GMAC becomes a bank holding company. The financial world is being restructured and mortgage borrowers will be the beneficiary of new forms of lending options again soon… Another positive sign that the real estate markets will rebound in 2009.
NEW YORK (CNNMoney.com) — The Federal Reserve on Wednesday opened the door for GMAC to get federal bailout money by granting the troubled General Motors finance arm status as a bank holding company.
“In light of the unusual and exigent circumstances affecting the financial markets … the board has determined that emergency conditions exist that justify expeditious action,” the Fed said in an order released Wednesday evening.
The move represents the latest extraordinary government action intended to rescue the American auto industry. Last week, President Bush announced a $13.4 billion aid package for GM (GM, Fortune 500) and Chrysler LLC, saying that allowing the U.S. auto industry to collapse “is not a responsible course of action.”
“Today’s announcement marks a key turning point in GMAC’s history,” said GMAC Chief Executive Officer Alvaro G. de Molina. “As a bank holding company, GMAC will be competitively positioned for the long-term to provide financing to auto and mortgage consumers and businesses such as automotive dealers.”
Cerberus could not be reached for comment.
GMAC is the biggest lender to GM’s 6,500 dealers nationwide, most of which get the financing they need to operate and buy vehicle inventory from the automaker.
The failure of GMAC could spark widespread failures among GM’s dealership network and cut even more deeply into sales. An analyst at Barclays Capital suggested in a report last week that GMAC’s failure could force GM to come up with $9 billion to $13 billion in additional funding to back its dealers - money GM clearly doesn’t have right now.
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