Sunday, May 20, 2012

Bailed out ~ Failed out ~ A close encounter

Some protest slogans really stick.
THEY GOT BAILED OUT WE GOT SOLD OUT- the cry of the Occupy Movement
is one of those slogans.

There is a "Bankster" fiasco hitting even closer to home. 

Interestingly, we received notice in the mail, that our Mortgage lender GMAC has filed for Chapter 11 Bankruptcy. (Ally owns ResCap, of which GMAC mortgage is a subsidiary).

For the record in 18 years, we have never once been late or short on the mortgage payments. 

Ally has paid back $5.5 billion to the U.S. Treasury since being rescued as part of the auto bailout, back when it was still known as General Motors Acceptance Corp., or GMAC. But the company still owes nearly $12 billion -- or two-thirds of the total loan.

Ally will be putting up $150 million to help finance the bankruptcy and will also contribute $750 million in cash once the restructuring plan is approved, which ResCap hopes will happen by the fourth quarter.
Ally, which is 74% owned by the government, also said it will also make a stalking horse bid for up to $1.6 billion of ResCap-owned mortgages.
ResCap, which will continue operating through its Chapter 11 proceedings, said it will sell its mortgage origination and servicing businesses to Nationstar Mortgage.,0,56360.story

Anyway another case of they got bailed out & we will get sold out. It is not uncommon for mortgage companies to sell their mortgages to another company.... but this will be done under (their own) financial distress. 

How can a financial institution get loaned $17.5 billion & still screw up??

The letter we received was to the effect of "Yes your mortgage company is filing for Chapter 11 Bankruptcy, but don't worry everything is just fine, and then in bold font it says:

"As such you must continue to make your scheduled mortgage payments on time and in full to the address listed on your monthly statement". 

So apparently they can screw up & be irresponsible by choice, but a person struggling to pay a mortgage WILL be punished. 

They got a $17 Billion dollar bailout & are filing for bankruptcy. 
I don't know about you, but the fact that the government owns 74% of this failing company brings no comfort. In the end that is just a huge liability that simply dumps the debt on the government which trickles down to "We the people take the loss". 
Chapter 11 bankruptcy is "restructuring", but let's face it, when is bankruptcy ever a good thing?? They are deep in debt & the article states " The filing will help Ally distance itself from litigation-laden ResCap". It does not state what kind of litigation it is "ladened" with, but I'm guessing funky foreclosures. In any case, they are in deep trouble & can dump it in the lap of the government who owns 74% of it. 
Perhaps they should consider a name change... I suggest this:
 to     all lies


Anonymous said...

First of all the government didn't bail out the Rescap mortgage unit. The bailout money was for the auto lending unit and was designed to support GM. In case you failed basic finance, you can't make money on 0% interest rate loans offered on GM vehicles to increase sales volume at GM. By the way GM also went through their own structured bankruptcy very successfully despite TARP funds. As for Rescap, mortage banking is very complicated and market driven. You are obviously completey ignorant of the back office operations seeing the world from only the consumers viewpoint. Trust to say there are many market factors beyond the control of any indivudual company - such as the Greek/Eruo crisis which just ripped JPMC. And Lest I remind you that when people borrow money they have to pay it back. No bank can afford to just give $ away so people can buy houses they can't pay for. Its NOT a charity. The money lost is also yours & mine. It is your 401K fund or pension plan that purchased Fannie Mae securities backed by mortgages that failed - oh yeah because homeowners didn't pay.

Fran said...

Anonymous~ If you have a contention about the facts, then take it up wit the LA TImes. It is their article quoted here
'Ally has paid back $5.5 billion to the U.S. Treasury since being rescued as part of the auto bailout, back when it was still known as General Motors Acceptance Corp., or GMAC. But the company still owes nearly $12 billion -- or two-thirds of the total loan."

But fact- wise GM the car manufacturer took bailout money, and while the door the the Federal reserve/Treasury was open, they did some fancy footwork to get GMAC- the financial lending wing of the corporation, declare themselves "a bank" and took more bailout money for that aspect of the business.

No need for personal attacks, how are car manufacturers able to sell vehicles at 0% loans??
Don't get mad at ME because manufacturers put 0% loans on the table. I can only assume they are willing to allow those with near perfect credits scores (no risk) to have the 0%, and still make money off the profit margin built into the price of the car.

I'm not buying the Rescap rhetoric you present about it being so mystical & complicated.
There was a time it was straightforward- people could only spend X % of their income towards housing. There was a formula that allowed people to buy housing & still afford to eat & live.
It's all this stupid derivatives gambling where it is not even clear WHO owns the mortgage of any given property.

