US Treasury to buy stake in GMAC; GM gets additional loan

Nick MaceusDec 30th, 2008 - 19:39:57

After the auto industry had to fight tooth and nail to secure the $17 billion it needed to save itself from collapse, the federal government has kindly kicked in another $6 billion. The beneficiary: GMAC, the auto financing company that provides financing for most GM dealers and many of its customers. GMAC has struggled in recent months to borrow the money it needs to make loans, and last week the Fed approved the company's request to become a bank holding company. The change in structure opened it up to new sources of funding, like the billions it's receiving from the $700 billion of TARP funds, but also made it subject to additional regulations, including a requirement to convert 75 percent of its $38 billion in debt into stock. As part of the $6 billion infusion, the Treasury will invest $5 billion, on which it will receive an 8 percent dividend, and loan $1 billion to GM for it to invest in GMAC. GM has a 49 percent ownership of GMAC.

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