March 13, 2010
In January, I bored everyone with how useless the U.S. taxpayer investments into GMAC were:
Now, the fun is beginning again. A government watchdog, the Congressional Oversight Panel, issued a report on Thursday which detailed the folly of the GMAC investments. The watchdog states that U.S. taxpayers could lose $6.3 billion on this “investment.”
It boggles the mind that GMAC was “saved” from bankruptcy. Numerous commercial banks could have picked up the slack for financing on new and used cars. Furthermore, no one cares anymore about the 125% loan-to-value mortgage loans that GMAC used to originate, since that product doesn’t exist anymore. That’s right, a mortgage loan of 125% of the value of your home. I wonder what the loss experience has been on those spectacular loans.
Nevertheless, the moral of the story is that the government is not the best suited entity to allocate capital in a capitalist society. How many more examples do we need to see before this losing proposition is halted?