The government is moving ahead Wednesday on a fresh multibillion dollar cash infusion to stabilize auto financing company
GMAC Financial Services, according to a person with knowledge of the matter.
GMAC, based in Detroit, is instrumental
to the operations of automakers General Motors Co. and Chrysler Group LLC. It has already received $12.5 billion in taxpayer
money and is 35 percent owned by the federal government.
The person, who spoke on condition of anonymity because
discussions weren’t complete, says the new infusion would be in the range of another $3 billion. That would fall short of
the roughly $6 billion the government had earlier thought GMAC would need to stabilize the company.
of the injection could come late Wednesday or on Thursday, the person says.
After the government conducted "stress
tests" on financial institutions earlier this year, it demanded that that GMAC raise an $11.5 billion capital cushion
to help it weather further economic decline. GMAC was unable to raise the funds privately.
The anticipated additional
government aid for GMAC would come from the $700 billion taxpayer-financed bailout pot the government set up at the height
of the financial crisis last year. The money was intended to shore up banks so that they would boost lending to people and
businesses and support the sagging economy. However, money also has been used to help GM, Chrysler, insurance companies and
others survive the worst financial crisis and recession since the 1930s.
GMAC has been in negotiations with Treasury
officials for months over additional taxpayer aid.
Treasury spokesman Andrew Williams declined to offer details,
but said: "Treasury is in discussions with GMAC to ensure its captial needs as determined … by the stress tests are
The Wall Street Journal was the first to report on Tuesday that GMAC will receive an additional $3.5
billion in government aid.
GMAC spokeswoman Gina Proia on Tuesday night declined comment on the newspaper report
but said the company "has been conducting a strategic review of its business and evaluating options to address the challenges
in its mortgage operation."
Proia said GMAC was trying to position itself to improve its financial performance
and repay the U.S. government.
Despite the government aid, GMAC still remains on shaky financial ground. Last month,
it reported a quarterly loss of $767 million. The company has struggled under the weight of its ailing mortgage lender, ResCap.
The unit was a major dealer in sub-prime mortgages and is still suffering from soured loans it made during the housing boom.
Some analysts have speculated that GMAC might have to shut down ResCap altogether.
However, a bright spot for GMAC
has been Ally Bank, its online consumer banking unit. The bank has offered some of the highest interest rates on CDs in the
industry, helping bring in billions of dollars in new deposits this year. But the rates have also irked rivals and drawn the
attention of regulators, since as the rebranded banking unit of GMAC, Ally has the backing of billions of government dollars
loaned to GMAC.
Michael Carpenter, who succeeded Alvaro De Molina as the company’s CEO in November, has said the
company would need no more than $5.6 billion in aid. Lawmakers estimated the company would receive between $2 billion and
$5 billion in additional aid.