After failing a bank “stress test” in May, GMAC was given six months to raise $11.5 billion. Looks like as much as nearly half that money may come from the federal government.
Apparently, GMAC is in advanced talks with the Treasury Department for another cash infusion — this time, as much as $5.6 billion, according to the Wall Street Journal. (The amount could be as little as $2.8 billion.) The government has already funneled $12.5 billion into the captive-turned-bank — $5 billion in December 2008 and $7.5 billion this past May.
The latest cash outlay would come in exchange for preferred stock, which would raise the government’s 35.4% stake in the company if the shares were converted to common equity.
Aside from the Treasury funds, GMAC was approved earlier yesterday for FDIC insurance on $2.9 billion in debt. The move is meant to shore up GMAC’s ability to fund daily operations by making it easier to sell debt to investors. Already this year the FDIC has guaranteed $4.5 billion of GMAC-issued debt. In a nutshell, the FDIC insurance will enable GMAC to keep up its auto-loan volume, according to the WSJ article.