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 It looks like GMAC LLC finagled its way into becoming a bank holding company after all, and got a bit more than a stocking stuffer for the holidays. The U.S. Treasury is buying $5 billion in senior preferred equity in GMAC and offered a new $1 billion loan to General Motors Corp. in an another attempt to stabilize the auto company. The $6 billion is an addition to the $17.4 billion emergency plan to bailout GM and Chrysler LLC.
GMAC LLC, an auto and
mortgage finance company, applied to become a bank holding company in November,
but there was some question as to how the government might take a stake
in the company through its $700 billion Troubled Asset Relief Fund,
which is owned by Cerberus Capital Management LP and General Motors
Corp. To resolve any issues, GM will
reduce its stake in the finance company to less than 10%, and Cerberus, which owns 51% of the company will have to cut its stake in the finance
company to 33%.
The extra $1 billion loan will be used to reorganize GMAC as a bank holding company. The transition of GMAC is considered to be crucial to GM's survival and its eventual reorganization, according to Reuters. GMAC said that the loan will allow it to increase the number of loans it makes and modify its credit criteria to include financing for customers with a credit score of 621 or above, compared with the 700 minimum score put in place two months ago. The lender had reduced the number of loans it offered in an attempt to keep its head above water. 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. - Maria Woehr Also see: Will GMAC drive away with rescue plan cash? GMAC files for bank status; will GM transfer ownership? Detroit Breakdown CategoriesComments Deal Video
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I do not agree with the government solution, of just throwing money, at the problem. Do we even know, what the balance sheets of this and/or any of these bailout companies are ? We, the little people, will be paying for this bailout, sooner or later, but we will pay. Why ? Simple, our government doesn't have this money, but never gets denied for a loan. Amazing...I should go apply for a bailout too...