Fed tells GMAC to raise $11.5 billion
Banking regulators on Thursday told GMAC Financial Services, the lending unit of General Motors Corp., that it needs to raise $11.5 billion in capital to stabilize its books as mortgage and auto loan losses mount.
The amount is the third biggest required for any financial institution in a round of stress tests aimed at gauging the health of 19 of the nation's biggest lenders, trailing only Citigroup Inc.
GMAC has been bogged down by credit woes in the auto and housing markets and also must raise cash to cover the cost of funding loans for Chrysler, now that Chrysler Financial no longer provides new customers with financing.
GMAC earlier this week said its first-quarter loss widened to $675 million. New loans fell from a year ago, but the company said refinancing picked up amid lower interest rates and margins have improved thanks to more government business.
The Treasury Department already infused GMAC with $5 billion in funds under the Troubled Asset Relief Program when the company became a bank holding company.
GM sold 51% of GMAC to Cerberus Capital Management back in late 2006 and held on to the remaining 49%. Under GMAC's arrangement to become a bank, both GM and Cerberus were required to divest some of their stakes.
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