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October 29, 2009

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GMAC discusses third aid batch from Treasury

GMAC Financial Services is in talks with the United States Treasury Department for a third injection of taxpayer aid as the auto lender faces a November deadline to raise the US$11.5 billion capital cushion mandated by results of the government's "stress test" earlier this year.

A Treasury Department spokesman confirmed on Tuesday that GMAC was in discussions about securing additional government help.

Of the 19 banks that underwent the government's stress tests, 10 were determined to be undercapitalized. GMAC is the only one of those to not have been able to raise all of its necessary capital from investors.

Citing insiders, The Wall Street Journal reported on its Website late on Tuesday that the US government could hand over another US$2.8 billion to US$5.6 billion to Detroit-based GMAC.

The move would make GMAC the only US company to receive three rounds of bailout aid.

GMAC spokeswoman Gina Proia declined to comment.

The government holds a 35 percent equity stake in GMAC after providing US$12.5 billion in aid to keep loans flowing to buyers of GM and Chrysler cars. The latest capital infusion would be via preferred stock, the paper said on Tuesday.

Last December, the government gave GMAC US$5 billion in exchange for 5 million shares and GMAC's agreement to extend financing services to bailed-out Chrysler LLC.

In May, Treasury announced a new US$7.5 billion injection for GMAC. Of that, US$4 billion went to support new loans to Chrysler dealers and customers, and the rest went toward boosting GMAC's capital base.


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