Financial Crisis News Center

COP Says Treasury's Decisions on GMAC Severely Constrained Its Options

By Serena Lynn, Editor, the CCH Federal Banking Law Reporter and Bank Digest.

The Congressional Oversight Panel has released its March oversight report, “The Unique Treatment of GMAC Under TARP.” The panel found that the government's early decisions to rescue GMAC instead of pursuing other options as part of a broader bailout of the domestic automotive industry resulted in missed opportunities to increase accountability and better protect taxpayers' money. The panel found that the Treasury and the Federal Reserve Board made critical decisions during the height of the financial crisis that severely constrained their options for addressing GMAC's uncertain future. According to the COP, GMAC's bailout dollars have also supported crippling losses in its mortgage lending business. The panel is deeply concerned that the Treasury has not required GMAC to lay out a clear path to viability or a strategy for fully repaying taxpayers.

Treasury to Commit Additional $3.8 Billion to GMAC

This story appeared in Bank Digest

The Treasury Department has announced that it is acting on its previously announced commitment to provide capital to GMAC as identified in May 2009 under the Supervisory Capital Assessment Program (SCAP). In May, SCAP identified an additional capital need of $5.6 billion for GMAC. Due to a variety of factors, including that the restructurings of General Motors and Chrysler were accomplished with less disruption to GMAC than banking supervisors initially projected, Treasury will commit $3.8 billion of new capital to GMAC, rather than the $5.6 billion originally announced, resulting in a $1.8 billion reduction in Treasury’s previously forecasted Troubled Asset Relief Program expenditures. The $3.8 billion of new capital will be provided in the form of $2.54 billion of Trust Preferred Securities (TRUPs), which are senior to all other capital securities of GMAC, and $1.25 billion of Mandatory Convertible Preferred Stock (MCP). In connection with providing this capital, the Treasury will also receive warrants to purchase an additional $127 million of TRUPs and $63 million of MCP, which it will exercise immediately at the closing of the transaction.

GM Makes First Quarterly Repayment

This story appeared in Bank Digest.

The Treasury Department has received the first quarterly $1 billion repayment from General Motors as part of the company’s accelerated plan to exit the federal government’s investments under the Troubled Asset Relief Program.

Treasury Department Issues Cumulative Dividends Report

This story appeared in Bank Digest.

The Treasury Department has released its Cumulative Dividends Report as of Nov. 30, 2009. The report covers the dividends paid by financial institutions that have received assistance from the federal government pursuant to such programs as the Capital Purchase Program, Systemically Significant Failing Institution Program or Automotive Industry Financing Program.

Treasury Department Issues Cumulative Dividends Report

This story appeared in Bank Digest.

The Treasury Department has released its Cumulative Dividends Report as of Oct. 31, 2009. The report covers the dividends paid by financial institutions that have received assistance from the federal government pursuant to such programs as the Capital Purchase Program, Systemically Significant Failing Institution Program or Automotive Industry Financing Program.

Nine of 10 BHCs Have Met Stress Test Capital Buffer Requirements

This story appeared in Bank Digest.

The Federal Reserve Board has announced that nine of the 10 bank holding companies (BHCs) that were determined in the Supervisory Capital Assessment Program, known as the “stress test,” earlier this year to need to raise capital or improve the quality of their capital to withstand a worse-than-expected economic scenario now have increased their capital sufficiently to meet or exceed their required capital buffers. The one exception, GMAC, is expected to meet its remaining buffer need by accessing the TARP Automotive Industry Financing Program and is in discussions with the U.S. Treasury on the structure of its investment.

Treasury Department Issues Cumulative Dividends Report

This story appeared in Bank Digest.

The Treasury Department has released its Cumulative Dividends Report as of Sept. 30, 2009. The report covers the dividends paid by financial institutions that have received assistance from the federal government pursuant to such programs as the Capital Purchase Program, Systemically Significant Failing Institution Program or Automotive Industry Financing Program.

Treasury Department Issues Cumulative Dividends Report

This story appeared in Bank Digest.

The Treasury Department has released its Cumulative Dividends Report as of Aug. 31, 2009. The report covers the dividends paid by financial institutions that have received assistance from the federal government pursuant to such programs as the Capital Purchase Program, Systemically Significant Failing Institution Program or Automotive Industry Financing Program.

Congressional Oversight Panel (COP) Analyzes Use of TARP Funds for Auto Industry

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Congressional Oversight Panel has released its September oversight report, “The Use of TARP Funds in Support and Reorganization of the Domestic Automotive Industry.” In protecting the interests of taxpayers, the COP found the Treasury Department negotiated aggressively with all the players in the automotive industry. While the Treasury Department has conceded that it is unlikely to recover the entire amount invested, other goals also influenced its overall strategy.

In the report, the COP encourages the Treasury Department to place its investments in Chrysler Group LLC and General Motors Co. into a separate trust to insulate the stakes from political pressures and government intervention. The COP, which is charged with overseeing the $700 billion Troubled Asset Relief Program (TARP), said in the report that such a trust would send a clear message to the markets that the government could not interfere in private commerce at Chrysler and GM. It added that decisions about voting, holding and the timing of security sales could be made “free of interference by any branch and not swayed by political expediency.”

Monthly Cumulative Dividends Report Released

This story appeared in Bank Digest.

The Treasury Department has released its Cumulative Dividends Report as of July 31, 2009. The report covers the dividends paid by financial institutions that have received assistance from the federal government pursuant to such programs as the Capital Purchase Program, Systemically Significant Failing Institution Program or Automotive Industry Financing Program.