OK you high finance guys what does this mean ?

[Clem Z.]

http://news.yahoo.com/s/ap/20081224/ap_on_bi_ge/fed_gmac

[Mark K.]

Re: OK you high finance guys what does this mean ?

In simple terms, it means that GMAC will have access to funds that wouldn't otherwise be available. This financial crisis is in large part about confidence in our lending institutions. The housing crisis has caused our banks to question the security of the loans and the way they feed back into the markets. The banks which have become "bank holding companies" (like Goldman Sachs et. al.) however have not been lending their portion of the government bailout money. GMAC, in large measure to help drive auto sales, may very well open the spigot, which is just what this economy needs.

[Donald T.]

Re: OK you high finance guys what does this mean ?

Not exactly sure, but I'm setting up shop as a "bank holding company". Now when do I get my bailout check?

[Michael L.]

Re: OK you high finance guys what does this mean ?

Look up the application online for bailout funds. It is two pages. You fill out more paperwork to buy a house. Only hitch is you have to be a bank... It is a joke. The ruling that GMAC has access to bailout funds should really help them. They were unable to loan money and many dealers suffered because they could not finance in-house. This could help them turn a corner albeit slowly...

[Duke W.]

Re: OK you high finance guys what does this mean ?

Bank holding companies can also borrow money through the Federal Reserve System. This announcement surprised me. I thought GMAC was already a bank holding company because they operate a commercial bank - GMAC Bank, which BTW, has been in the top list for CD rates in the last few years.

Bank holding companies are also subject to specific federal regulations that don't apply to non-banks, which is why the Wall Street investment banks were not bank holding companies until recently when they got into trouble with their riverboat gambler securities schemes.

Duke

[Erik S.]

Re: OK you high finance guys what does this mean ?

it likely means that things can start all over again with a little band aid. GMAC finances dealers, dealers customers to buy new GM cars

Erik

[David D.]

Re: OK you high finance guys what does this mean ?

I see Toyota suddenly wants in on the bailout gravy, how long did their accountants work to cook the books to show a loss.

[Steven C.]

Re: OK you high finance guys what does this mean ?

Bank holding companies can also borrow money through the Federal Reserve System. This announcement surprised me. I thought GMAC was already a bank holding company because they operate a commercial bank - GMAC Bank, which BTW, has been in the top list for CD rates in the last few years.

Bank holding companies are also subject to specific federal regulations that don't apply to non-banks, which is why the Wall Street investment banks were not bank holding companies until recently when they got into trouble with their riverboat gambler securities schemes.

Duke

Duke, GMAC is an industrial loan bank ("ILC"), owned by a commercial company not owned by a bank holding company and is not (or was not) not a commercial bank, different animal. ILC's are supervised by the FDIC but are not regulated, which creates it's own set of problems.

[Duke W.]

Re: OK you high finance guys what does this mean ?

Industrial banks are strange animals. An example is Fireside Bank in Pleasanton, CA. Their primary line of business is auto loans. I have a business relationship with them as an investor.

Industrial banks are "state regulated", but most, like Fireside, and GMAC Bank are FDIC insured, which means they must meet FDIC standards, so they effectively are also subject to some "federal regulation".

They usually don't have a zillion branches like the big retail commercial banks, but have traditionally offered "mail order" CDs and most have now transitioned to offering Internet CD purchases, and many offer pretty good CD deals.

Duke

[Jean C.]

Re: OK you high finance guys what does this mean ?

Clem,
What it means is that as a result, GM shares were up nearly 20% yesterday.
Best regards,

[Harry S.]

Re: OK you high finance guys what does this mean ?

GMAC is the parent of Ditech. Both GMAC and Ditech hold mortgages thus an impact on the housing market.

[Jake D.]

Re: OK you high finance guys what does this mean ?

We should have bought some shares of GM when it was $2 a share!

[Anthony M.]

Re: OK you high finance guys what does this mean ?

The bank holding company designation for GMAC will loosen up the loan market for auto loans. It will give access to funds that GMAC does not now have. Part of the problem at GM was that they couldn't offer low financing packages because GMAC funds had dried up and although GM offered it to other lenders but there were no takers. It also threatened the dealer floorplan availability,again the options for dealers were very limited. If the dealers can't stock vehicles GM can't sell vehicles to them.

The catch is GM must reduce their stake in GMAC to 10% and Cerberus must reduce their stake to 33%. GMAC shares opened at $5.10 today and right now are trading at $9.54 an 87% increase TODAY. Hindsight is great.