The federal government went to extraordinary lengths to save the auto financing company GMAC. It was the only bank to get three separate rounds of federal aid -- the most recent in December, even as the broader bailout was winding down -- and it is the only bank in which the government now owns a majority stake.
On Thursday, congressional investigators questioned whether all those efforts were a mistake. Members of the Congressional Oversight Panel, charged by Congress with policing the bailout, pressed Treasury Department officials to explain why the government did not let the company go bankrupt.
They also questioned whether the rescue of GMAC, achieved in part by making it a bank, had created a long-term situation in which the government guarantee of bank deposits was subsidizing sales at General Motors and Chrysler. GMAC is the primary source of financing for GM and Chrysler dealers, and a major source of loans for buyers of their vehicles.
Elizabeth Warren, a Harvard law professor who chairs the panel, said she understood GMAC's utility for GM and Chrysler.
"What I don't understand," she said, "is what the justification is for being an independent bank that takes deposits that has a backup from the United States government."
Ron Bloom, a senior adviser to Treasury Secretary Timothy F. Geithner, told the panel that the rescue of GMAC was necessary to save the automakers, and that the $17.2 billion price tag was a good deal for taxpayers. He said that no other lender or combination of lenders could have quickly replaced GMAC's role in the marketplace.
rest at http://www.washingtonpost.com/wp-dyn/content/article/2010/02/25/AR2010022505677.html
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