The United States Treasury Department says it plans to give auto financing giant GMAC up to $5.6 billion in exchange for preferred shares of stock to help the company meet new capital requirements.
Since late last year, the government has supported GMAC with $12.5 billion in funding, taken a 35.4 percent stake and appointed two directors.
GMAC, which provides loans for General Motors and Chrysler customers and dealers, received bank status last December, which meant that it qualified for a slice of the $700 billion Trouble Asset Relief Program, yet it hasn’t raised a sufficient amount of private capital. The Treasury requires a certain amount of liquidity as part of its “stress test” for the country’s largest 19 banks. For GMAC, $9.1 billion of the $11.5 billion of additional capital needed to meet the government’s “stress test” needed to be from new sources. The company has come up about $5.6 billion short of its needed liquid capital.
“GMAC is the only one of the banks that went through the stress test to need additional government capital; all other institutions were able to raise any necessary capital from investors, and several paid back the taxpayers,” Treasury spokesperson Meg Reilly told the media.
