GMAC Financial Services is likely to receive an additional $3.5 billion in financial aid from the U.S. government, according to recent reports. The official announcement could be made in the coming days and would add to a taxpayers’ outlay that has already hit $12.5 billion.
The move would be in correspondence with GMAC making moves to digest mortgage losses as it cleans up its balance sheet in hopes to return to profitability in the first quarter of 2010, people close to the situation said in several reports.
If funds are provided to GMAC, they would come from the U.S. Treasury through the Troubled Asset Relief Program. The move would mark the first TARP outlay in many months as recently the government has received several repayments of these funds from financial institutions.
It is believed that additional funds from the government will likely be used to keep from putting ResCap into bankruptcy. ResCap is GMAC’s residential lending unit, a main source of its financial problems. The unit lost $2.7 billion through the first three quarters of 2009. GMAC has previously said it would decide ResCaps fate by the end of the year.
Any mortgage losses GMAC announces would impact ResCap and Ally Bank, the online bank GMAC created in order to receive a banking charter from the Treasury, thus allowing it to receive TARP funds.
GMAC is a key financier for thousands of GM and Chrysler dealers throughout the U.S., if it were to fail these dealers would not be able to bring cars onto their sales lots.
