GMAC only major bank that needs more bailout money, Fed says
GMAC is the only major bank that will need additional bailout money after it was unable to raise enough capital on its own, government officials said Monday.
The major provider of auto loans was one of 10 banking firms, including Bank of America Corp. and Wells Fargo & Co., that needed to raise a combined $75 billion by Monday as a cushion to withstand worse-than-expected economic conditions under the Federal Reserve’s stress tests of the 19 largest U.S. bank holding companies.
All but GMAC have met the requirement, raising the money by issuing new common stock or securities, converting preferred equity to common equity and selling business units or other assets, the Federal Reserve said.
The stress test determined that GMAC needed to raise $11.5 billion, but the Fed would not say how much the lender had raised so far. The company now expects to raise the remaining amount it needs from the $700-billion Troubled Asset Relief Program, the Fed said.
GMAC already has received $12.5 billion in TARP money as part of the government’s effort to stabilize the automotive industry.
Treasury Secretary Timothy F. Geithner said the success of the banks in raising the additional capital privately was a major improvement from the trouble they had borrowing earlier this year and a sign that “credit is coming back.”
But GMAC remains a problem among the U.S. banks with assets of more than $100 billion each. It is the main lender for General Motors and Chrysler, the two struggling automakers emerging from government-led bankruptcies. GMAC last week reported it lost $767 million in the third quarter.
General Motors owned a controlling interest in GMAC until 2006 and now owns 9.9% of the bank holding company. GMAC has a consumer banking subsidiary, Ally Bank, and home mortgage operations, including Residential Capital.
GMAC is in discussions with the Treasury Department about the structure of the additional bailout money, the Treasury said. Published reports have indicated GMAC needs $2.8 billion to $5.6 billion.
GMAC had had an “active dialogue” with Treasury and expects to meet its higher capital requirements, said company spokeswoman Gina Proia. As a private firm, GMAC has more difficulty raising money than public companies, she said.
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