GMAC Gets $6 Billion from Treasury

The government announced Monday that it will inject $6 billion into GMAC Financial Services, an automotive financing, insurance and mortgage firm seen as essential to the survival of General Motors Corp.

GMAC Is Seen as Essential to the Survival of GM
GMAC Is Seen as Essential to the Survival of GM

The Treasury Department will give $5 billion directly to GMAC for equity shares paying an 8% dividend. The Treasury will also lend $1 billion to General Motors to invest into GMAC, which was formerly the financing arm of the auto giant.

The money will allow GMAC to convert to a bank holding company and also to jumpstart its lending operations.

“The company intends to act quickly to resume automotive lending to a broader spectrum of customers to support the availability of credit to consumers and businesses for the purchase of automobiles,” GMAC said in a statement.

This money comes less than two weeks after President George W. Bush announced a $17.4 billion rescue package for General Motors and Chrysler. The president took that step after Congress voted not to fund an auto industry bailout, and after Ford declined any bailout funds.

GMAC is the biggest lender to GM’s 6,500 dealers nationwide. They provide financing for dealers to purchase inventory from the automaker. Without such financing, they would be unable to fill their lots with actual cars. If GMAC were to fail, it could trigger a complete collapse of the dealer system in place, crippling the auto giant.

Bailout To Bonuses: Bank Execs Raking In Taxpayer Cash

Just weeks after the CEOs of Ford, General Motors and Chrysler were openly criticized by many for taking corporate jets to testify before Congress, the Associated Press is reporting that $1.6 billion from the original financial services bailout will go to salaries, bonuses and fringe benefits for executives.

Benefits for employees were wide in scope: cash bonuses, stock options, driving services, use of corporate jets, professional money management, home security and country club memberships were all given. “The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines,” the AP reported.

After reviewing Securities and Exchange Commission documents, it appears that at least 116 banks have received nearly $200 billion of the bank bailout so far. The executives of the recipient banks received an average of $2.6 in salary and benefits from the bailout funds.

Granted, this is almost two orders of magnitude less than the amount of funds given out, but with the economy sliding deeper and deeper into recession, these banks are drawing ire from the public. With so many people losing jobs, the funds being received by executives overseeing failing banks seems unfair at best.

At worst, you are Goldman Sachs, where Treasury Secretary Henry Paulson, who oversaw the bailout funds, used to be the Chairman and CEO of the bank. The top five Goldman executives received over $25 million on average.

In need of consolation? At least they received funds for professional financial management.

Treasury Secretary Henry Paulson
Treasury Secretary Henry Paulson

Green Eggs and Pork?

Back in October, when Congress passed the massive $700 billion bailout for the banking industry, many lawmakers were at first uncertain about passing the legislation. Because the bailout was seen as so necessary by many, billions in pork were added to the bill, mostly in the form of tax breaks.

A large amount of these tax breaks were so-called “green tax pork” aimed at incentivizing businesses and individuals to invest in green products.

The bailout contained tax breaks for a wide range of green technologies, including home windmills, corn-powered stoves, plug-in hybrid automobiles and deluxe bicycles. Can’t wait to start cooking cornbread in your corn-powered oven? You can start right away: These tax breaks are retroactive to the beginning of 2008 and will likely last through at least 2016.

Congress Authorized Tax Breaks for Green Technologies
Congress Authorized Tax Breaks for Green Technologies

For a more complete list of benefits, here is a report from Forbes Magazine:

SolarĀ  > For 2008 you can claim one tax credit of up to $2,000 for up to 30% of the cost of a photovoltaic system to generate electricity and another credit of up to $2,000 for 30% of the cost of a system to heat hot water for showers and radiators (not for hot tubs or pools). This is a credit, not a deduction, so it reduces your tax liability dollar for dollar.

