Opening Bell: 11.20.08

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GMAC Files Application With Federal Reserve to Become Bank Holding Company (Press Release via DB)

GMAC Financial Services ("GMAC") today announced that it has submitted an application to the U.S. Federal Reserve Board of Governors for approval to become a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). GMAC also announced today that it has submitted an application to the U.S. Treasury to participate in the Capital Purchase Program created under the Emergency Economic Stabilization Act of 2008, conditional upon becoming a bank holding company.
As a bank holding company, GMAC would obtain increased flexibility and stability to fulfill its core mission of providing automotive and mortgage financing to consumers and businesses. GMAC also expects to have expanded opportunities for funding and for access to capital as a bank holding company. If GMAC's application to become a bank holding company under the BHC Act is accepted, GMAC Bank will become a Utah chartered Federal Reserve member bank.
GMAC also announced that it has commenced separate private exchange offers and cash tender offers to purchase and/or exchange certain of its and its subsidiaries' (the "GMAC offers") and Residential Capital, LLC's (the "ResCap offers") outstanding notes listed below held by eligible holders for cash, newly issued notes of GMAC and, in the case of the GMAC offers only, preferred stock of a wholly owned GMAC subsidiary, upon the terms and subject to the conditions set forth in the applicable confidential offering memoranda, each dated November 20, 2008 (the "offering memoranda"), and the related letters of transmittal. The purpose of the offers is to increase GMAC's capital levels while reducing the amount of GMAC's and ResCap's outstanding debt in connection with GMAC's capital plan relating to its application to become a bank holding company.

Senate To Probe Bond-Ratings Firms (Reuters)
A Senate subcommittee is going to be investigating the involvement of the ratings companies in the recent credit crunch, looking into whether there were conflicts of interests that may have led to the other big three handing out ratings as tokens of affection.
I don't think there's any big secret here: the credit companies dropped the ball. Well, they didn't drop it: they threw it down, peed on it, and capped it with a nice bow. Really though people, it's the thought that matters.
Iceland May Not Fail, Receives $4.6B Bailout (Bloomberg)
Iceland is looking at $2.1B from the IMF, and another $2.5B from Sweden, Denmark, Norway and Finland. The money is gong to be used to stabilize the currency through recapitalization of banks, which should limit the contraction of the economy somewhat.
Just a note: Iceland reminds me a bit of the quiet kid in High School that went crazy and lit his girlfriend's car on fire in the parking lot (no, she wasn't in it). You can almost see these things coming: a slight shift in the eye, their hair just a little too frazzled. All I'm saying is maybe England should consider catching the bus for the next couple of days.
Treasury Yields In Decline During Flight To Safety (FT)
"The yield on two-year US Treasury bonds hit a record low of 1.06 per cent, responding both to the fresh flight to safety and the prospect of lower interest rates. Eurozone government bond futures hit their highest level since March 2006."
The incentive to save is approaching zero, which would normally mean a bout of inflation; I don't think we're going to see that here. Everyone producing consumer goods so over manufactured that they can't get rid of all of their shit: it's just sitting in warehouses. I don't know that food costs will rise considerably over the holiday season, and I can't see gas becoming overly volatile. What I would worry about is an inflation whip when things start to speed up again, considering the moves in Ms.


Autos Make Bailout Case To Public (AP)
You cannot make this shit up:
"Mobilize Now!" cries a Web site created by General Motors Corp. at GMfactsandfiction.com. "Tell your U.S. senators and representatives that support for the U.S. auto industry is in America's best economic interest." ... "GM's page on Facebook has.."
When formulating the strategery for saving an industry that's responsible for a little over 2% of our GDP, you should always seek to utilize the best tools available. Like Facebook.
Analyst Calls For $1T In Financials (Reuters)
Friedman Billings Ramsey analyst Paul Miller is calling for $1T to $1.2T in common equity to restore liquidity in the markets, pointing out the patently obvious:
"Debt or TARP capital is not true capital.."
I'm a little up in the air on this: Miller is calling for equity purchases by the US Government, which I'm against as it would present voting ownership in private enterprise - something the government should never have the ability to do.
I'm open to arguments/workarounds though.
Citi Falters (Again, and Again, and Again..) (WSJ)
Citi's loving public was a little dismayed at the announcement of another write down Wednesday, this time to the tune of $1.1B, or 10,000 jobs, as the stock fell 23% in value.
Happyending Tanning Salons Busted For Prostitution (Examiner)
Excited about the interview with famed hooker Ashley Dupre tonight I wanted to know what else was gong on in the world of brothels this morning, so I googled it. It turns out that Spitzer isn't the only one flying pro's up and down the seaboards: a couple of real winners were recently arrested in Seattle (of all places?) for operating brothels out of tanning salons.
To our BlackRock brethren in Seattle: don't panic yet, no word was given on client lists.
--William Richards

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