Fed moving closer to action is GM failing
Fed moving closer to action, is GM failing?? GENERAL MOTORS IS HEADED FOR BANKRUPTCY -- AGAIN?? President Obama is proud of his bailout of General Motors. That's good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market. Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion. Right now, the government's GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow. It's doubtful that the Obama administration would attempt to sell off the government's massive position in GM while the stock price is falling. It would be too embarrassing politically. www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/ WASHINGTON (MarketWatch) — Members of the Federal Reserve got closer to pushing the button on a new round of bond purchases even as a less-aggressive step of altering language on a low-rate pledge seems to be in the works, according to minutes from the most recent meeting released Wednesday. The minutes of the July 31-Aug. 1 meeting of the central bank's Federal Open Market Committee showed a central bank worried about signs of decelerating growth. www.marketwatch.com/story/fed-minutes-show-active-discussion-of-qe3-2012-08-22-14103110 GET READY FOR QE3 Commentary: FOMC signals another round of bond buys soon Top officials of the Federal Reserve are leaning strongly toward a third round of bond buying by the Fed, known colloquially as QE3, according to the minutes of the Aug. 1 meeting of the Federal Open Market Committee. | www.marketwatch.com/story/get-ready-for-qe3-2012-08-22?link=MW_story_insert ONE OF PRESIDENT OBAMA'S supposed strengths heading into this year's election is his decision to bail out automakers, in particular general motors. GM made record profits in 2011, though that success has slumped a bit in 2012. As with home financing, a potential car buyer's credit score is rated on a scale between 300 and 850. In 2010, GM bought "subprime specialist" Americredit and renamed it GM Financial. GM Financial provides more than 8 percent of loans offered by GM. And of those, 93 percent are to buyers with credit scores below 660, the cutoff between prime and subprime. Not only is government-owned GM making more subprime loans than before, the loans it is making are increasingly going to those with worse credit scores. IBD notes "From Q4 2010 to Q1 2012, GM Financial loans to customers with the worst FICO scores — below 540 — shot up 79% to more than $2.3 billion." 1, www.breitbart.com/Big-Government/2012/07/28/GM-Increasing-Use-of-Subprime-Loans 2, news.investors.com/article/620090/201207271807/gm-risky-subprime-auto-loans-fuel-sales.htm GM OFFERS FINANCING to subprime buyers in an effort to boost sales, the automaker targets buyers with less-than-perfect credit. General Motors' subprime buyers have grown to more than 8% since the purchase of AmeriCredit, and now the carmaker is about to release the program again. Vehicles included in the promotion are likely to include 2012 models of the Chevrolet Malibu, Cruze and Silverado. Should the program follow the same guidelines as it did in 2010, annual percentage rates (APRs) will be near 12%, with money down for buyers with a credit score lower than 650. General Motors showed soft vehicle sales during the second quarter of 2012, reporting only modest growth of 1.4% from the year-ago period (falling far below analyst expectations of 11%). money.msn.com/top-stocks/post.aspx?post=d4eb1e6e-4e3e-4727-922c-9048bd1e021a UPDATED! NEW GM'S turn to subprime loans could prevent bailout payback to taxpayers. That threshold is crucial because the U.S. Treasury still owns about 500 million shares of the New GM, or about 26 percent of the total. A November 2011 sale netted Treasury $23 billion, leaving the taxpayers still holding the bag for nearly $27 billion. The New GM stock is trading under $20 per share this week. The government estimated in May that it would lose about $15 billion were it to fire sale its New GM shares then when it was trading at $24 per share. washingtonexaminer.com/watchdog-article-new-gms-turn-to-subprime-loans-could-mean-taxpayers-will-never-be-paid-back/article/2503516#.UDeKh6P2zcA
