GMAC Financial Services today announced that it has submitted an application to the Federal Reserve for approval to become a bank holding company. GMAC also said today that it submitted an application to the U.S. Treasury for TARP funds.
* GMAC’s announcement here.
* AP coverage here.
* MarketWatch coverage here.
I think GMAC has the bank holding company request all locked up. It might take a couple weeks, but I would guess that the Fed would approve the request. With AmEx, which was granted bank holding company status last week, the process took 2-3 weeks from application to approval.
I think the issue here is that BHC status should open a lot of doors for GMAC. It seems pretty clear from the hearings on Capitol Hill the past couple days that another $25 billion loan to the Big Three is fairly unlikely. And besides, the automakers made it pretty clear yesterday that even if they received the funds, they would not be used for financing activities.
Essentially, this move is GMAC’s only chance. The thinking is that as a BHC, GMAC would qualify for reduced borrowing costs. It would also have access to deposits from its bank.
As for the TARP funds, I’m not sure if the allocation would be different whether GMAC applies as a lender (its current status) or as a BHC, should the status be granted. In any event, it seems that the Treasury would grant at least a few billion dollars either way, just to keep another company from going belly-up.
I bet they are using inflated residual values to try and move vehicles??? Are they betting on the future to get them through the present crisis?? As you watch Chrysler try and “Brand” their different product lines, it is becoming clear that they are counting on “Ram” trucks to be a big part of the future. They still have a long way to go and it is not even certain that Chrysler will make it. Something has to change rather quickly to pull them out of their downward sales spiral!!!