Are GMAC Demand Notes Safe?
(January 3, 2006) With all the talk of a GM bankruptcy, many investors have been asking the question – What’s the risk in holding GMAC Demand Notes? For years many have utilized GMAC Demand Notes as an account for cash reserves that pays a much higher rate of interest (5.5% as of 12/30/05) than a typical money market account. The rules are about the same in terms of check writing and other features. With speculation of a GM bankruptcy running wild on Wall Street and Main Street over the past few months, some have begun to wonder about the risk of GMAC Demand Notes. Unlike accounts at a local bank, GMAC Demand Notes are not FDIC insured. In addition, Demand Notes are regarded as unsecured debt by GMAC, meaning that no specific assets have been pledged to pay off these obligations. So, theoretically an investor’s money is at risk. Brokers and others who are employing fear tactics to accumulate more assets in their proprietary products have done a very good job of preying on investors’ co
