Treasury: $7.5 Billion More To GMAC

(AP)  The Treasury Department said Thursday it is providing auto lender GMAC with $7.5 billion in fresh aid to enable it to make new loans for General Motors Corp. and Chrysler LLC vehicles.

The department said the investment will help provide a reliable source of financing to auto dealers and people looking to buy GM and Chrysler vehicles.

Treasury said it won't immediately expand its equity interest in GMAC but will exercise in the near future its right under an earlier agreement to exchange an $884 million loan it made to General Motors for an equity share in GMAC.

"This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars," said Treasury Secretary Timothy Geithner.

Strengthening GMAC will help stabilize America's auto financing market, which should help the economy, he said.

The government has a vested interest in seeing GMAC succeed and the U.S. auto industry revive. General Motors has received $15.4 billion in federal loans and Chrysler has received $5.8 billion.

The move to provide fresh aid to GMAC comes after it failed a bank "stress test" earlier this month. The Treasury Department mandated the company raise $11.5 billion within six months.

GMAC Financial Services received $5 billion from the government's $700 billion financial bailout program in December. In return, the government received 5 million shares of GMAC, and told the company it must extend financing services to Chrysler, which filed for bankruptcy protection April 30.

The dose of new aid marks the government's latest attempt to break through credit clogs and spur more lending, a necessary ingredient to lifting the country out of recession.

Analysts suggest that fresh government aid, along with the merger of Chrysler's financial arm, will make GMAC a lending powerhouse that would give GM and Chrysler a huge advantage over their competitors. A government-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.

GMAC, which reported a first-quarter loss of $675 million, said earlier this week 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 from private investors.

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

[mhalaska]

I know what GMAC is doing with the bail out money...buying foreclosed properties when forclosure sales are cried at the courthouse. GMAC just bought one a week ago for $84,000, foreclosed note was $164,000 lender who foreclosed was Countrywide. House is worth $215,000. GMAC isn't making car loans or mortgage loans with that TARP money, they are buying up foreclosed properties for pennies on the dollar, selling them and fattening up their bottom line. Much less riskier than making a loan to someone. Not to mention the quick return on the investment. The financial institutions and lenders are laughing at the government, saying thanks a bunch for helping us recover our losses all at the expense of the tax payer, whooo hooo!!!

[sjc_1]

"In return, the government received 5 million shares of GMAC"

For years, GMAC was making more money on mortgages than on cars. They have significant assets and if the financial world was not in meltdown could get the money they need through the market. Some people would rather make knee jerk reactions to stories that they know little or nothing about. That is a bad thing to do. It leads to mob mentality and major mistakes that cause damage, all because people did not take time to educate themselves about the facts.

[sjc_1]

jbar116,

This is GMAC, not GM. GMAC is a bank and GM is a car company. Please inform yourself before ranting. You look a bit less like an idiot by doing so.

[jbar116]

Stop the insanity already! Don't throw more money at a s**t pile corporation like GM, hell you are better off giving it to Toyota and Honda or better yet give me an infusion of fresh cash and I'll think about buying an American car for my boat anchor.

[bozworth4]

When will enough be enough? As the entitled drive past the homeless and hungry, be sure to at least have the courtesy to notice us. As we are the ones that put you where you are, and you are the ones that put us where we are. In history this will be referred to as the great money grab and rape on defenseless citizens. Wait a minute, this all happened before, in a different country and time. Someone help me remember what it was called. I now know what yes we can means. And don't tell anyone, but I still have some of the change they all talked about left from payday. IRS doesn't know!!

[whitemale08]

GOLDMAN SUCKS/BARCLAYS/JP MORGANBoA/HSBC....ARE....THE.....ENEMY!!!!

...and their hitman Standard & Poors has got his finger on the trigger to kill the AAA rating.

When that happens Goldman Sucks will be sitting pretty and everyone else under AUSTERITY!

[sjc_1]

GMAC was declared a bank with U.S. backing, just like Goldman. Goldman however, was allowed to sit in on all the meetings concerning CDS bets so that they did not lose any money. Paulson has $400 million in Goldman stock that was becoming $200 million, so he used tax payer money to make sure he did not lose a penny.

[walt1944]

Would someone in the government explain to me WHY we are rescuing a company that loans money to people to BUY CARS????

We may as well "rescue" Sears, K-Mart, Wal-Mart and General Electric too!!!

BILLIONS to Corporate America, but not one stinking cent to the out-of-work taxpayer!!!

HAIL OBAMA???

[grabandgo]

I guess exec's need more golden parachute money.I SAY NO WAY!!!!!!

[endrepubs]

No More Bailout Money for large corporations!!!!. Bailout money to large corporations just disappears into a black hole and no one knows what happens to it. It's the average taxpaying American Citizen that needed the bailouts. That would have gotten the economy moving faster that anything.