GMAC Wins Bid To Become Holding Company
December 26, 2008
GMAC LLC, the finance arm of General Motors Corp. that also lends money for home mortgages and lines of credit, on Decemcber 24 was granted status as a bank holding company by the U.S. Federal Reserve.
The move was vital for GMAC in order for it to qualify for relief loans from the storied Troubled Assets Relief Program (TARP), passed in October to provide emergency loans to distressed banks and other financial institutions.
To qualify for the funding, however, GMAC needed to obtain the bank holding company designation, essentially making GMAC's business fit the description of a full-fledged bank.
GMAC's transformation into a bank -- and the subsequent qualification for government loans that could run as high as $6.3 billion, according to a report from Bloomberg -- is one crucial step toward improving the availability of credit for those attempting to buy GM vehicles. GM was approved for a loan from the TARP funding pool by the Bush administration, but has in recent weeks said enhancing the availability of credit is an essential factor in jump-starting the industry's dismal sales pace of the past several months.
GMAC is majority owned by Cerberus Capital Management LP, which also owns most of Chrysler LLC. Financing for Chrysler vehicles traditionally came from the company's own captive finance arm, Chrysler Financial, but that company suspended almost all vehicle leasing and a large portion of conventional auto loans several months ago as the nation's credit crisis tightened on the automotive sector.
In compliance with stipulations for GMAC's receipt of TARP funding, both GM and Cerberus now will give up control of GMAC because of regulations regarding what kind of companies can own banks, Bloomberg reported.
Posted by Bill Visnic at 9:33 PM under Business , Chrysler , GM , News | Comments (0) | digg this | Seed Newsvine
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