Madoff-linked GMAC chairman resigns

J. Ezra Merkin reportedly lost $1.8 billion fund he managed to the Madoff scheme.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Lara Moscrip, CNNMoney.com contributing writer

Have stock market losses caused you to postpone retirement plans?
  • No
  • Yes, by a couple of years
  • Yes, by 5 years or more
  • I'll never be able to retire

NEW YORK (CNNMoney.com) -- GMAC chairman J. Ezra Merkin, who lost billions after getting caught up in the Madoff scandal, resigned from the finance company's board Friday.

During the transition to a new GMAC board the managing director and co-head of Cerberus Capital Management, Lenard Tessler, will replace Merkin, according to a GMAC statement.

Merkin ran two funds - the $5 billion Gabriel Partners and the $1.8 billion Ascot Partners and lost at least the entire Ascot fund to the Madoff scheme.

The vacant seat will be filled by Jeffrey Lomasky, Cerberus' chief financial officer. GMAC, which provides loans to auto dealers and customers is partially owned by Chrysler parent Cerberus and also by General Motors (GM, Fortune 500).

GMAC was permitted to become a bank holding company by the Federal Reserve and is participating in the Treasury Department's Troubled Asset Relief Program.

The board will be reconstituted no later than March 24.

According to the company, the seven-member board will be made up of GMAC chief executive Al de Molina, one representative from FIM Holdings LLC, two directors appointed by a trust to be formed the Treasury Department, and three independent directors elected by the board's directors.

A prominent banker

Merkin is president of Manhattan's Fifth Avenue Synagogue and was a well-respected investor and one of the nation's leading Jewish community leaders.

Merkin is the second generation scion of a prominent banking family, and was until recently on the investment committee of Yeshiva University. Madoff was chairman of the business school.

Yeshiva University President Richard Joel announced on December 16th that the school had lost about $110 million of its endowment funds to Madoff. Yeshiva apparently had no conflict-of-interest rule barring investments with a board member

Trying to recover

On Dec. 31, GMAC announced the results of a vote that the company said would help it become better capitalized and viable for the future.

GMAC announced that holders of $21.2 billion of its debt agreed to a plan to swap their bonds for about $15.7 billion in stock and cash. A total of 59% of GMAC debt holders and 39% of its Residential Capital division investors made the switch.

GMAC has been trying to raise capital after the Federal Reserve said the in late December that it would approve GMAC's conversion to a bank holding company.

The company said it hoped the exchange program would help it meet the Fed's bank capitalization requirements, which would make it have $30 billion of capital on hand.

But the Fed said it made a special exception for GMAC, as the government considers the company critical to the recovery of the U.S. auto industry.

GMAC is trying to recover from $7.9 billion of losses in the previous five quarters, most of which came from risky subprime mortgage bets made by ResCap. It got some help Dec. 29 when the Treasury Department invested $6 billion in the company through the Troubled Asset Relief Program.

Treasury confirmed Dec. 31 that it had finalized the loan transaction and funded the first $4 billion in federal loans to General Motors.

In December, the government announced plans to make a total of $13.4 billion in loans available to GM and Chrysler. As a condition of the loan, GM submitted a "viability plan" to Congress, which it agreed to implement in order to secure the funds.

In a statement Dec. 31, the company said it is committed to successfully executing its viability plan, and is "confident in the future of General Motors."

Jennifer Reingold and David Goldman contributed to this report.  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Most 'one percent' moments of 2014 This year was all about more money, more problems. Here's a look at the trials, tribulations and triumphs of the 1% over the last year. More
6 products to keep the skies friendly Plane travel can be stressful, especially during the holidays. These things can help keep the peace among travelers. More
2014: Helluva good year for stocks The bull market has been going for 2,115 days. If you put you're money in stocks, it's been a very happy year. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.