GMAC receives $7.5B in new Treasury aid

NEW YORK — The U.S. government could eventually own a majority stake in GMAC Financial Services following its latest $7.5 billion aid package to the ailing auto financing company.

To keep loans flowing to would-be buyers of GM and Chrysler vehicles and shore up its capital position, the Treasury Department agreed Thursday to provide GMAC with $7.5 billion in loans. The new aid marks the second time the government has stepped in to prop up the former lending unit of General Motors Corp.

In addition, the Federal Deposit Insurance Corp. took the rare step of allowing the low-rated company to gain access to its debt guarantee program. The program normally is limited to companies with investment-grade debt ratings but GMAC carries a rating below that. GMAC will be allowed to issue as much as $7.4 billion in debt, guaranteed by the FDIC in case the company defaults on payment.

In addition, the Federal Reserve waived rules to give GMAC's new bank, called Ally Bank, more leeway to make loans to GM customers.

In exchange for the latest round of aid, the government will receive 157.5 million preferred shares of the lender, according to a regulatory filing Friday. The Treasury said it won't immediately hold an equity stake in GMAC but will soon exercise its right to swap an $884 million loan to General Motors Corp. for an equity share in GMAC.

The Treasury said it expects to exercise that right "in the very near future," giving it a 35.4 percent stake in the company. That stake could climb to more than half if the government converts its latest $7.5 billion investment into equity.

The government could ultimately sell its stake in GMAC if the lender holds a public stock offering, according to Friday's filing. If GMAC holds an offering, the government would begin liquidating its stake within seven years in increments of 10 to 20 percent per year. At that rate, the government could hold onto its stake in the lender for as many as 17 years from the time of a public offering.

Analysts suggest that the new government support will make GMAC a lending powerhouse that will give GM and Chrysler a huge advantage over their competitors — including U.S. rival Ford Motor Co., which hasn't taken any government aid. It would have the power to offer better loan terms to buyers of GM and Chrysler cars and trucks as a way of steering business to those automakers.