US Government Takes Majority Stake in GMAC

The U.S. government is taking a controlling stake in GMAC Financial Services by providing $3.8 billion in fresh aid to the company, which is the former financing arm of U.S. auto maker General Motors.

The Treasury Department Wednesday said the new aid, which comes from a taxpayer-financed bailout fund, is less than the roughly $6 billion the government had earlier thought GMAC would need to stabilize the company.

GMAC had already received $12.5 billion in emergency financial aid from Washington after auto sales plunged due to the economic downturn. Its balance sheets were also severely affected by losses from its sub-prime mortgage lending practices.

The Treasury Department received a 35 percent equity stake in GMAC in exchange for the loans. Officials say that with the new agreement, the government's ownership in GMAC will climb to 56 percent.

The lender was among 19 banks to undergo so-called "stress tests" to determine whether they needed more capital to withstand the slumping U.S. economy.

GMAC was used by GM to help customers get the financing needed to buy its cars.

Some information for this report was provided by AFP and AP.