Automobiles

Miracle TARP Can Cover Anything

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The Treasury Department has agreed to buy a $5 billion stake in GMAC, General Motors' former financial subsidiary, to help it become a bank holding company. The money will come from the Troubled Asset Relief Program (TARP), created by the Emergency Economic Stabilization Act. Yet GMAC wants to be a bank so it can be considered a "financial institution" under the act and thereby qualify for TARP money. In other words, GMAC is receiving TARP money so it can be eligible for TARP money. Assuming there's no time travel involved, that sounds pretty fishy. On second thought, this plan would be logically impossible even with a time machine.

Wait, it gets better. According to The New York Times, the Treasury Department will also give G.M., which owns 49 percent of GMAC, $1 billion in TARP funds so the carmaker can "purchase additional equity offered by GMAC." At the same time it is buying more GMAC stock, G.M. is supposed to reduce the share of the company it owns to less than 10 percent. Presumably this is possible because GMAC is issuing a lot more stock as part of its plan to convert 75 percent of its debt to equity. But that's hardly the most confusing part of the deal. GMAC, which loans money to car buyers and dealers, evidently did not count as a "financial institution" until it decided to become a bank. Yet G.M., which makes cars, somehow does. The $1 billion it will receive to facilitate the GMAC transformation is on top of the $9.4 billion it is already getting from TARP, on the strength of being such a crappy carmaker that it's on the verge of bankruptcy.

A few weeks ago I explained why President Bush's creative use of TARP is illegal and unconstitutional.

NEXT: The Buck Keeps Moving

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  1. Today’s Principle:

    Kuumba (Creativity)
    To do always as much as we can, in the way we can, in order to leave our community more beautiful and beneficial than we inherited it.

    Happy Kwanzaa!

  2. Illegal? Unconstitutional? Hah…..those words have no meaning! Everything is legal if Hank Paulson says it is!

    The new Treasury Department motto!

    I pity you Jacob Sullum!……mere mortal……..

  3. the government needs to controll the corporations more in order for society to progress. purchasing the companies is not as desirable as making them fulfill their moral responsibilities, like creating jobs, making a clean environment and providing affordable planned housing, but it is a start.

  4. A week or two ago, I saw a couple of stories which said PIMCO was refusing to accept a debt-for-equity swap needed by GMAC as part of the bid for bank status.
    Apparently Bill Gross wasn’t interested in taking a big hit for the benefit of GM.

  5. Is Jacob the only staffer not out drinking already?

  6. Assuming there’s no time travel involved, that sounds pretty fishy.

    Everything about this whole multi-trillion-dollar bailout seems pretty fishy to me.

  7. Some normally libertarian-leaning family and friends of mine have now changed their minds and are for any bailout of GM.

    Why?

    Because in case of war, we might need GM to make tanks and planes and stuff, so it would be nice to keep GM’s factories in the United States under US ownership.

    They remained unconvinced when I told them that our MIC no longer uses GM to make military hardware, and that in a time of war (the current wars don’t count as real wars apparently), it doesn’t matter which factories or companies produce military hardware.

  8. I would totally want to go lurk beneath the polar icecap for months at a time in a nuclear submarine built by Buick.

  9. Also, if you cared about our boys having the best war gear available for the best price available, you’d think that it would be nice to buy it from the most successful companies out there, instead of propping up the least successful companies *just in case* we might need to buy from them later.

  10. Geo Metro-class subs. The mind boggles.

  11. Some normally libertarian-leaning family and friends of mine have now changed their minds and are for any bailout of GM.

    Oddly enough my extremely liberal parents and the liberals amongst my friends were all die-hard against the bailout, and this idiotic extension of it didn’t change their opinion one whit.

    It’s weird. It’s like people leaping *out* of stereotypes.

  12. LMNOP – ditto with some liberal types I know. (but they also have realistic expectations for the next administration, so you gotta hand ’em that)

  13. Some normally libertarian-leaning family and friends of mine have now changed their minds and are for any bailout of GM.

    There are no libertarians in foxholes.

  14. if gm were making green submarines then we would not be in this quagmire.

