Treasury to Lend GMAC Billions More: Report

The Treasury Department is set to inject more than $7 billion into GMAC, the first installment of a new government aid package that could reach $14 billion, a report says.

Author:: Joseph Woelfel
Publish date:: May 21, 2009 12:22 AM EDT

The Treasury Department is set to inject more than $7 billion into GMAC, the first installment of a new government aid package that could reach $14 billion, a report says.

The Treasury Department is set to inject more than $7 billion into

GMAC

, the first installment of a new government aid package that could reach $14 billion, the

Wall Street Journal

reports, citing people familiar with the matter.

As a result of the move, the government within months could end up owning both GMAC and

General Motors

(GM) - Get Report

. The plan being devised by President Barack Obama's auto task force for GM calls for the government to emerge with a majority stake. The additional infusion of taxpayer money into GMAC could turn the U.S. government into a majority shareholder there, the

Journal

reports.

The

Detroit News

put the amount that GMAC would receive at $7.5 billion.

The

Journal

reports the GMAC injection is designed to firm up the auto-financing company's battered balance sheet and allow it to continue making loans for car purchases at GM and

Chrysler

. GMAC already received $5 billion from the Treasury in December.

Whether the U.S. emerges as a majority shareholder in GMAC depends on how the arrangement is structured. It is possible the U.S. might end up investing less than the $14 billion figure, the

Journal

reports, citing the people familiar with the plan. GMAC is now owned by GM and a group led by private-equity firm Cerberus Capital.

GMAC, which reported a first-quarter loss of $675 million, said earlier this month it has seen rising defaults in its auto finance division. That, combined with soured assets in its Residential Capital mortgage unit, makes it more difficult for the company to raise the additional capital in the public markets.

GMAC's troubles stem from a spate of subprime-mortgage lending in recent years as the company moved beyond its traditional business of supplying fleet financing for GM dealers, the

Journal

notes.