Watchdog's report attacks US bailout of GMAC
By Daniel Wagner |
March 12, 2010, Friday
|
Print Edition
Print Edition
THE United States Treasury Department sank billions into auto finance giant GMAC Inc without an exit strategy or proof the company was viable - a decision that could cost taxpayers US$6.3 billion, a new watchdog report says.
The government said the US$17.2 billion bailout was a necessary step to save troubled auto makers General Motors and Chrysler. GMAC provides financing to auto dealers, who borrow to finance their fleets until the cars can be sold to consumers.
Yet GMAC faced fewer conditions than the bailed-out car makers, the report says. When the auto makers were rescued, they were forced into bankruptcy. Shareholders lost their investments, creditors took a hit and executives were forced to detail plans for making the companies viable.
GMAC was treated more like banks that received bailouts without having to explain what they were doing with the money, the report says.
The report was released yesterday by the Congressional Oversight Panel overseeing the US$700 billion financial bailout that Congress passed in October 2008.
"Treasury missed many opportunities to improve accountability and protect taxpayer money," panel chair Elizabeth Warren told reporters. She said Treasury didn't make GMAC show how it would return the taxpayer money, or how the investment would increase credit to consumers.
The Treasury Department responded by reiterating that backing GMAC was necessary to preserve dealer financing for GM. It disputed the report's core finding, that alternatives might have saved taxpayer money and provided better transparency.
"Treasury viewed the course taken as the least costly and least disruptive of all the options available," Treasury spokeswoman Meg Reilly said in a statement.
The government said the US$17.2 billion bailout was a necessary step to save troubled auto makers General Motors and Chrysler. GMAC provides financing to auto dealers, who borrow to finance their fleets until the cars can be sold to consumers.
Yet GMAC faced fewer conditions than the bailed-out car makers, the report says. When the auto makers were rescued, they were forced into bankruptcy. Shareholders lost their investments, creditors took a hit and executives were forced to detail plans for making the companies viable.
GMAC was treated more like banks that received bailouts without having to explain what they were doing with the money, the report says.
The report was released yesterday by the Congressional Oversight Panel overseeing the US$700 billion financial bailout that Congress passed in October 2008.
"Treasury missed many opportunities to improve accountability and protect taxpayer money," panel chair Elizabeth Warren told reporters. She said Treasury didn't make GMAC show how it would return the taxpayer money, or how the investment would increase credit to consumers.
The Treasury Department responded by reiterating that backing GMAC was necessary to preserve dealer financing for GM. It disputed the report's core finding, that alternatives might have saved taxpayer money and provided better transparency.
"Treasury viewed the course taken as the least costly and least disruptive of all the options available," Treasury spokeswoman Meg Reilly said in a statement.
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