Now, thanks to the U.S. government's $700 billion financial rescue plan, everyone wants to be a bank holding company, and joining that list is home and auto lender GMAC LLC, according to
The Wall Street Journal.
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For GMAC, becoming a bank holding company -- a move pioneered by investment banks Morgan Stanley and Goldman Sachs Group Inc. -- could be tricky because the troubled lender is co-owned by auto maker General Motors Corp. (49%) and buyout firm Cerberus Capital Management LP (51%). In order for GMAC to become a bank, GM may need to transfer at least half of its ownership in GMAC to Cerberus so it won't have a controlling interest in the firm and satisfy federal regulations. According to The Wall Street Journal, Cerberus could also merge GMAC and Chrysler Financial into an entity controlled by the bank holding company as part of the potential GM-Chrysler LLC merger.
The home and auto lender appears to be essentially the back-seat driver in the deal as the Federal Reserve has already intervened in the company's operations. The government has approved GMAC to use the Fed's commercial paper funding facility created earlier this month to ease pressure in the credit market. The Fed funding, no doubt will definitely help the firm in the short term.
Prior to the government's intervention, GMAC already had to:
- halt some new vehicle loans in the U.S. and now seven European countries,
- sell off its home services unit,
- close all 200 GMAC Mortgage retail offices, and
- sell some mortgage-servicing rights to Cerberus in order to make ends meet.
Meanwhile, the Fed has been in discussions with GM and Chrysler and could even provide a $10 billion rescue package to support GM's acquisition of Chrysler from Cerberus, according to Reuters.
With the Fed reportedly involved for more than a month already, whatever structure is decided upon will likely satisfy the Treasury's requirements to make TARP funding available to GMAC-Cerberus (or whatever they want to call the bank holding entity), which can then drive into the sunset with their government bailout. - Maria Woehr
