Billion Dollar GMAC Bailout Despite Chairmanship by Madoff Crony J. Ezra Merkin
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SPECIAL REPORT BY EDWIN BLACK
TheCuttingEdgeNews.com
The Federal government is using billions in taxpayer money to convert General Motors Acceptance Corp, known as GMAC, into a bank, as part of a backdoor Detroit bailout. In the process, it will rescue a company headed by J. Ezra Merkin, a cohort of Bernard Madoff, who engineered a $50 billion international Ponzi scheme.
The chairman of GMAC is J. Ezra Merkin. Merkin has been broadly accused of facilitating Madoff’s Ponzi scheme by deliberately feeding him billions in investor money through two hedge funds Merkin controlled.
 Edwin Black, award winning investigative journalist |
By way of background, J. Ezra Merkin is the man who lost billions of dollars for investors via the ill-fated Ascot Fund and Gabriel Fund. Both funds, under Merkin’s personal direction, fed all or most of its investment monies to Madoff’s Ponzi scheme.
Merkin’s chairmanship of GMAC has been widely reported by the media. Numerous calls from Wall Street and the financial press have called for Merkin to resign from GMAC as a condition of the bailout. But federal bailout officials are proceeding despite the scandal surrounding Merkin, despite a spate of lawsuits for misuse of funds, and in spite of demands that he resign from numerous boards whose assets he helped direct. A spokesperson for GMAC declined to comment except to confirm that the federal funds are committed and Merkin is still chairman of the board.
Lawsuits against Merkin for financial misconduct are mounting. New York Law School, which lost $3 million investing in the Ascot fund, was among the first to file a lawsuit against Merkin and its accountancy firm, BDO Seidman. The class action lawsuit filed in U.S. District Court in Manhattan said the defendants "recklessly or with gross negligence caused and permitted $1.8 billion, virtually the entire investment capital of Ascot" to be handed over to Madoff.
A second class action lawsuit charges that Merkin “facilitated” the Madoff scandal “recklessly or with gross negligence and/or in breach of fiduciary duties.” This suit was launched by Scott Berrie, a Gabriel investor. Berrie alleges, “Plaintiffs investment in Gabriel has been decimated as a direct result of defendant Merkin's abdication of his responsibilities and duties as General Partner and Manager of Gabriel and its investment funds.” The Berrie suit specifies that Merkin is chairman of GMAC.
A confidential 60-page, 2006 Ascot memorandum obtained by The Cutting Edge News states on page 23, “All decisions with respect to the management of the capital of the Partnership are made exclusively by J. Ezra Merkin. Consequently, the Partnership's success depends to a great degree on the skill and experience of Mr. Merkin.”
Wall Street financial analysts have been mystified by the manner in which GMAC engineered banking status. “We believe GMAC has been less than clear in detailing how it would achieve adequate capital levels,” CreditSights analyst Richard Hoffman recently declared. “But with the primary regulator on board, the capital raise machinations seem almost a moot point.”
GMAC’s transition to a bank diminishes the threat of credit evaporating for GM dealers who use the company to finance most of their inventory. GMAC also makes a third of the car loans that go to GM car and truck buyers.
The Fed used its emergency powers Christmas Eve to grant GMAC’s bank conversion, stating that it had to act in order to avoid further turmoil in the nation’s economic downward spiral.
For more information about Edwin Black visit www.edwinblack.com.
EDITOR'S NOTE: Instead of CNN and The New York Times spending all their time looking for ways to blame Israel for the current Middle East flare up why aren't they all over this story? How can Henry Paulson continue to be Secretary of the Treasury? How can Ben Bernanke continue to be Chairman of the Federal Reserve? How many more crooks and thieves do we allow to run our country?
