Treasury To Lend GMAC At Least $7 Billion More

NEW YORK — The Treasury Department is set to inject billions more dollars into GMAC Financial Services, according to media reports.

The Wall Street Journal said the Treasury Department will lend GMAC more than $7 billion, a step towards making the company a quasi-federal entity with the power to offer low-interest loans to would-be buyers of GM and Chrysler cars. The Detroit News put the amount at $7.5 billion.

The move comes after GMAC failed a bank "stress test" earlier this month, and the Treasury mandated that the company raise $11.5 billion within six months. GMAC already received $5 billion from the Troubled Asset Relief Program in December after the government approved its application to become a bank. In exchange for the funding, the government received 5 million GMAC shares.

The additional funding gives the Treasury more control over GMAC, and it has already told the General Motors Corp. financing arm that it must extend its financing services to bankrupt Chrysler LLC.

GMAC, which reported a first-quarter loss of $675 million, said earlier this month it has seen rising defaults in its auto finance division. That, combined with soured assets in its Residential Capital LLC mortgage unit, makes it more difficult for the company to raise the additional capital in the public markets.

It is unclear what additional mandates the government will impose on GMAC.

Analysts suggest the infusion, along with the merger of Chrysler's financial arm would make GMAC a lending powerhouse that would give GM and Chrysler a huge advantage over their competitors _ including Ford Motor Co., which hasn't taken any aid from the government. A U.S.-controlled GMAC would have the power to offer better loan terms to buyers of GM and Chrysler cars and trucks as a way of steering business to the troubled automakers.

The banking arm of GMAC changed its name to Ally Bank last week, in an effort to repair its tarnished image and attract customers.

Comments

[davidwayneosedach]

Instead of lending the money to GM - lend it to the car buyers - for whatever car they want.

[econ1]

Government lending $7B to GMAC for buyers of ONLY GM and Chrysler cars?

Ford employees, creditors, shareholders should all be livid. Your own government supports your competition when they screw up. Think what Ford could have done with the $45B directed into GM, plus whatever Chrysler gets and this $7B. Think what HP, Intel, Google, GE....etc. could have done. But no...our politicians now want to support the inept and punish the diligent. This will turn out badly.

And I own a GM and a Chrysler..­..hmmmmm.

[KillTheMessenger]

"This will turn out badly."

I think it already has. We have been doing all the wrong things for the past 30 years. At least since Reagan America has reversed every single one of its fundamental values. We reward failure. We do everything to keep the past alive instead of looking into the future. We are sorry for ourselves instead of picking up the shovel to dig ourselves out of our own hole.

[loki]

More of our funds going to the richie riches of the world. Just think, they will sell us a car we basically have already paid for 10000 times over, and will pay for it again and again for the next 150 years of tax burden. yippie. and I personally I dont care if you make it 0% interest and $4000 cash back and free maintenance for life, why would anyone take on a $400 car payment, the cost of full covered insurance, the tax burden, and if you live in a state with personal property tax that too. Why would you want to take on a house payment a month just to ride in a new car? Im happy with my 2000 Honda accord that gets 32mpg everyday and insurance is less per year than one month on a new car. I just cant take on a new car debt load at this time. So it doesnt matter what the interest rate is on $30k car. I can wait another 5 or more year and buy another good used car for under 10k, and drive that for 10 years. Who do I have to impress. I know who I am. I dont need to go into financial doom just to look good.

[drymartini1]

govt encouraging people to buy one of the most depreciable assets. !! great job.

i know that economy needs to turn around, but maybe MOST PEOPLE should be driving USED CARS !! hello !!

[rbchilds]

Government gives money to auto manufacturers. Government forces auto manufacturers into bankruptcy. Government gives money to bank to finance autos that aren't going to be built because the manufacturer is bankrupt. Some politician somewhere is getting his pocket filled.

[ObamAtomic]

Low interest to consumer to purchase a car? Too good to be true!

[Roguewolf]

Big Brother Barry says now I own you

[swo68]

It's a foot in the door. Sad.

[OneTop]

It's nice to see the Taxpayer helping out those poor Private Equity Firms.

