Fed approval to GMAC for becoming a bank
The fraught automaker General Motors Corp's financial arm, GMAC Financial Services, has received approval from the US Federal Reserve allowing it to become a bank holding company. The Wednesday approval makes the auto lender eligible for financial relief under the $700 billion bailout of the US government, as well as receiving emergency loans directly from the Federal Reserve.
The Federal approval would give GMAC an access to new sources of funding, including a probable infusion of taxpayer dollars from the Treasury Department. Currently operating as an industrial company, GMAC Bank had earlier received approval for conversion to a state bank from the Utah Department of Financial institutions.
In a statement, company chief executive, Alvaro G. de Molina, said: "Today's announcement marks a key turning point in GMAC's history. It is critically important to our company and to the broader economy to resume responsible lending to consumers and businesses."
GMAC's application was granted on an emergency basis, for which the Federal Reserve Board shortened its normal review process. Nonetheless, the company had some capital requirements to be met. It needed the consent of 75 percent of its bondholders for a change in the terms of their investments. In addition, it required more investments from other sources, for meeting the requirement of a particular amount that a bank is supposed to maintain.
Federal conditions also require GM, with 49 percent share, and Cerberus Capital Management, with 51 percent of the company, to dissociate from their ownership stakes in GMAC, since commercial companies cannot own banks.