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GMAC Grabs $6B Federal Lifeline

Government uses bailout funds used to buy stake in auto finance giant

By Rob Quinn, Newser Staff

Posted Dec 30, 2008 3:41 AM CST

(Newser) – The federal government is dishing out a $6 billion bailout to keep auto financing giant GMAC afloat, the New York Times reports. The Treasury Department will spend $5 billion to buy a stake in the former General Motors subsidiary, and will loan GM a further billion so the company can increase its 49% stake in GMAC. The money will come from the government's $700 billion bailout fund.

GMAC, now owned by GM and Cerberus Capital Management, the private equity firm that owns Chrysler, is a vital cog in America's auto financing. The administration hopes that shoring it up will boost the auto industry by making it easier for customers to get loans to buy cars and trucks. The Federal Reserve has approved a request from GMAC to convert itself into a bank holding company, but insists it require its bondholders to convert their debt into equity.

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A lot employee looks over Dodge Ram trucks parked in a holding lot in Warren, Mich. (AP Photo/Carlos Osorio)

American flags flap in the wind outside General Motors' world headquarters in Detroit. (AP Photo/Carlos Osorio)

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The company intends to act quickly to resume automotive lending to a broader spectrum of customers to support the availability of credit to consumers and businesses for the purchase of automobiles. - GMAC statement

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COMMENTS

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Newser001

Dec 29, 2008 9:16 PM CST

Despicable... It appears the candy store is now open to all industries... But what of the rest of us? My house isn't what it was worth on the paper I owe... GMAC hounded me over and over, and over to refinance and/or take a second; I faltered and succumbed. Where's my bailout? Do I need to turn my checking account into a bank to get some help? What the hell is going on here?!! The more money we print, the more inflation we create... its not rocket science. Do you see Germany throwing money around like the US? No! One must exercise some sort of common sense / restraint or our very own government will be our own worse enemy / demise. We must help the average citizen. We must create Green jobs. We must become self sustainable. We must end or dependancy on oil on nation security grounds. Wake up America! GM and its fleet of gas guzzlers' was its own demise, along with cars American's just didn't want nor saw as quality. I've made mistakes, I don't see anyone with handouts for me. When does it make sense to throw good money at bad? This IS capitalism; those who produce quality, reliable consumer goods that the public wants and is attracted to, survive; all others go the way of the has beens... We put a man on the moon, yet it took the Japanese to create and revolutionize the hybrid; where's the logic in that. Do you realize, Ford leases Toyota Hybrid technology from Toyota? Is that lame or what? So we throw more money at Detroit, GMAC converts to a bank (GM's parent) and gets even more... When does this insanity end?

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Chrysler • Cerberus Capital Management • General Motors • Treasury Department • auto industry • bailout • GMAC • financial crisis • TARP

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GMAC Grabs $6B Federal Lifeline