24 May 2009

$US7.5 billion federal aid for GMAC

10:14 am on 24 May 2009

The US Treasury is to give $US7.5 billion in further state aid to GMAC, to help the finance group offer loans to potential Chrysler and GM car buyers.

GMAC, which is part-owned by General Motors, failed to meet the government's "stress test" and the Treasury ordered it to raise $US11.5 billion in extra capital.

But the company failed to raise money privately as bad debt has risen, leading to quarterly losses of $US675 million - 15% greater than in the same period a year earlier, when it reached $US589 million.

The BBC reports this is the second time the government has intervened to help GMAC. In December, a $US6 billion bail-out was given to the company.

GMAC Financial Services was one of the 19 lenders that were subject to US government "stress tests" to assess its health.

GMAC will be able to keep lending to GM dealers and customers, which would usually not be allowed. However, the Federal Reserve has now waived rules, permitting GMAC's bank more scope to provide loans.

GM is trying to stave off bankruptcy protection and Chrysler has already filed for bankruptcy.