  15. It’s tough to seal the oarlocks in a green submarine.

  16. “It’s weird. It’s like people leaping *out* of stereotypes.”

    I think patriotism plays a big part to some extent. GM is a symbol of American industrial might. Nevermind that it was capitalism that made the might of GM possible. Ironic that if you are against American capitalism, that you’ll oppose the bailout, but if you are for it that you’ll support the bailout. Both sides of course wouldn’t know free market capitalism if Adam Smith’s invisible pimp hand whacked them in the forehead, much like out soon-to-be ex president.

  17. How about a solar powered stealth bomber?

  18. How about a solar powered stealth bomber?

    yes, a green airforce too. how about ethanol tanks?

  19. lurker – can you hug a child with nuclear arms?

  20. How about a solar powered stealth bomber?

    I’m pretty sure the energy density of sunlight at the Earth’s surface is too low to sustain flight. Now this:

    Geo Metro-class subs.

    …is full of win, so long as you don’t expect the things to carry SRBMS.

  21. Geo Metro-class subs. The mind boggles.

    1. Suzuki made the Metro, not GM. GM just sold them under an American brand to make them more palatable to Made In The USA types.

    2. My Metro can kick your Aveo’s ass any day of the week.

  22. vm, no and we need more farms and less arms.

  23. This article can’t be accurate.

    Joe told me that the TARP funds going to GM and Chrysler were being routed through their financing arms. So this article’s claim that TARP money is being given directly to GM, and that GMAC is getting a separate bailout of its own, must be false.

    Please do better research, Jacob.

    Signed, Fluffy the Joe Stalker

  24. “Miracle TARP Can Cover Anything”

    It’s a “space age polymer formula”!

    (Or are people here too young to remember that?)

  25. There’s been a lot of backlash over the GM bailout via the TARPIT. Is anyone filing or planning to file a lawsuit over it?

  26. There’s been a lot of backlash over the GM bailout via the TARPIT. Is anyone filing or planning to file a lawsuit over it?

    Who has standing to bring suit?

  27. How are you gentlemen!!

    Nothing in the TARP says the Big 2.5 can’t take the money and sell themselves to foreigners.

    …And foreigners has US T-bills!!

    …And F-35 is built by limeys!!

    All your base are belong to us.
    You are on the way to destruction.
    You have no chance to survive make your time.
    Ha ha ha ha ….

  28. Funny, I seem to remember a “tarp” being a big, ugly blue sheet of plastic used to cover up things – notably rooftops in post-Katrina New Orleans.

  29. I had this dream last night. I dreamed that the Supreme Court ruled all of the bailouts illegal. All the banks and automakers were ordered to give the money back, but they had already spent it on hookers and booze.

    p.s. I used to make Redneck Swimming Pools out of blue tarp. Awesome fun.

  30. “A few weeks ago I explained why President Bush’s creative use of TARP is illegal and unconstitutional.”

    Well since the federal government has been operating outside of Constitutional bounds for, oh, about 70 years or so (and counting), there isn’t anything particularly unique about that designation.

  31. GMAC’s chairman, Jacob Ezra Merkin, plowed (and lost) $1.8 billion into Madoff’s investment funds. Sounds like a sound financial strategist to me.

  32. “lurker – can you hug a child with nuclear arms?”

    sure…but i’d imagine the sheer weight of the missile would crush them.

  33. Miracle TARP can’t protect everything.

    We need immediate action from Congress to pass Amazing SHAMWOW. SHAMWOW is guaranteed to soak up any troubled businesses that fall through holes in the TARP.

  34. Who has standing to bring suit?

    Couldn’t some taxpayer advocacy group file a class action lawsuit on behalf of everyone in the country?

    I want to sue the fed for devaluing my savings by printing more money also.

  35. The SHAMWOW project sounds very promising.

    As tests have proved, SHAMWOW solves everything but cross-eyed-ness.

  36. Miracle TARP Can Cover Anything

    It’s a Tarp of Covering*.

    * Yes, I am a big dorky nerd.

  37. “p.s. I used to make Redneck Swimming Pools out of blue tarp. Awesome fun.”

