Federal Government Orders GMAC To Raise $13.1 Billion

The U.S. government has ordered GMAC to raise $13.1 billion in new capital. Likely source for that capital? Uh, the U.S. government.

Since GMAC’s lending is in weak sectors—auto financing and home mortgages—it’s in a more precarious position than other banks.

The bulk of the new capital needed — $9.1 billion — would be designed to bolster the existing GMAC against the adverse scenario included in the federal government‘s recent “stress test” of major financial institutions. The government is expected to release the official results of the stress tests today after the markets close.

Regulators said that GMAC faced substantial risks of new defaults, particularly in mortgage and consumer automobile lending. GMAC’s focus on those areas of business has made the firm more vulnerable to losses during the economic downturn than more diversified banks, said the executive.

Feds Order GMAC to Raise $13.1 Billion to Shore Up Finances
[Washington Post]

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