The Treasury Department plans to inject up to $5.6 billion in new capital in GMAC — the latest effort to help the auto finance giant, a government official confirmed late Tuesday.
The new capital would help firm up GMAC’s balance sheet and solidify its auto-loan business. GMAC provides the vast majority of wholesale financing for GM dealerships across the country, meaning scores of local distributors would be unable to bring new vehicles onto their lots if GMAC were to collapse.
GMAC achieved bank holding status in late December from the Federal Reserve — winning it access to emergency loans under the $700 billion Wall Street Troubled Asset Relief Program.
But the finance company has not raised enough private capital.
GMAC is likely to receive about $4 billion in additional Treasury money in a deal that should be finalized by next week, but the exact amount has not been determined and could be higher, sources said. GMAC spokeswoman Gina Proia declined to comment. The 90-year-old auto and mortgage finance company was sold by GM to Cerberus Capital Management LP in 2006.
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