Treasury, GMAC in talks for 3rd round of US aid
Treasury says auto lender GMAC in talks for billions more in taxpayer funds to boost capital
NEW YORK (AP) -- GMAC, the former lending arm of General Motors Co., is in talks with the Treasury Department for a third injection of taxpayer aid, a further sign of the U.S. government's entrenchment in the U.S. auto industry.
The Treasury Department mandated earlier this year that GMAC Financial Services raise an additional $11.5 billion in capital after undergoing a "stress test" along with 18 other banks. While other banks deemed undercapitalized have been able to raise funds from private investors, GMAC has been forced to go back to the government.
GMAC is a crucial player in the U.S. auto industry, providing wholesale financing to many General Motors and Chrysler dealerships to pay for the vehicles on their lots. The company also operates a mortgage lending unit -- Residential Capital -- which has been pummeled by the housing market downturn. It also runs an insurance unit and an online banking unit called Ally Bank.
A Treasury Department spokesman confirmed that it was in talks with GMAC about a third helping of aid. The government already owns a 35 percent stake in GMAC after providing $12.5 billion to the lender. It also owns a majority-stake in GM and a smaller stake in Chrysler.
The Treasury spokesman declined to comment on whether the government's ownership stakes in GM and Chrysler make it more willing to again help prop up GMAC. But Kirk Ludtke, a senior vice president of CRT Capital Group LLC in Stamford, Conn., who follows GMAC, said the automakers can't succeed without GMAC.
"We continue to believe that a viable GMAC is critical to the success of GM and Chrysler," Ludtke said.
Citing people familiar with the matter, The Wall Street Journal first reported late Tuesday that the U.S. government could hand over another $2.8 billion to $5.6 billion to Detroit-based GMAC. The latest capital infusion would be in the form of preferred stock, the paper said. The government's stake could rise if the new preferred shares were ever converted into common stock.
A GMAC spokeswoman declined to comment.
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