One of the more interesting details about today's announcement by Obama about Chrysler's chapter 11 filing was the deal with GMAC to be Chrysler-Fiat's primary lender. Said Obama:
The path we're taking also involves steps to shore up
financing, because we cannot have viable car companies
without strong car financing companies. It's now clear
that Chrysler Financial -- the institution that finances
Chrysler cars and dealers -- would on its own require an
unacceptably large stream of taxpayer money to remain
viable -- and that's something I refuse to provide. And
that is why, as part of this agreement, GMAC, an
independent bank holding company that finances General
Motors, has agreed to finance new Chrysler sales. We will
be providing additional capital to GMAC to help unlock our
frozen credit markets and free up lending so that consumers
can get auto loans and dealers can finance their
inventories;
I wonder if this was in a way punishment to Chrysler Finance for refusing the $750 million TARP infusion because the execs didn't want to abide by the compensation rules? By refusing to prop up Chrysler Finance, Obama is really sticking it to Cerberus. As part of the requirement for GMAC becoming a bank, Cerberus must sell off most of its stake.
Using GMAC helps GM because GM still owns a large minority stake GMAC. And because GMAC is a bank holding company, it is easier for the government to support through the TARP.
It also may be a hint of Obama's future intentions. If Chrysler-Fiat fails, the groundwork for GM absorbing Chrysler may be laid here.
