Auto lender GMAC Financial Services will receive $7.5 billion in additional government aid to keep loans flowing to would-be buyers of GM and Chrysler vehicles and shore up its capital postion _ marking the second time the government has stepped in to prop up the lender, according to AP. To help GMAC raise additional funds, the Federal Deposit Insurance Corp. took the rare step Thursday of allowing the junk-rated company to gain access to its debt guarantee program. 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. 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. GMAC received $5 billion in December from the Treasury Department's $700 billion financial bailout program in exchange for 5 million common shares and the promise to extend financing to dealers of Chrysler LLC, which is restructuring under Chapter 11 bankruptcy protection. After failing the government's bank stress test, the Treasury Department mandated earlier this month that GMAC raise $11.5 billion in additional capital, including $9.1 billion of new Tier 1 capital. But GMAC, which reported a first-quarter loss of $675 million, has seen rising defaults in its auto finance division. That, combined with soured assets in its Residential Capital LLC mortgage unit, made it difficult for the company to raise capital from private investors. So in addition to $4 billion in aid to support GMAC's new loans to Chrysler dealers and customers, the government agreed to inject $3.5 billion to help the company bolster its capital cushion. «This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars,» Treasury Secretary Timothy Geithner said Thursday.
