GMAC Has Its Hand Out Again
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The battered financial firm, GMAC has called on the U.S. Government yet again for an infusion of cash. According to a Wall Street Journal report, the company that has already taken $12.5 billion in taxpayer dollars since December of 2008 will use the money to sure up the Company’s balance sheet and firm up its auto-loan business.
The Detroit-based GMAC is a leader in auto financing that provides loans to 15 million borrowers and thousands of General Motors and Chrysler dealerships in the U.S.
This move could increase the government's stake in the Company if the existing shares are changed into common equity. The government’s current stake is 35.4 percent.
Without the money from the U.S. treasury, GMAC would be forced to further downsize its lending volume, which is already down in new-car loans by 55 percent to $5.6 billion during the second quarter from the year-ago quarter.
After the government mandated stress-test in May, it became more apparent that the Company would require a third infusion of cash.
"GMAC is the only one of the banks that went through the stress test to need additional government capital," Treasury spokesman Andrew Williams stated.
The willingness of the government to continue to infuse money into GMAC is a key indicator of the Company’s importance to the revival of the U.S. auto industry. The negotiations require that GMAC keep its rates at certain amounts in return for the financial support.
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