Gmac Llc Receives Federal Bailout

GMAC LLC was a major player in the automotive finance industry, but it faced significant challenges in 2008. The company received a federal bailout.

In September 2008, the US Treasury Department announced a $5 billion investment in GMAC LLC. This investment was part of a broader effort to stabilize the US financial system.

The bailout helped GMAC LLC to access capital and continue lending to consumers. This was crucial for the automotive industry, which was already reeling from a severe downturn in sales.

Check this out: Gmac Bank Trust

GMAC LLC has a rich history dating back to 1919 when it was established. It was initially created to fund the purchase of General Motors vehicles.

GMAC's expansion into mortgage lending began in 1985 with the creation of GMAC Mortgage. Five years later, GMAC purchased Residential Funding Corporation, which became GMAC-RFC.

GMAC also formed Homecomings Financial in 1995 from the purchased assets of another company. In 2005, ownership of GMAC Mortgage, GMAC-RFC, and Homecomings was transferred to a newly formed holding company, the Residential Capital Corp. (ResCap).

Additional reading: Gmac and Ally Financial

Here's a breakdown of GMAC's ownership structure:

GMAC's CEO as of May 2009 was Alvaro G. de Molina. The company has several lending subsidiaries, including GMAC-RFC Holding Co. LLC, Residential Funding Co. LLC, and Homecomings Financial LLC.

GMAC's headquarters is located in Minneapolis. The company has a complex history, with various mergers and acquisitions over the years.

Broaden your view: Accrue Company

The U.S. Department of the Treasury made an investment of $7.5 billion in GMAC LLC to support its ability to originate new loans to Chrysler dealers and consumers.

This investment was made to help address GMAC's capital needs as identified through the Supervisory Capital Assessment Program (SCAP). The SCAP identified a $9.1 billion capital need, and GMAC will announce an approved Capital Plan on June 8 outlining how it will meet this need.

The $7.5 billion investment will be made in the form of 9 percent Mandatorily Convertible Preferred Interests, with $4 billion supporting GMAC's growth in Chrysler dealer and retail loans, and the remaining $3.5 billion helping GMAC address its capital needs.

As a result of this transaction, the U.S. Treasury will not immediately hold common equity interests in GMAC, but it does retain the right to exchange the $884 million loan it made to GM for common equity interests in GMAC.

If this caught your attention, see: Capital Structure