U.S. Treasury invests $7.5 billion in GMAC


GMAC's total is now up to $13.5 billion

GMAC's total is now up to $13.5 billion

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As the economy and car market continue to stagnate, it's becoming increasingly obvious that the bailout funds already paid to industry players like General Motors, Chrysler, and their financing arm GMAC, were just the tip of the iceberg. Today the Obama administration proved that point by handing over another $7.5 billion in funds to GMAC.

The new GMAC has the duty of financing not just GM's customers, but also Chrysler's now that the administration has required them to. So ensuring GMAC's success is a necessary element in the GM-Chrysler restructuring effort. "This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars," said Treasury Secretary Timothy Geithner in a statement.

But that doesn't make it any less costly to the taxpayer, or ensure that GM and Chrysler will ultimately survive in the long run.

The total tally of GMAC-received government funds is now up to $13.5 billion. The financing agency had already taken about $6 billion under the TARP program started last year.

Rather than being structured as a loan, the latest $7.5 billion will be paid in exchange for preferred equity, reports CNN Money, meaning the U.S. government will be a 35.4% owner of GMAC.

 
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