Fed Approves GMAC Bank Holding Company Status In "Emergency" Move

What, you didn't think the Fed had proven it was willing to just make things up as it went, to maximize its ability to transfer the exposure to the public?

Details on the ramifications for GM and Cerberus:

Under the Fed's order, Cerberus and GM, whose businesses are mainly outside banking, would both have to significantly reduce their ownership stakes in GMAC. GM has committed to reducing its ownership in GMAC to less than 10 percent. Cerberus was ordered to reduce its stake to 33 percent of total equity in the company.

This doesn't seem like much "punishment", given that GMAC looks to be loss-making for the forseeable future. Acccording to the Fed's statement, GMAC will get to put at least 39% of its 49% stake in GMAC in an "independent trust" rubber-stamped by the Fed and the Treasury, and it will have three years to dispose of the equity interests. Cerberus will simply get to return its shares (over the 14.9% ownership level) pro-rata to its individual fund investors, presumably at present market value (or better, if the stock rallies on the deal).

This is a sham and an outrage. Both GM and Cerberus are getting away with unloading the majority (75%) of their GMAC shares without having to actually sell them -- in GM's case, for three years, and in Cerberus' case, forever!

And presumably, some Fed money will get put in to effect the GM GMAC share offload into the Trust.

This is as sweet a deal as it gets for these two reckless and negligent corporate owners.

Can you imagine investing in Cerberus and having a significant portion of your investment returned to you in the form of GMAC shares? Perhaps it will be profitable, after all the TARP money is poured in...