Holy C.R.A.P. Pimpco!

By DAMIAN PALETTA and JOHN D. STOLL
Wall Street Journal
December 30, 2008

WASHINGTON -- The federal government Monday deepened its involvement in the U.S. automotive industry by committing $6 billion to stabilize GMAC LLC, a financing company vital to the future of struggling car maker General Motors Corp.

In a sign the government's role in the industry could become open-ended, the Treasury Department said Monday it had set up a separate program within the Troubled Asset Relief Program (Can I be the first? Car Rescue Asset Program, C.R.A.P.- AM), a fund originally designed to help banks, to make investments directed at the auto industry. A Treasury official said the new program didn't have a specific dollar limit.(Wherever our imagination takes us?-AM)

The Treasury purchased $5 billion in senior preferred equity in GMAC and offered a new $1 billion loan to GM so the auto maker could participate in a rights offering at GMAC. (Oh this is the priceless part. PIMPCO not only doesn't take a loss, not only gets the juice from GMAC debt ramping cause your taxpayer money is subordinate but gets the Government to pony up 1 billion so that GMAC can hit the 75% limit. Will Paul McCulley's next blogging adventure with Bun Bun,his Netherlands Dwarf pet bunny,-hand to God check out their web site - be entitled, 'Yo, we punk'd the taxpayer?' -AM) That loan comes in addition to the recent $17.4 billion emergency plan to rescue GM and Chrysler LLC.

The move by Treasury is the second part of a two-step rescue by the government of GMAC.(Part 2 of 2? Isn't that optimistic? -AM) Last week, the Federal Reserve approved the finance company's application to become a bank-holding company, a move sought by other companies, too, to take advantage of new government programs aimed at stabilizing banks.

The Fed's approval was conditional on GMAC raising new capital, which the company tried to do through a debt-equity swap that expired Friday. The company's goal was to raise $30 billion by converting 75% of its issued debt into preferred-stock holdings. Last week, less than 60% of bondholders had signed on and the offering had been extended four times. At the same time as the Treasury announcement Monday, GMAC said it had raised enough capital to satisfy the Fed's conditions. It wasn't clear whether the government's intervention prompted or followed GMAC's meeting the capital requirement.(Read your full article, I guess when it's written by committee -4 folks cited - they don't check each other's notes - AM)
—Neal Boudette and Sharon Terlep contributed to this article.