United States of America: Bail-out of GMAC
Description
The U.S. Department of the Treasury announced on December 30, 2009 that it will expand the bailout of GMAC, taking a majority stake in the financial services company. Prior to this action the Treasury had invested $12.5 billion in preferred stock of GMAC. Treasury owns $13.1 billion in preferred stock in GMAC, through purchases and the exercise of warrants, and 35 percent of the common equity in GMAC.
As described by GMAC in a press release, this is part of a three-pronged set of capital actions:
- A capital infusion of $3.79 billion from the U.S. Department of the Treasury consisting of the purchase of $2.54 billion of trust preferred securities, with a coupon of 8 percent, and $1.25 billion of mandatorily convertible preferred securities (MCP), with a coupon of 9 percent.
- The exchange of all the GMAC non-convertible preferred stock held by the U.S. Treasury for $5.25 billion of newly-issued MCP.
- The conversion of $3.0 billion of existing MCP held by the U.S. Treasury into GMAC common equity. Following the conversion and new issuances of MCP, the U.S. Treasury will hold a total of approximately $11.4 billion of MCP.
Formerly known as the General Motors Acceptance Corporation, GMAC is principally engaged in financing the sale of automobiles. It became an independent finance company in 2006 when General Motors sold a 51 percent stake in the company to a group of investors led by Cerberus Capital Management, L.P. The firm had approximately $178 billion in assets, with 15 million customers worldwide as of September 30, 2009.
Any Evidence-Based Deliberation:
| Question | Result |
|---|---|
| Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations? | No |
| Is there any evidence that alternatives to the proposed measure were considered? | No |
| Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government? | No |
| Was such evidence identified? | No |
| Is such evidence publicly available? | No |
| Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives? | No |
| Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken? | No |
| Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory? | No |
| Did the government state its intention to review the measure within one year of implementation? | No |
Date Discovered:
Implemented: Yes
Date of inception: 30 Dec 2009
GTA Evaluation: Red
Source:
See the material hyperlinked in the description.
Government Response:
- 374 reads