GMAC is 51% owned by Cerebus

http://www.cerberuscapital.com/

Privatize the profits and Socialize the losses ----- Welcome to America

[TrueSense]

While defaults are hurting them now, reports are they got into initial trouble trying to get into the action on derivatives and playing at being a hedge fund. You know that's where the "real money" is. Take those payments and deposits and gamble.

When can we go to Vegas with other people's money and our money, lose it and then made whole by the government ?

Meanwhile, the real economy where things are made and done is in shambles, but who cares. Let's worry about 3 Card Monte. I guess helping finance cars is something of some worth but higher wages so less financing would be needed would be even better.

[steppenwolfsayshi]

Ally Bank is very nice. The website is a bit glitchy still, but they are trying to put banking in simple terms, so you understand what financial products you're buying.
I went to GMAC bank to buy a CD since they had been offering the highest around (among banks I've actually heard of before) and Ally still had the most competitive rates.

[sc300nc]

Next step, Joe Biden commercials on late night TV.

"Bad credit, no problem, no job, no problem, We here at Obama Motors can put you in a car today!"

[Paul]

"I'll eat a bug..."

[OldFreddie]

LOL, this is funny. Thanks, can always use a good laugh these days.

[Obamalicious]

Biden missed his calling. He could have been the best used car salesman.

[KillTheMessenger]

Buying more inefficient cars with federal money... sounds like a pretty poor national security policy to me.

:-)

[yappnmutt]

russia has given up on the dollar. the trend is accelerating.

http://english.pravda.ru/business/finance/19-05-2009/107581-dollar_russia-0

[steppenwolfsayshi]

No, they didn't. You just made me waste five minutes of my life double-checking. Let's be clear, Pravda is communist propaganda. It's good only as insight into the worldview of a large cross-section of Russia that want to believe that the Cold War is not lost and that Russia and America are still fighting wars in space, ect.

[Energizer2009]

Of course, there is no end in sight. We are looking in the wrong direction for the wrong signs. To actually understand that, you have to do some reading.

See: Why the market failed - http://twisri.blogspot.com/2009/03/why-market-failed.html

Adam Smith on the Current Financial Crisis - http://twisri.blogspot.com/2009/04/adam-smith-on-current-financial-crisis.html

What happened. What now. - http://twisri.blogspot.com/2009/04/commercial-and-investment-banks-used.html

To REALLY see what went wrong, take a look at page 6: http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf

See page 2: http://www.sec.gov/rules/proposed/s71005/wcunningham5867.pdf

Also see: http://www.ethicalmarkets.com//wp-content/uploads/2008/12/financialbailoutcomment1.pdf

[Kassandra]

I'd rather have them LOAN money to our last manufacturing sector than be giving it to the world's banks so they can turn around and screw US some more:
An oldie but goodie:
U.S. Taxpayers Risk $9.7 Trillion on Bailout Programs (Update1)
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aGq2B3XeGKok

Take a look at this one too:
http://firedoglake.com/2009/05/21/alan-grayson-says-audit-the-fed/

This is the entity Obama wants to/ is being forced to? turn financial regulation over to and we can't even audit them?
apparently Congress must pas a bill ( hahahaha) in order to find out where they sent all our $$$$$$$$ for the next infinity of generations. Durbin is right , Congress is OWNED. Esp the Senate.

[vagabondvet]

Last manufacturing sector? Qualify that statement.

[economics101]

Please understand­....This stuff has never worked anywhere.I­f we would of let these companies go bankrupt,and kept the government out(We would still have our money,and the free market would weed out weeklings,and new blood would flourish.T­he same regulation­/deregulat­ion that started the Crisis is being employed on the auto,credit card,health care,banking,and energy markets.Th­is Hope and Change BS is pathetic.H­ope makes no money,and this change is a 2000 year old economic theory that has worked no where its been employed.

[KillTheMessenger]

This isn't our "last" manufacturing sector. It's just our worst performing manufacturing sector. We keep putting billion dollars into dying industries­... while China is putting billions into the future. How do you expect that to end...

:-)