see why they did it. If Bear Stearns had been allowed to fail, it would have caused a huge panic, which would have exacerbated the downturn and made it more severe than was necessary.

The problem is that these firms were went unchecked, and everyone just assumed the free market would make it all work. Now these firms have proven their inability to self-govern, and tighter controls are being proposed. I think tighter controls are good.

This whole housing debacle wouldn't have occurred if tighter controls regulating the mortgage industry, securitization industries, even appraisers and realtors had existed. I'm generally a free market guy, but in cases like this more regulation is better because the monetary impact on such a broad spectrum of average Americans is impacted.

You almost had it, steinravnik.

The free market was not allowed to work. The market enjoyed the success without government intervention, but when the crisis started, the government foolishly intervened. Prior to the government's action, you already witnessed mortgage companies tightening their lending practices, which was long overdue. The crisis, I think, needed to occur to some extent and would have largely untouched many Americans. 93 percent of people are still paying their mortgages on time, and those who are not able to secure further lending probably should not have gotten the first mortgage in the first place. Companies who need to borrow money to invest and who now cannot secure funding now probably don't deserve it. Then managed themselves poorly.

It's really Wall Street types that play this mortgage crisis up: the government's gotta do something or the entire global economy will spiral down into a massive depression, and the end of the human race will occur. No it won't. It will restore sensibility in the system. Just like it has in other times of crises.

People claim credit is tightened. Again, I think that that's rightfully the case. But I don't have a problem securing additional credit. I have a FICO score of 811, and my better half's score is 809. We don't have problems securing money because we've established strong credit histories. Just like millions of American citizens and businesses. Does Berkshire have funding problems? Does Toyota? Does Microsoft? Does Wal-mart?

The government should have some oversite of the financial markets, but only to a degree. If we operated in a truly free market system, the banks and mortgage companies would have been allowed to suffer, just like they were untouched during their times of success. The weak would have been picked apart, the strong would have risen. Just like when crises hit the financial markets in the past. Funny, we all managed to survive.

What we have now, what many people believe in right now is privatized success, socialized risk. When Bear Stearns does well, the government doesn't get much of the profit (and it shouldn't); privatized success. But when the **** hits the fan, Wall Street thinks the federal government should come a runnin', taxpayer funds in hand; socialized risk. Paulson should have gone to Stearns and simply offered a few words of encouragement: "I hope you guys make it through. Better days are ahead." Then he should have returned to Washington. That's it.

 

[Buickman]

the most corrupt individuals in corporate history control our beloved General Motors. they call the shots on dissolution, profit for their "advice" and reap rewards for advancing long term debt. those who believe otherwise are but fools.

 

[t-rex]

Live by the sword...die by the sword...

Heh heh.

Or...

Live by the shady subprime lender... die by the shady subprime lender...

WTF was GM doing in the g-d home lending business anyway? GM isn't a chaebol or a conglomerate... it's a friggin' car company. Stick to cars and trucks, Rick...

Not like he seems to know what he's doing with just cars and trucks either...

 

[steinravnik]

You almost had it, steinravnik.

The free market was not allowed to work. The market enjoyed the success without government intervention, but when the crisis started, the government foolishly intervened. Prior to the government's action, you already witnessed mortgage companies tightening their lending practices, which was long overdue. The crisis, I think, needed to occur to some extent and would have largely untouched many Americans. 93 percent of people are still paying their mortgages on time, and those who are not able to secure further lending probably should not have gotten the first mortgage in the first place. Companies who need to borrow money to invest and who now cannot secure funding now probably don't deserve it. Then managed themselves poorly.

It's really Wall Street types that play this mortgage crisis up: the government's gotta do something or the entire global economy will spiral down into a massive depression, and the end of the human race will occur. No it won't. It will restore sensibility in the system. Just like it has in other times of crises.

People claim credit is tightened. Again, I think that that's rightfully the case. But I don't have a problem securing additional credit. I have a FICO score of 811, and my better half's score is 809. We don't have problems securing money because we've established strong credit histories. Just like millions of American citizens and businesses. Does Berkshire have funding problems? Does Toyota? Does Microsoft? Does Wal-mart?

The government should have some oversite of the financial markets, but only to a degree. If we operated in a truly free market system, the banks and mortgage companies would have been allowed to suffer, just like they were untouched during their times of success. The weak would have been picked apart, the strong would have risen. Just like when crises hit the financial markets in the past. Funny, we all managed to survive.

What we have now, what many people believe in right now is privatized success, socialized risk. When Bear Stearns does well, the government doesn't get much of the profit (and it shouldn't); privatized success. But when the **** hits the fan, Wall Street thinks the federal government should come a runnin', taxpayer funds in hand; socialized risk. Paulson should have gone to Stearns and simply offered a few words of encouragement: "I hope you guys make it through. Better days are ahead." Then he should have returned to Washington. That's it.

There was no "success" in the housing bubble. The entire episode was a waste. You can't create real wealth by shuffling debt and extending credit to anyone with a pulse. Mortgage companies artificially created wealth with their mortgage backed securities and sold them around the world. It's called a scam in more common words. The demand for houses was comletely artificial. It only existed because banks made the money available. The availability of money created inflation in prices, which further drove demand. It's a classic bubble scenario. It's the government's job to protect consumers from predatory lending, scams, and the like. And the government failed miserably.

Despite the what the media portrays, many people bought homes they could afford and are still paying their mortgages. But because they are upside down, they are stuck with their house for a very very long time. People that already owned homes payed inflated property tax bills. Retired people that had homes paid off were forced to sell during the bubble simply because they could not afford the taxes. What about people that were forced to settle for inferior/inadequate living accomodations because they didn't want to buy into a bubble? Sure, plenty of the foolish and greedy got burned, but everyone else was affected as well in one degree or another. There are many, many examples of innocent people that have been adversely affected, that shouldn't have. I think the answer here is better controls, not less.

 

[code blue]

What I wonder is: if GMAC goes under, what happens to my car loan?

 

[F14CRAZY]

What I wonder is: if GMAC goes under, what happens to my car loan?

News headline: GMAC is forced to give up their leins on millions of loans and leases. I ask that too, about Chrysler

 

[Buickman]

"This was the device by which dependence and suffering were perpetuated as fundamentals of life"

A Rand 1943

how prophetic