Earlier today, the Congressional Oversight Panel (COP) released its March oversight report, “The Unique Treatment of GMAC Under TARP,” discussing Treasury’s bailout of GMAC. This report was issued after COP held a hearing on February 25th examining the government’s assistance to GMAC under the Troubled Asset Relief Program.
The report explains that although COP takes no position as to whether or not Treasury should have rescued GMAC, COP finds that Treasury missed numerous opportunities to increase accountability and protect taxpayer dollars.
Among the deficiencies COP noted were:
- Treasury did not condition access to TARP money on GMAC’s creation of a viable plan for returning to profitability;
- Treasury did not require a detailed, public explanation of how the company would use taxpayer funds to increase consumer lending;
- Treasury should have strongly considered a strategic bankruptcy for GMAC which would have preserved GMAC’s automotive lending function while cleaning its balance sheet and limiting liabilities;
- Treasury should also have considered merging GMAC back into GM in order to create an automotive financing structure more similar to the model shared by other automotive manufacturers.
COP also noted that the government has spent $17.2 billion so far on GMAC, and, in doing so, has reinforced GMAC’s dominance in certain areas, possibly obstructing the growth of a more competitive lending market.
COPS recommendations for Treasury included:
- TARP support should be subject to more stringent criteria in order to better ensure that the company receiving funds will become a profitable concern and to determine the use of funds;
- Treasury should work to end government support for GMAC;
- Treasury should require GMAC to produce a viable business plan;
- Treasury should formulate an exit strategy with respect to GMAC, and should coordinate that exit with the exit from Treasury’s holdings in GM and Chrysler;
- Treasury should consider promoting a merger with GM; and
- Treasury should periodically disclose its estimate of the overall subsidy or loss rate, and the subsidy amount for each company receiving assistance.