Give me
Your dirty love
Like you might surrender
To some dragon in your dreams

Give me
Your dirty love
Like a pink donation
To the dragon in your dreams

I don't need your sweet devotion
I don't want your cheap emotion
Just whip me up some dragon lotion
For your dirty love

Frank Zappa
"Dirty Love"

Kudos to The Wall Street Journal, which scooped the rest of the Big Media last night by reporting that GMAC Inc. is asking for yet another $3 billion bailout from the US Treasury. If Citigroup (NYSE:C) is the Queen of the Zombie Dance Party and AIG (NYSE:AIG) the King, then GMAC is certainly one of the children. In relative terms, GMAC has received far more subsidies than any other zombie and seemingly has no access to the private markets in terms of raising new equity. Of the 19 banks subject to the Fed's stress tests earlier this year, GMAC is the only bank that has not raised the required private capital.

Looking at the latest 10-Q from GMAC filed with the SEC, the only question we have is why isn't GMAC already in bankruptcy? In Q2 2009, GMAC reported a net loss of $3.9 billion on $3.6 billion in net revenue. We can't wait to read the Q3 10-Q. Even if you back out the $1.3 billion in depreciation expense for GMAC, the picture remains pretty bleak. Revenue and total assets are down significantly from a year ago, a characteristic that GMAC shares with C and other zombie banks. Most important, the fact that GMAC as a whole is shrinking makes a lie of claims by the White House that this hideous zombie needs to be kept alive to provide credit to the US economy.

Looking at GMAC's bank subsidiary, Ally Bank, the picture is even more alarming. As of Q2 2009, Ally Bank was rated "F" by the IRA Bank Monitor. The chief reason for the poor rating is the negative score for ROE, but defaults are also elevated compared to the US industry average. The Q2 2009 Banking Stress Index is shown below.

IRA Bank Stress Index Rating -- Ally Bank -- Q2 2009

Source: FDIC/The IRA Bank Monitor

Notice that Ally Bank has excellent scores for capital, but the bad news is that only your taxpayer dollars made that possible. While GMAC's total consoldiated assets are down, Ally Bank's assets have grown by nearly 25% in the past quarter, fueled by copious television advertising and federal subsidies. The term "moral hazard" comes to mind. By propping up GMAC and Ally Bank with taxpayer dollars, the Treasury is hurting sound, well-managed banks.

Virtually all of the readers of The IRA have seen the obnoxious television and print ads run nationally by Ally Bank, offering above-market deposit rates and no penalties for early withdrawal. Such tactics also are generally associated with unsafe and unsound banking practices, yet the Treasury and other regulators allow this dangerous charade to continue because of political pressure from the White House. And nobody in the Big Media wants to critizcize Ally Bank or GMAC because of the huge ad spend this zombie has been making during 2009.

The low score for lending capacity again illustrates that Ally Bank is actually retreating from the marketplace in terms of credit available for customers -- even as GMAC pyramid's the bank unit's investment book in a desperate bid to survive. Note too that as of Q2 2009, Ally Bank was funding more than 17% of its now $42 billion in assets via the Federal Home Loan Banks -- yet another subsidy and another striking indcator of growing moral harzard . Federal bank regulations generally identify 15% as the threshold for unsafe and unsound practices with respect to the use of FHLB advances for funding, but it seems that GMAC is exempt from these rules as well.

As we wrote earlier this year regarding the GMAC and GM, the political end game being played by President Barack Obama and the Democrats in Congress is to keep GMAC, the crippled automaker GM and the United Auto Workers afloat through next year's election. The Democrats know that if GMAC is forced into bankruptcy, then GM will be unable to finance their paltry auto sales and will likewise end up back in bankruptcy. In the event, the web of subsidies and co-dependency between the UAW and the Democratic Party will begin its final collapse. We can't wait.

We hear that Treasury Secretary Timothy Geithner and his minions at the Treasury have already blessed an additional $3 billion cash infusion to keep GMAC afloat for a few more months, this on top of the $12 billion in public funds already thrown into the furnace. But keep in mind that at the current burn rate inside GMAC, it looks to us like this dancing zombie will be back looking for another handout from Washington early in Q1 2010.

Given the above, we are initiating coverage of GMAC in the IRA Advisory Service with a "negative" outlook on forward operating results. Stay tuned.

Questions? Comments? info@institutionalriskanalytics.com

About IRA Products and Services

IRA offers advanced analytics for risk surveillance and investment research via subscription products such as the IRA Bank Monitor for Professionals covering the US banking industry and the IRA Corporate Monitor covering public companies. For a trial subscription or an on-line demonstration, please register here.

IRA Advisory Services including our channel research and diligence support services are available to qualified clients. For more information, please contact our offices.

IRA for Consumers

IRA provides consumers easy to buy online reports to independently check on their banks via our How's My Bank? system.

IRA on Web 2.0

For updates during the week please follow IRA www.twitter.com/IRABankMonitor.

(c) Institutional Risk Analytics

www.institutionalriskanalytics.com