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US offers $6 billion to support auto lender GMAC

(Agencies)
Updated: 2008-12-30 10:39

WASHINGTON -- The US government said on Monday it was pumping $5 billion into auto and mortgage lender GMAC LLC and lending up to $1 billion to automaker General Motors, ensuring the solvency of a company considered crucial to GM's survival.

A view of a five-bedroom and two-bath home with a GMAC real estate sign in Detroit, Michigan September 23, 2007. The US government said on Monday it was pumping $5 billion into auto and mortgage lender GMAC LLC and lending up to $1 billion to automaker General Motors. [Agencies]

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The US Treasury Department said it would buy $5 billion in senior preferred equity with an 8 percent dividend from GMAC. It also said it is lending up to $1 billion to GM to help GMAC reorganize itself as a bank holding company.

The US Treasury Department said it was dipping into a $700 billion bailout fund to buy equity in GMAC and lend to GM, the latest in a string of capital injections aimed at easing the worst credit crisis since the 1930s.

GMAC won Federal Reserve approval to become a bank holding company last week, giving it access to the emergency source of funds and helping it avoid bankruptcy.

The company, co-owned by GM and private equity firm Cerberus, has lost $7.9 billion over the last five quarters as the credit crunch lifted its borrowing costs sharply and the value of many of its assets plunged.