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U.S. to take majority stake in GMAC
The Treasury Department announced Wednesday the U.S. government would take a majority ownership stake in the troubled auto financier GMAC. Treasury will provide $3.8 billion to the auto lender, which has struggled to raise private funds. Treasury's equity ownership of GMAC will increase from 35 percent to 56 percent under the transaction, making the government and taxpayer the majority owner. Treasury previously had invested $12.5 billion in preferred stock in GMAC. It owns a total of $13.1 billion in preferred stock in GMAC, which includes purchases, the exercise of warrants and 35 percent of common equity. The U.S. government's unprecedented intervention in the auto sector earlier led to the dismissal of General Motors CEO Rick Wagoner, who was ousted by the Obama administration. Treasury said it had initially thought it would have to provide $5.6 billion to GMAC, and cast the $3.8 billion in support as a reduction in its expected expenditures under the Troubled Asset Relief Program. It said less money would be needed because the restructurings of General Motors and Chrysler had been less disruptive than expected. While other large banks such as Wells Fargo and Citigroup have recently paid back billions in government funds, GMAC has sunk deeper into need. GMAC is also a centerpiece of the American auto industry the Obama administration has attempted to rejuvenate. GMAC is the primary lender to General Motors and Chrysler customers. GMAC will become the sixth company the U.S. has taken control of in the past two years. It joins mortgage lenders Fannie Mae and Freddie Mac, auto manufacturers General Motors and Chrysler and the largest commercial insurer in the U.S., American International Group. Posted by: Fred 2009-12-31 |
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