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GMAC likely to tap bailout to raise capital
The finance firm hasn't yet been able to find billions it was told that it needed.
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WASHINGTON - The Federal Reserve said Monday that GMAC is the only one of 19 stress-tested banks that needs more capital to withstand losses if the economy softens.
GMAC, a crucial player in the U.S. auto industry, has been unable to raise the $11.5 billion regulators said it needed after stress-test results were announced in May. The Fed says the finance company is expected to close the gap with more money from the $700 billion financial bailout.
GMAC, already the recipient of $12.5 billion in taxpayer infusions, is negotiating with regulators over how much more it will get.
The Detroit-based lender expects to meet its additional capital requirements under the stress-test program and is in "active dialogue" with Treasury about its next round of bailout money, said GMAC spokeswoman Gina Proia.
Those funds will be used to fulfill the stress-test requirement "and not to resolve any new matter related to our business," she added.
GMAC provides wholesale financing to many General Motors and Chrysler dealerships to pay for the vehicles on their lots.
The company also operates a mortgage lending unit -- Residential Capital -- which has been pummeled by the housing market downturn. It runs an insurance unit and an online banking unit called Ally Bank.
Treasury Secretary Timothy Geithner said the success of the other 18 companies showed the financial sector has become far more stable since January.
"Banks are repaying the taxpayers with interest, and credit is coming back, but we need to reinforce that improvement and ensure that small- and medium-sized businesses can borrow to create jobs," he said.
The test results in May found 10 of the 19 largest banks needed an extra cushion of capital to withstand deeper losses they would see if the recession worsened. They were given six months to raise a total of $74.6 billion of capital. The Fed said Monday that they have raised a total of $77 billion.
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