THE BAILOUT BOWL
January 7, 2010
College football fans can't even get a respite from big government on game day. Yesterday's matchup between Central Michigan and Troy was particularly insulting to taxpayers because it's the annual GMAC Bowl, says Tad DeHaven, a financial analyst with the Cato Institute.
- GMAC, the former in-house financing arm of General Motors, has been sponsoring the bowl game since 2000, when it paid $500,000 for the right.
- More recently, the firm was battered by the collapse of GM and the housing market, and it was allowed to restructure as a bank holding company, which made it eligible for TARP bailout funds.
- The federal government has given GMAC $12.5 billion in return for 35.4 percent ownership stake in the company, however, the bailout just got larger.
From last week's Wall Street Journal:
- The Treasury Department last week said it will provide GMAC Financial Services with an additional $3.8 billion in capital and assume a majority stake in the firm.
- The money, along with adjustments to existing aid already provided to the firm, aims to close a capital shortfall identified by government stress tests in May.
- The additional aid brings the total U.S. investment in GMAC to $16.3 billion and raises the government's ownership interest to 56 percent from the current 35 percent.
- In exchange for committing more funds, the Treasury will appoint a total of four directors to the company's board instead of two as previously planned.
- The company will also continue to be subject to pay limits set by U.S. pay czar Kenneth Feinberg.
Whatever GMAC is currently paying to sponsor the bowl game, it's not a large sum compared to the billions in funds it has received. Nonetheless, it is a poke in the eye to bailout-fatigued taxpayers that a government-owned corporate failure continues to blow money on a largely irrelevant football game, says DeHaven.
Source: Tad DeHaven, "The Bailout Bowl," Cato Institute, January 4, 2010.
For Wall Street Journal text:
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