GMAC: Closer to Admitting It's (Already) Bankrupt
Lyndon LaRouche
September 4, 2008 (LPAC)--Economist Lyndon LaRouche's accurate, February 2005 warning of bankruptcy looming for the auto industry, was focussed on the unpayable debt bubble of the General Motors Acceptance Corporation (GMAC), the so-called financial arm of GM.
Three and a half years later, GMAC, a financial firm with $150 billion in debt liabilities, may be in the final stages before being forced to admit it's actually, (already), a bankrupt operation. GMAC announcement on Sept. 3 that it is essentially closing down its mortgage unit ResCap, which is laying off 5,000 of its remaining 8,000 employees and ceasing to do retail mortgage business, closing all of its 200 offices across the country. GMAC's other half, auto finance, is also losing money. GMAC has lost $7.2 billion since fourth quarter 2006, when 51% of it was acquired by Cerberus Capital Management LP, which also bought Chrysler Corp. So financial predator Cerberus has wound up chewing off its own leg in the trap of the collapsing auto management sector.
The market valuation of GMAC's huge debt has fallen to 58 cents on the dollar, and it must pay 24% to borrow money!
With about $150 billion in debt liabilities, GMAC only underscores the need for a federally directed, economy-wide, bankruptcy reorganization of the entire credit system.