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Are we enablers?

Discussion in 'General Real Estate and Real Estate Finance' started by Elliott, May 7, 2009.

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  1. Elliott

    Elliott Elite Member

    14
    Apr 23, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Oregon
    WSJ 5/7/09, (now GMAC was more stupid than the too big to fail banks.....can Quicken be far behind?) Geeus, what was the final cost of
    S&L Bailout I? It was pennys.


    The federal government projected that 19 of the nation's biggest banks could suffer losses of up to $599 billion through the end of next year if the economy does worse than expected and ordered 10 of them to raise a combined $74.6 billion in capital to cushion themselves.
    The government's much-anticipated stress-test results unleashed a scramble by the weakest banks to find money and a push by the strongest ones to escape the government shadow of taxpayer-funded rescues.
    .......................
    GMAC LLC has the biggest capital hole to fill of any of the 19 stress-tested banks, relative to the size of its equity, but its role as a lender for General Motors Corp. and now Chrysler LLC means the government is likely to take a big stake in the company.

    The Treasury said GMAC will have to raise $11.5 billion of additional capital, roughly half of the company's $21.9 billion of total equity. The company is unlikely to be able to raise that money in the public markets due to rising losses from souring mortgages and auto loans and the likelihood that the federal government will control a big stake in the firm, which is owned by GM and an investor group led by private-equity firm Cerberus Capital Management LP. "I think the government will be an extremely important source of capital for the firm," said Mark Wasden, an analyst at Moody's Investors Service. Compared with other banks required to raise equity, GMAC's hole is much bigger. Citigroup Inc.'s capital shortfall, under the stress-test results, totaled $5 billion, a fraction of its $128.1 billion stockholders' equity as of March 31. Similarly, Bank of America Corp. would have to shore up capital by $34 billion. Its common shareholders' equity is $166.3 billion.
     
  2. Lloyd Bonafide

    Lloyd Bonafide Senior Member

    0
    Jan 15, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    So far, that is the understatement of the century. I can't quite see any private investors diving into GMAC right now.
     
  3. Karl

    Karl Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Licensed Appraiser
    State:
    Arizona
    "I think the government will be an extremely important source of capital for the firm,"

    And the government gets money from????????????
     
  4. Caligirl

    Caligirl Senior Member

    0
    Jan 27, 2006
    Professional Status:
    Certified General Appraiser
    State:
    California
    The government will be an important source of capital-let's just admit that we have nationalized the banks and be done with it!!!!
     
  5. Steer

    Steer Junior Member

    0
    Dec 12, 2007
    Professional Status:
    Licensed Appraiser
    State:
    Maine
    It's sad but true. We are moving towards a socialist economy and that should frighten us all
     
  6. Lloyd Bonafide

    Lloyd Bonafide Senior Member

    0
    Jan 15, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    OK - but could the FDIC just shut down one of the large zombie banks, just for the heck of it?
     
  7. c w d

    c w d Senior Member

    0
    Oct 2, 2006
    Professional Status:
    General Public
    State:
    Florida
    With the negative connotations that "nationalized" implies in a supposedly capitalistic society, there is one other aspect that doesn't get much attention. That is those entity's responsibility to provide worth and accountability to the people whose money keeps them afloat. And we'll have neither, I guarantee it. So no, they'll never be nationalized but, they will happily take our money without the nationalization.
     
  8. Elliott

    Elliott Elite Member

    14
    Apr 23, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Oregon
    From WSJ 5/12/09, ...giving the drunks more money...

    Freddie Mac reported a loss of $9.85 billion for the first quarter as the costs of home-mortgage defaults mount and said it will need another $6.1 billion of capital from the U.S. Treasury. The government-backed mortgage company, based in McLean, Va., had a loss of $151 million in the year-earlier first quarter.

    Last week, Freddie's main rival, Fannie Mae, reported a loss of $23.17 billion for the first quarter and said it would need $19 billion from the Treasury. Federal regulators seized control of Fannie and Freddie, the two main providers of funds for U.S. home mortgages, in September as growing losses ate through their thin layers of capital. The Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie by purchasing preferred stock paying 10% dividends.

    The latest calls for capital by the companies bring Freddie's total to about $51 billion and Fannie's to $34 billion.
     
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