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GMAC Becomes a Bank

Automaker's financing arm could access bailout funds

By Mark Huffman
ConsumerAffairs.com

December 26, 2008

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GMAC, the financing arm of General Motors, will become the nation's newest bank. The Federal Reserve this week approved GMAC's application to become a bank holding company, making it eligible for federal assistance.

The order applies to GMAC LLC and IB Finance Holding Company, LLC, both of Detroit, Michigan, converting GMAC Bank, a Utah industrial loan company, to a commercial bank, which will retain certain nonbanking subsidiaries.

"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 board said in a statement.

"The Board has provided notice to the primary federal and state supervisors of GMAC Bank, the Federal Deposit Insurance Corporation and the Commissioner of the Utah Department of Financial Institutions, and to the Department of Justice," the board said. "Those agencies have indicated that they have no objection to approval of the proposal."

Because of GMAC's precarious financial condition, the Fed also waived public notice of the move, expediting the process.

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 United States and abroad. GMAC Bank has total consolidated assets of approximately $33 billion and controls deposits of approximately $17 billion.

GMAC Bank engages primarily in lending and other financing activities and taking deposits of the type that are permissible for an industrial loan company under the exception in section 2(c)(2)(H) of the BHC Act.

The change in status is potentially critical to the company's survival, since it may provide access to U.S. Treasury Department funds, as well as access to emergency Fed loans. It will also be able to issue debt guaranteed by the Federal Deposit Insurance Corp.

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