Stop! Don’t install a photovoltaic system yet. In 2009 the $2,000 cap on that credit (but not the cap on the credit for thermal systems) comes off. No matter how much you spend, you can get 30% back from Uncle Sam. For a typical $60,000 installation, you’ll get $18,000 knocked off your tax bill. If you don’t owe that much you can carry forward any unused credit and use it in later years. Charles Goulding, a Syosset, N.Y. energy tax lawyer, reports that homeowners who have already started work are asking contractors not to finish until next year, to get the bigger break. “It’s going to cause solar to boom in this country,” he predicts. But first, perversely, it’s causing a delay.

Note: In some cases the federal credits apply only to your net system cost after state incentives–now offered by 18 states. (For a state-by-state listing of green incentives, go to www.dsireusa.org.) Between the state and federal giveaways, installing a solar system might be a win financially (for you personally, if not for the taxpayer). To figure out how much energy a photovoltaic system will generate in your locale, check out the National Renewable Energy Laboratory’s PVWatts online calculator.

Can’t find a contractor? No need to rush; Congress authorized both of the solar credits through 2016, and a Democratic Congress is unlikely to take green credits away, even from rich folks. Even better, you can use the credits to reduce your alternative minimum tax bill as well as your regular tax.

Wind and geothermal > There’s a new $4,000 credit for up to 30% of the cost of installing a home windmill system to generate electricity. (The credit is available even if you’re selling the wind energy back to a utility.) For geothermal systems like the one the Chayets installed there’s a new $2,000 credit. Daniel Ellis, president of ClimateMaster, a manufacturer of heat pumps, says the typical geothermal installation runs about $18,000. So the $2,000 break, he says, “isn’t going to be a deal-changer for most people, but it’s a sweetener.” Like the solar credits, these credits are available for work done between Jan. 1, 2008 and Dec. 31, 2016.

The National Renewable Energy Laboratory has an In My Backyard tool that estimates the electricity you can produce with a windmill at www.nrel.gov/eis/imby. For geothermal the best tool comes from Natural Resources Canada, downloadable at www.retscreen.net.

Home improvements > The new law resurrects for 2009 a $500-per-tax-filer lifetime tax credit for energy-efficient home improvements. This credit was in effect in 2006 and 2007 but isn’t available for work performed in 2008. (Couples who file separately can claim only $250 each.)

It’s not hard to use up your $500 lifetime allotment. You can get up to a $500 credit (equal to 10% of materials costs) for insulation or exterior doors; up to a $200 credit (equal to 10% of installation and materials costs) for windows; up to $150 for an energy-efficient furnace or boiler burning gas, propane or oil; and up to $300 for a new central air system or water heater meeting certain specs. New for 2009 is the $300 credit for a corn stove, that being something to heat your home. (Why is this country using food to heat homes? Same reason it uses food to run cars.) To see if the equipment you’re buying qualifies, go to www.ase.org/taxcredits.

Transportation > The new law creates a credit of up to $7,500 for the first 250,000 buyers of plug-in electric vehicles, beginning in 2009. So far the Chevy Volt, scheduled to come on the market in 2010 with an estimated $40,000 sticker price, is the only vehicle that seems to qualify. Meanwhile, the old hybrid-car tax credit of up to $3,150 is still available for certain models but not the most popular ones. That break, passed in 2005, applied in full to only the first 60,000 hybrids from each manufacturer; Toyota (nyse: TM – news – people ) has run out of credits, and Honda (nyse: HMC – news – people ) is likely to do so by year’s end. (Warning: You can’t use a hybrid credit to reduce your AMT.)

Congress even found a place in the bailout for a bicycle tax benefit–an idea that Representative Earl Blumenauer (D–Ore.), who bikes to work, has been peddling for years. Beginning in 2009 employers who provide transit benefits (either pretax salary reduction plans or prepaid vouchers) for bus, train, van pooling or parking can provide up to $20 a month in tax-free bicycling benefits. (Bike commuters can’t double-dip and get transit or parking vouchers, too.)

Congress has left it to the IRS to fix the details, but expenses that could be reimbursed from a pretax or employer-paid bicycle benefit are likely to include the costs of buying, fixing or storing a bike. No word yet on Spandex.