Merkin is currently in hot water due to the huge failure of his hedge fund, which invested billions of dollars with Bernard Madoff, in what is now being described as the world’s biggest Ponzi scheme.

It’s not as if his performance at the help of GMAC has been anything less than a dismal failure, either:

Merkin, 55, presided over $7.9 billion of losses at GMAC during five quarters caused by defaults on subprime mortgages and a collapse in auto sales. He closed his $1.5 billion Gabriel Capital LP last month after disclosing losses tied to Madoff, who allegedly ran a $50 billion Ponzi scheme. Gabriel and two other Merkin funds, Ascot Partners LP and Ariel Fund Ltd., face lawsuits for investing with Madoff.

As part of the TARP funds already paid out to GMAC, the company is required to pick a new seven-member board to oversee the company. It’s doubtful that Merkin will be anyone’s top pick, considering his involvement in the Madoff scheme, as well as GMAC performance under his tutelage.

The retooled board will be decided on within 90 days.

A recent display of bad form occurred during the “Bowl Games.” Companies that have accepted billions from our government were still advertising during the Bowl Games, a move that didn’t sit well with many viewers.

“Some of the advertising folks at these firms might think it’s important to put their corporate brand on public events, but taxpayers might think they’re being taken for a ride,” said Pete Sepp, vice president for policy and communications at the National Taxpayers Union.

Bailed out banks are big ballers

This is only the tip of the iceberg. A bigger conflict of interest would be that these same companies are still lobbying the government, despite getting public funds. Should companies that have failed so enormously be allowed to shape public policy? And if companies aren’t lending money to Americans, then why bother spending huge money on ads?

That’s the exact question that Republican Scott Garrett posed.

“The irony is these guys aren’t lending to people, so what are they advertising for?” Mr. Garrett said.

Bank leaders could care less

Of course you can’t actually expect leaders of the nation’s banks to feel guilty about advertising while accepting bailout cash.

“For the last several years this has been part of an integrated marketing strategy and no taxpayer-funded TARP money was used for it,” said Citi spokesman Luis Rosero.

The auto industy has a huge base of lobbyists

Now that the US auto industry has been bailed out, will the still be allowed to lobby against fuel efficiency laws as they’ve done for decades? The auto makers have been so in love with gas guzzling vehicles for so long now that they automatically fight any push for greater fuel efficiency, which would also reduce our nation’s dependence on foreign oil.

Now that bailout funds have been dispersed to keep the auto makers in business, shouldn’t we as taxpayers expect that they should be allowed to exert less pressure on policy in Washington? Whether they do or not will be interesting as it concerns Barack Obama. Obama has pledge greater fuel efficiency on the campaign trail, and now that the government he represents is an investor in the “Big Three” auto makers, he’s in a position to push them to greater change.

Whether he does so successfully may end up being contingent on the power of the auto makers lobbying efforts. Personally, I’d like to see these companies lose any right to lobby now that they’re being “bailed out” by public funds.

Bailout insanity full speed ahead

There doesn’t appear to be any temperance ahead for any of the bailed out companies. In fact, taxpayer dollars are now being used to fund takeovers. That’s right, several banks are already in the process of using TARP funds to acquire rivals.

“As we see this economy shake out, there are going to be some that make it and some that don’t make it,” said Alan B. White, PlainsCapital’s chairman and chief executive. “And there are going to be good opportunities that people are going to be able to take advantage of. I hope I’m one of those.”

It turns out some companies that received bailout funds didn’t “need the money” and are now looking to use it to make higher returns.

“Some of the banks that have received the money don’t need it but decided they would go ahead and take it since it was available,” said Robert L. Clarke, a senior partner at Bracewell & Giuliani in Houston who was comptroller of the currency under presidents Ronald Reagan and George H.W. Bush. “But it has not changed their view of the risk of making loans.”

So even though these banks are willing to take money that they don’t need, they have no intention of loaning it back out to beleaguered consumers.

The bailout of the financial industry has left out one big component: the consumer. Consumers can’t expect even the slightest bit of credit reform until 2010. So in 2009, you can expecte bailed out banks to overcharge and abuse consumers in every while possible, all the while using TARP funds to take over rivals and lobby the government. Only in America.

GMAC has long been the financing arm of General Motors and government regulators feared that losing GMAC would further threaten the health of General Motors. The government also put a massive cash infusion into General Motors in the past seven days.

GMAC is strictly obligated to make payments on the interest. If they fail to do so for six consecutive quarters, the Federal Government will replace two of their board members with two G-men.

GMAC also loses some exclusive financing deals they’ve had with General Motors. So far there’s no guess on how that would hurt future profitability. Right now profits are off in the future, as both GM and GMAC fight for survival. Car sales worldwide have slowed, and in particular they’ve stalled out in the mature markets of the USA, Japan, and Europe.

I think it’s safe to say we’ll many incentives being offered to anyone who can get approved for credit. With the Federal Funds rate as low as it is, the government is doing everything to jump start the beleaguered consumer credit market.

Whether it will be enough remains to be seen.

Regulators also wanted to approve GMAC’s application to become a bank so that it could apply for federal funds before a year-end deadline set by the Treasury Department. “GMAC will be well capitalized on completion of the proposal,” the Fed said in a public notice.

As a condition of the Federal Reserve’s approval, General Motors will have to reduce its ownership stake in GMAC to less than 10 percent, from 49 percent. An independent trustee, whose appointment will be approved by the Fed and Treasury, will sell the company’s stake within the next three years.

Of course many investors would have to be squeamish about this conversion, especially at a time when the auto industry is in the tank, new capital is impossible to get and you have J. Ezra Merkin steering the Titanic and there’s an iceberg in clear view.

Under the terms of the deal, GMAC is eligible for $6 billion dollars in bailout money, that will no doubt be carefully invested by Merkin, who announced he’s shutting down his Ariel LTD hedge fund because he lost $1.8 billion to his “good friend” Bernard Madoff. NYU accused Merkin today of handing money to Madoff, with little or no oversight. Can we expect more of the same at GMAC? Of course we can. Not only is Merkin asleep at the wheel, the Federal government just handed him the keys and a bottle of Jack Daniels.

This wasn’t the only good news for GMAC. This week GM announced it was agreeing to postpone payment by GMAC for up to $1.5 billion for cars already sent to dealers. Christmas has come early and stayed late for GMAC.

GMAC has lost $8 billion in the last two years.