    That almost makes me want to buy a repossessed Ford Truck for pennies on the dollar. Almost.

  38. IT’S A TARP!

  39. IT’S A TARP!

    Excellent.

    “Something, something, something, dark side. Something, something, something, complete.

  40. *imagines what type of bait caster would be needed for the good admiral. And what kind of space giant bass we could catch*

    dhex – excellent – nuclear power is relatively earth friendly. Flattening the kid will deal with overpopulation (see: abortion, retroactive; and: “life: begins at 40”). It’s a win win.

  41. “the government needs to controll the corporations more in order for society to progress. purchasing the companies is not as desirable as making them fulfill their moral responsibilities, like creating jobs, making a clean environment and providing affordable planned housing, but it is a start.”

    Kind of like allowing beer advertisements on TV and, at the same time, promoting programs to keep responsible and honest cannabis users unemployed with drug testing.

  42. Do not taunt happy fun miracle TARP

  43. GMAC not only issues loans to people who buy cars, it also issues loans to people who buy houses, problems with which was the reason for the TARP in the first place. Ever see an ad for Ditech? That’s a GMAC division.

    Under the rules of the TARP, I can easily see GMAC getting TARP money without jumping through any hoops. I don’t understand how GM can, though. (And GM currently only owns 49% of GMAC. Cerberus, who owns Chrysler, owns the other 51%, although it looks like they both get a haircut with the government owning most of it after this.)

  44. Geo Metro-class subs.

    …is full of win, so long as you don’t expect the things to carry SRBMS.

    There was a Golf submarine that carried SRBM’s.

  45. and FWIW, Darpa is looking at ways to get the vehicles off of oil products, but in order to reduce the logistical tail and potential vulnerability thereof.

  46. The SHAMWOW project sounds very promising.

    I now understand why Obama did an informercial despite having the election more or less sewn up at the time. Preparation for the new paradigm.

  47. It’s a win win.

    Silly VM, the expression is now “win win win win win”.

    WIN, I tells ya.

  48. And GMAC is putting the money to use by lowering their required credit score so they can give people loans that wouldn’t normally qualify.

    The best way to solve a problem is to do more of that which caused the problem?

  49. “and FWIW, Darpa is looking at ways to get the vehicles off of oil products”

    Great!

    Tell them to lead the way in researching an electric car that is powered by it’s own internal nuclear reactor – one that can run for 20 years straight with no refueling and no maintence. And make sure it doesn’t cost one cent more than a comparable size and equipped gasoline powered car.

    That is the ONLY kind of electric car I want.
    The hell with the Chevy Volt.

  50. Fully electric cars will not be popular until the range, and refuel time is equivalent to current models.

    No one really wants a car that travels 50 miles and then requires 10 hours to refill.

  51. “Fully electric cars will not be popular until the range, and refuel time is equivalent to current models.

    No one really wants a car that travels 50 miles and then requires 10 hours to refill.”

    Yeah – or one that costs 30% or 40% more than a comparably sized gasolone powered car for the “priviledge” of not burning gas.

    Even the hybrid cars like the Prius make no economic sense from the individual purchaser standpoint – even more so now that gas prices have declined dramatically. I’ve heard that Toyota is losing money on every one they sell despite the fact that they cost more than pure gasoline powered cars.

  52. I have a friend that has a Prius, just the other day he was boasting about spending $17 on gas for an entire month. It may still make economic sense to the consumer, I’m not sure, but I would agree that it has lost its pop appeal.

  53. Probably depends how much you drive it. If it saves you $100 a month in gas, that probably makes up for the larger car payment.

    On the other hand the recharge time is a killer if you want to take it on road trips.

  54. Easily swappable batteries would make pure electric cars much more practical. ie, if you want to travel 3x the distance a single battery can handle, you just bring along two fully charged batteries in the trunk, and wahlah, no recharge time necessary.

    Also this would make it possible for those of us who drive less than 50 miles a day to not be forced to pay for a battery that lasts 500 miles between charges.

  55. I doubt you would have room to carry any extra batteries in an electric car.

    The batteries needed to power them are huge as it is.

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