Questions about GMAC Financial Services survival may be answered if it gets the ability to tap TARP funds. Thursday morning, the firm -- owned by Cerberus Capital Management LP and General Motors Corp. -- announced like so many others that it applied to the Federal Reserve to
become a bank holding company, thereby giving it access to the Treasury's $700 billion bailout fund. GMAC says the funds would increase its flexibility and stability for its core mission of providing automotive and mortgage financing to consumers and businesses.
GMAC also commenced private exchange offers and cash tender offers for $38 billion of certain outstanding GMAC and Residential Capital LLC (the home lending unit) debt securities to increase capital.
A Bloomberg article noted
losses at GMAC since mid-2007 reached $7.9 billion through last quarter, as home foreclosures pressured the mortgage unit and GM's auto sales plummeted to the worst level since 1945. Our sister blog Dealscape said in order
for GMAC to become a bank, GM, a subject of massive debate about
whether it should be allowed to fail, may need to transfer at least half of its ownership in GMAC to Cerberus (51% owner) so it won't have a controlling interest in the firm and satisfy federal regulations.
GMAC did not say how much money it would seek from the government. -
Baz HiralalSee the GMAC press release
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