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GMAC Files for 'bank' status

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GMAC files for bank holding status

Thursday November 20, 10:25 am ET

Kimberly S. Johnson, AP Auto Writer

GMAC applies to become bank holding company, qualify for federal aid

DENVER (AP) -- GMAC Financial Services has applied to become a bank holding company, which would allow General Motors' financing arm to be eligible for aid under the government's $700 billion bank rescue plan.

GMAC said Thursday the change in status would shore up its capital position and allow it to continue providing automotive and mortgage financing.

GMAC is majority owned by the private equity firm Cerberus, which also owns most of Chrysler. General Motors Corp., which itself is running out of cash, owns a 49 percent stake in GMAC.

GMAC also is launching cash tender offers to buy or swap debt held by its units and mortgage business Residential Capital LLC for cash, new notes or preferred stock, in a move to boost capital levels and reduce debt.

The financing arms of Ford Motor Co. and Chrysler LLC may also apply to become bank holding companies, and therefore become eligible for a piece of the financial bailout being administered by the Treasury Department.

Earlier this month, GMAC reported its third-quarter loss widened to $2.52 billion compared to a loss of $1.6 billion a year ago. Steep losses at the company's insurance division weighed heavily on the results.

GMAC also warned that its mortgage lending division, ResCap, could fail. In September, GMAC announced it would close all of its 200 retail offices and lay off about 5,000 employees, with the bulk of cuts coming at ResCap. The division lost $1.91 billion in the third quarter, compared with $2.26 billion a year ago.

GMAC has tightened its criteria for U.S. consumers seeking financing, including limiting purchases to those with a credit score of 700 or above and limiting how much financing about the value of a new car consumers can receive.

Shares of GM fell 24 cents, or 8.6 percent, to $2.55 in morning trading.

Congress won't give us a loan? Fine, we'll find a way to work around the system......

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