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.