GMAC Flashback

The whining has started, with most people (e.g., Chris Whalen at The Big Picture) making the obvious mistake of confusing GMAC with General Motors.

In the interest of history, I quote myself from the Dark Ages (March 2007) at Tom’s Place:

The next time GM explains that its pensioners need to take a hit, it won’t be because car sales have fallen.

It will be because of their subprime mortgage lending [original link expired]:

GMAC’s ResCap unit, which specializes in housing finance, reported $48 billion in subprime loans — about 76 percent of its mortgage portfolio as of year end.

ResCap increased its allowance for loan losses to 2.17 percent at year-end from 1.55 percent a year earlier and reported a spike in nonperforming loans to 10.5 percent of its mortgage portfolio.

GMAC said it earned $1 billion in the fourth quarter of 2006, compared with $112 million a year earlier. The results included a $791 million tax benefit from its conversion to a limited liability company.

Translation: that’s another $791 million that GM pensioners and others will have to pay into the general fund.

Loaning to the auto industry may be dicey, but it pales compared to a mortgage portfolio that was 76% subprime at the end of 2006.

GMAC may “need” to be bailed out, but that’s not because of its auto industry exposure.