Banking update
General Motors sells most of mortgage business
General Motors Acceptance Group, mostly in the business of car loans, also has had a significant mortgage operation. So significant in fact that it just sold a major part of the business for over $9 billion. The buyers were a collection of equity groups including Kohlberg Kravis Roberts, Five Mile Capital Partners and Goldman Sachs Capital Partners.
GM suffering crippling losses and desperate to buy out the contracts of its workers and those of former subsidiary auto parts maker Delphi, saw this as a quick route to instant cash. Of course, it is also getting rid of part of the most promising sector of the whole GM empire.
South Korean bank merger
Kookmin Bank, the #1 Korean bank, bought a majority share in the #5 bank, Korea Exchange Bank, for $6.6 billion, the country's largest acquisition deal ever. Kookmin beat out Korea's #4 bank, Hana Financial Holdings Co., and Singapore's DBS Bank.
Kookmin controls around 30% of all lending in Korea, and the merger will increase its market share by a third, far surpassing #2 Shinhan Financial Group. In addition, Kookmin will expand abroad with deal, as Korea Exchange Bank has several dozen external branches.
US equity group Lone Star Group will get most of the money, nearly $5 billion. In an illustration of how equity firms get rich as buffers, the company bought the majority share of the Korea Exchange Bank for $1.4 billion in 2003. Not a bad markup.
Wal-Mart banking: The battle begins
A Wall Street Journal article ("Wal-Mart Gains Allies for Bank Plan", 3/20/06) tells of the ongoing campaign of Wal-Mart to get into the banking business. It's a classic case of hard-core lobbying to get legislative approval to change the rules. On the one side is the Wal-Mart empire, back by several other large companies that want to expand their banking operations, including General Electric, General motors, and Toyota. On the other side is the commercial banking industry, led by trade associations and some big national banks.
As the article states, "The 1999 Gramm-Leach-Bliley law allowed linkups among banking, securities and insurance but largely ruled out combinations involving nonfinancial institutions' ownership of banks." Now some big companies liek Wal-Mart want to change the rules.
This is a true test of which powerful oligopoly can defeat the other powerful oligopoly.
9:40:11 PM 
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