GMAC gets $6 billion to support auto lending

The U.S. Treasury Department said last night that it will purchase a $5 billion stake in GMAC LLC “as part of a broader program to assist the domestic automotive industry in becoming financially viable.” The move is seen as a move aimed at easing the worst credit crisis since the 1930s.

As a part of the purchase, the government is lending GM another $1 billion to GM so it can participate in a rights offering at GMAC connected to the company’s move to become a bank holding company. The $1 billion will be offered separately of the $13.4 billion.

GMAC, which is co-owned by GM and Cerberus Capital management, lost a total of $7.9 billion over the last five quarters due to the credit crunch. GMAC won approval from the fed to become a bank holding company last week after GM and Cerberus agreed to cut their stake in the company.

Source: Reuters