Business

Feds pumping more aid into GMAC operations

The government on Wednesday provided a fresh $3.8 billion cash infusion to stabilize GMAC Financial Services as the financing company struggles with hefty losses in its home mortgage unit.

The Treasury Department 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.

The fresh infusion is on top of $12.5 billion in taxpayer money Detroit-based GMAC has already received from the government. The new agreement will boost the federal government's ownership in GMAC to 56 percent, from 35 percent.

Even with the government upping its stake, Treasury officials said the government intends to stick to its policy of leaving day-to-day business decisions about fi-nancing to GMAC management. Still, with the additional stake, the government will have the right to appoint two additional directors to the company's board, Treasury officials said.

GMAC will continue to be subject to executive pay restrictions imposed by the government's pay czar.

Shoring up GMAC has been a major component of the Obama administration's massive effort to rescue ailing automakers General Motors and Chrysler. The lender provides critical wholesale financing to thousands of GM and Chrysler auto dealers, allowing them to stock their showroom floors with vehicles.

But GMAC also operates a large residential mortgage business, ResCap, which was battered by the recent housing collapse. GMAC was obligated by the Treasury Department to raise $11.5 billion in additional capital earlier this year after failing the government's stress test for banks, largely because of ResCap's big losses.

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