Chrysler's race to turn its debts into equity took a major turn for the better today, with an offer from a group of banks and hedge funds that hold almost $7 billion in debt. The group is proposing to exchange around $2.5 billion of Chrysler's debt, but only in exchange for close to 40% of the company.

There is also a stipulation that Fiat must invest at least $1 billion in cash in Chrysler, as well as one seat given to the group on the company's board. The offer from the banks is a far cry from what the Treasury Department requested just last week, which was a debt reduction of around $6 billion.

The race to beat the April 30th deadline, which is now almost upon Chrysler, has seen the company attempting to swap its debt for equity, cutting costs massively and attempting to form an alliance with Fiat. Nevertheless, should any of these goals fail then government aid will end and Chrysler will be left to stand - or rather, fall - on its own.

While the banks understandably don't want to forgive all of Chrysler's debt, some government officials such as Congressman Gary Peters, D-Mich., are viewing the banks' offer as that of one seeking a windfall.

Speaking with the Associated Press, Peters claimed that the "debtholders were offered fair market value for their debt" but then "responded by asking for a windfall". He further criticized the banks, which include the likes of JPMorgan Chase, Citigroup, and Goldman Sachs for taking billions of dollars of taxpayer money through the Wall Street bailout but then remaining unwilling to "work with President Obama" to support the auto industry.