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.
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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 WoehrAlso see:
Will GMAC drive away with rescue plan cash?GMAC files for bank status; will GM transfer ownership?Detroit Breakdown
Comments
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...