From the WSJ:

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government’s 35.4% stake in the company could increase if existing shares eventually are converted into common equity.

Federal officials also are moving to shore up GMAC’s ability to fund its daily operations, with the Federal Deposit Insurance Corp. telling the company Tuesday the agency will guarantee an additional $2.9 billion in debt, according to people familiar with the discussions. The FDIC guarantee will make it easier for the company to sell debt to investors. The FDIC backed $4.5 billion in GMAC-issued debt earlier this year.

We now make a prediction:  GMAC will be the first of many.  Due to cash flow, several more TBTF banks will come back to the bailout trough over the next 6 months…

From Tech Ticker (ht Rolfe Winkler)…

“…the whole concept of the economy finding its footing was “preposterous” to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.”
“We’re in a complete mess and the consumer is smart enough to know it,” says Davidowitz, whose firm does consulting for the retail industry. “If the consumer isn’t petrified, he or she is a damn fool.”

Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: “The worst is yet to come with consumers and banks,” he says. “This country is going into a 10-year decline. Living standards will never be the same.”

Well, its official, we lost $28% on commercial loans and 38% on residential loans…about $4.5B, so far. Bernanke knowingly sold us a bill of goods…with no due diligence and violated the FED’s charter to boot.

Two opinions, taken together, can lead to a slightly different conclusion than if only one or the other is taken singularly.  Two separate opinions out this morning illustrate this. The first is in FT , where John Dizard opines that Treasury Secretary Tim Geithner will likely be relieved of duty soon:

“For the rest of us, the question is who can be the next to take the lead on the national workout. That is probably Sheila Bair, chairman of the Federal Deposit Insurance Corp. But the FDIC needs serious reinforcement of its talent, and a different capital structure, for this to work.”

Dizard expects Citigroup will be taken over by the government, also soon:

“You can pick out the likely geographical spot where the present bail-out wave will recede: 399 Park Avenue, the Citigroup HQ. Already, the Federal Deposit Insurance Corp’s resolution planners are circling the holding company’s shareholders, bondholders, and – at last! – top management.”

The second piece is in the New Republic, where John B. Judis argues the Obama administration is influenced much more than it should be and perhaps even wants to be, by the bank oligopoly:

“President Obama himself has described his role as mediating between the bankers and angry masses. “Be careful how you make those statements, gentlemen,” Obama said in his statement to bankers who were complaining vociferously about the restrictions on CEO salaries and bonuses. “The public isn’t buying that. My administration is the only thing between you and the pitchforks.”

That’s a great sound bite, but it suggests that Obama sees the administration’s proper role as acceding selectively to pressure from either the people or the banks.  That’s not the way the administration should be conducting itself. A president is supposed to represent the people and banks, and to choose policies based on what is best for the nation.”

The chief mechanism by which the president chooses “policies based on what is best for the nation” is through approval of laws made by congress and enforcement of those laws.  If laws are broken by banks then it is the duty of the president to seek prosecution.  But the symbiotic relation that now exists between the Obama administration and the banks is preventing even an investigation into possible wrongdoing by the banks, even to the point that the government itself is involved in obfuscation and perhaps illegality.  There no way to tell until a champion arises to challenge the secrecy. Mr Judis writes of this:

“Obama has also made the case repeatedly for transparency in government. And there is probably no place where it is more needed than in the relations between the administration and the banking community…Yet, in its dealings with the banks, the Obama administration has been anything but transparent.”

Let’s hope that Mr. Dizard is right and the Obama administration is going to move to cut the current  “inappropriate” relation between the Treasury and the banks and to face up to insolvent banks.  If Mr. Dizard’s predictions come true, then it is more clear that the Obama administration has nothing to hide. Why?, because, if Geithner is fired and Citi is reorganized, it is likely that Mr. Geithner and his pals at Citi will have a few tell all books to write and testimonies before committes to give.  Will they have anything sensational to say?  Not if the Mr. Dizard’s predictions come true.  The Obama administration would never risk it.  However, if Geithner remains and Citi continues as a zombie, what shall we conclude?

Bruce Krasting in a Seeking Alpha article highlights the S&P action and the effect on Fannie and Freddie:

“There are six principals in the MI business. Here is what S&P had to say about them:

• AIG -United Guaranty Residential Insurance Co to ‘BBB+’ from ‘A-’ .
• Radian Guaranty Inc. to ‘BB-’ from ‘BBB+’.
• PMI Mortgage Insurance Co. (PMI) to ‘BB-’ from ‘A-’.
• Genworth Mortgage Insurance Corp. (GMICO) to ‘BBB+’ from ‘A+’.
• Mortgage Guaranty Insurance Corp.’s (MGIC) ‘BB” ratings were affirmed.
• Republic Mortgage Insurance Co. to ‘A-’ from ‘A’.

FHFA and the Agencies have played fast and loose with their own rules governing activities with the PMI providers. The revised ratings by S&P and other ratings agencies will make it impossible for this to continue.

At some point in the next six months the GSE’s will need more capital. Congress will have to approve at least an additional $200 billion. Having a hand out while at the same time breaking reasonable credit guidelines that result in taxpayer losses and more foreclosures will make the next round of capital for the GSE’s a harder sell. “

The $200B going to the GSE’s in the next 6 months will be to raise loss provisions on already impaired loans due to the reduction in the cushion from PMI companies.  The reality is that there are more impaired loans to come. We think the $200B will be at least doubled.

Bill Moyers interviews Bill Black, a former regulator involved in the liquidation of the S&L’s.  Hat tip Option ARMegeddon. Mr. Black details how liars’ loans were used to defraud as regulators never examined loan files under the Bush administration.  The recent attempts to cover up the banking problems by Geithner and company is one focus of his attention:

“Geithner is…covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have massive losses, and that they’re fine.”

There is much more.  How can the American people fix these guys?  …check out the video (1 of 3):