Financial units of collapsed giants trying to win Fed aid
Friday, 26 December 2008
From Fazle Rashid
NEW YORK, Dec 25: Many American corporate giants have financing units. The General Motors (GM), the auto-makers and General Electric (GE) for instance have financing units.
The General Motors after collapsing as an automaker by failing to win federal financial aid is trying to come out in a different garb. The GE has earlier turned itself into a financing unit.
GM will hopefully be given permission by the Federal regulators to become a bank and gain access to billions of dollars in government aid that will ensure revival of the company, the New York Times (NYT) reported today.
It is not clear whether the government fund will be allowed to be used in its auto unit. The Federal Reserve board approved GM's application to transform itself into a bank holding company "in light of the unusual and exigent circumstances" The agreement will allow GM to tap as much as $6.0 billion in government bailout money.
The General Motors has been hit by huge losses in both its mortgage and auto loan businesses. The Fed's decision was at least the sixth time in the last few months that it has moved quickly to let non-bank lenders which rely on credit markets for funds become bank holding companies, the NYT reported.
Credit Card lenders American Express and investment banks like Goldman Sachs and Morgan Stanley also became bank holding companies. The GM will come under more scrutiny. It will face stringent Federal oversight and will have to diversify its business beyond loans to car buyers and dealerships.
The automaker is dumping its corporate jets business. In not too distant past, hundreds of mega-millionaires were elbowing one another in the lineup to buy a $60 million executive jets which were not ready for delivery before 2012. The intending buyers had advanced $500,000 to stay in line for the aircraft. But this was before billion of dollars in corporate and individual wealth were lost. The Chief Executive Officers (CEOs) of GM, Chrysler and Ford who travelled to Washington from Detroit to beg federal fund by executive jets were mocked and booed.
Meanwhile, Federal officials are bringing far fewer prosecutors as a result of fraudulent stock schemes than they did eight years ago raising further questions about the Bush administration has been too lax in policing the Wall Street, NYT said.
Loosening of enforcement measures, cutbacks in staffing at the Securities and Exchange Commission and a shift of resources toward terrorism at the FBI have combined to make federal government something of a paper tiger in investigating securities crime, the market watchers commented.
There were 133 prosecutions for securities fraud in the first 11 months of this year down from 513 cases in 2002 when Wall Street scandals from Enron to WorldCom led to crackdown on corporate crime.
The New York University has brought a legal suit against a money manager who had invested $94 million of university funds in Bernard Madoff's fraud ridden investment business. The university accused the investor of investing its money without proper diligence.
NEW YORK, Dec 25: Many American corporate giants have financing units. The General Motors (GM), the auto-makers and General Electric (GE) for instance have financing units.
The General Motors after collapsing as an automaker by failing to win federal financial aid is trying to come out in a different garb. The GE has earlier turned itself into a financing unit.
GM will hopefully be given permission by the Federal regulators to become a bank and gain access to billions of dollars in government aid that will ensure revival of the company, the New York Times (NYT) reported today.
It is not clear whether the government fund will be allowed to be used in its auto unit. The Federal Reserve board approved GM's application to transform itself into a bank holding company "in light of the unusual and exigent circumstances" The agreement will allow GM to tap as much as $6.0 billion in government bailout money.
The General Motors has been hit by huge losses in both its mortgage and auto loan businesses. The Fed's decision was at least the sixth time in the last few months that it has moved quickly to let non-bank lenders which rely on credit markets for funds become bank holding companies, the NYT reported.
Credit Card lenders American Express and investment banks like Goldman Sachs and Morgan Stanley also became bank holding companies. The GM will come under more scrutiny. It will face stringent Federal oversight and will have to diversify its business beyond loans to car buyers and dealerships.
The automaker is dumping its corporate jets business. In not too distant past, hundreds of mega-millionaires were elbowing one another in the lineup to buy a $60 million executive jets which were not ready for delivery before 2012. The intending buyers had advanced $500,000 to stay in line for the aircraft. But this was before billion of dollars in corporate and individual wealth were lost. The Chief Executive Officers (CEOs) of GM, Chrysler and Ford who travelled to Washington from Detroit to beg federal fund by executive jets were mocked and booed.
Meanwhile, Federal officials are bringing far fewer prosecutors as a result of fraudulent stock schemes than they did eight years ago raising further questions about the Bush administration has been too lax in policing the Wall Street, NYT said.
Loosening of enforcement measures, cutbacks in staffing at the Securities and Exchange Commission and a shift of resources toward terrorism at the FBI have combined to make federal government something of a paper tiger in investigating securities crime, the market watchers commented.
There were 133 prosecutions for securities fraud in the first 11 months of this year down from 513 cases in 2002 when Wall Street scandals from Enron to WorldCom led to crackdown on corporate crime.
The New York University has brought a legal suit against a money manager who had invested $94 million of university funds in Bernard Madoff's fraud ridden investment business. The university accused the investor of investing its money without proper diligence.