Fed Approves Auto Lender GMAC To Be A Bank Holding Company

December 25, 2008 4:58 a.m. EST

Washington, D.C. (AHN) - GMAC LLC (GM1), an auto lender, has been authorized by the Federal Reserve to be a bank holding company, providing a boost to General Motors Corp. (NYSE: GM).

General Motors has a 49 per cent stake in GMAC. Cerberus Capital Management LP, which owns 80 per cent of Chrysler's total stake, has 51 per cent of controlling interests in GMAC.

General Motors will reduce ownership in GMAC to less than 10 percent, according to the Fed.

"In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the Board has determined that emergency conditions exist that justify expeditious action on this proposal in accordance with the provisions of the BHC Act and the Board's regulations," the Fed said in an approval statement.

The authorization to GMAC to become a bank holding company is extraordinary action by the government to rescue the country's Detroit's Big Three auto makers .

Last week, President George W. Bush said two of the nation's three largest automakers, General Motors and Chrysler, will receive a $17.4 billion bailout. The rescue consists of $13.4 billion in emergency loans and $4 billion to be released in February.

GMAC, with total consolidated assets of approximately $211.3 billion, engages in automotive financing, commercial financing, mortgage financing, insurance, and other activities both in the U.S. and abroad.

GMAC Bank has total consolidated assets of around $33 billion and controls deposits of about $17 billion, according to the Fed.