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.