The lenders got sloppy & greedy. Loans were approved to anyone w a pulse, and no formula was needed, in fact there was the funky balloon payment and variable rate mortgages, that had uninformed buyers enticed to focused on todays low low payment, ignoring the almost guaranteed default down the road.
If I were in charge I would have regulators clamp down on the sloppy & predatory practices. I would abolish the balloon payment & variable rate loans.
So if you are so very knowledgeable about Ally-- tell me what their recent bonus structure is
how much bonus money has flowed, and also what kind of litigation ResCap is ladened with.

By the way... I love this line "You are obviously completey ignorant of the back office operations seeing the world from only the consumers viewpoint."
Ignorant of how a company can get a $17.5 BILLION dollar bailout & still wind up in bankruptcy-- you betcha.

Fran said...

Read this 3/11/2010 abc news article about major concerns that the GMAC bailout
"The chief problem area for GMAC has been substantial losses at the lender's home mortgage unit Residential Capital, which was battered during the housing meltdown by heavy investments in subprime loans.

The lender said in December that it would "explore strategic alternatives" for the unit, calling it "a major drain" on the company."

I am very familiar with General Motors Acceptance Corporation.
I witnessed them slowly get rid of FSO's (field service offices) that had Union workers, opened subsidiary companies to unknowingly be scabs to displace union workers, until they finally ditched the US based call centers to move it to India.

Even more ironic is GM survives it's own bankruptcy, with a hefty government handout, only to put out an electric car that costs $40K.

That's my problem with GM. You'd think they would have learned some kind of lesson-- instead, they come back into the market knowing the economy is unstable, and roll out a $40K electric car, that at least occasionally bursts into flames.

I think it is totally irresponsible to try to put blame upon or point the finger at @ Greek/Euro crisis which just ripped JPMC.

Even JP Morgan's top dog admits they were sloppy and made stupid decisions.

Fran said...

The banking finance world needs to stop with the greedy and risky format.

I may not be a back room insider, (perhaps happily so)... but any basic math knowledge would yield the same conclusion:
If your company can't get it's act together with an infusion of $17,500,000,000 ($17.5 billion)... then the people running the show need to go.

Also an "F" for GMAC /ResCap/Ally for screwing up their own management, yet having no forgiveness working w clients who may need to refi mortgage loans .

Finally, Ally may run into trouble trying to wash it's hands of ResCap...

Such issues have been a lingering question mark over Ally's ability to make a clean break from ResCap, whose creditors could claim the companies are too intertwined to separate through a bankruptcy. Mr. Carpenter has repeatedly stressed ResCap is a separate company with its own board and should be treated as such.

Well sure from a back room perspective, being able to break off & write off (cut & run)....
because, as I had suspected the "litigation laden" is due to
The lender has been hit with billions of dollars worth of lawsuits over soured mortgage securities and claims to buy back shoddily underwritten loans by mortgage insurers and investors.

If you don;t like that statement, take it up with the Wall Street Journal.

In closing I am sick of the "banksters" running shoddy operations, and using federal treasury monies & still playing fast & loose with risky business, all the while admonishing mortgage payers with demands for perfection while the company is screwing up big time.
I'm sick of all lenders in the mortgage biz unwilling to rework loans, and too quick to literally throw out clients-- expecting al the breaks & chances for themselves & not giving an inch to anyone else.

GMAC gets bailed out but does not think twice to sell out mortgage holders.
Only to get abandoned houses sitting empty & much confusion as to who actually owns them.

I resent the remark /assumption that I expect banks to "give money away". People are painfully aware that they are not charities.
But yet the banks expect the treasury to give them BILLIONS, then still fail & turn to bankruptcy court to allow them to write off debt.

The banks should be getting the lecture that the treasury can't just give money away. When they get $17.5 billion, they had better damned well
get their act together- because if the Feds treated banks like banks treat customers...
they would be foreclosed & shut down.
Check ResCap's litigation workload if you find that confusing.

D.K. Raed said...

Fran, I'm sure you plan to keep paying your mortgage, no matter who eventually ends up with the loan under any kind of bankruptcy restructure deal. You are a responsible consumer who pays their debts ... that puts you miles ahead of the corporate welfare queens who rake in profits during the good times but expect to be bailed out when times get rough. From their POV, it's an excellent business strategy ... profits are theirs to keep, losses are everyone else's to absorb. Win-Win (for them).

Fran said...

No risk gambling has been a good & fun run for banksters. Corporate welfare has worked out soooo well for them.
Really don;t like the subsidiary dance they do.... wanting to run parts of the biz into the ground, then dump it w/o consequence.

Enigma4ever said...

the banks are still a mess...and you were right to explain this....and you did so thoroughly and well....greed is not a mystery...not any more..

Fran said...

Yet they come back to the trough for write offs & bail outs.

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