GMAC to receive more bailout money

November 9, 2009 1:47:03 PM PST
The Federal Reserve said Monday that GMAC is the only one of 19 stress-tested banks that needs more capital to withstand a future downturn.

GMAC has been unable to raise the $11.5 billion it needed after stress test results were announced in May. The Fed says the finance company is expected to meet its remaining needs by accessing the $700 billion financial bailout.

GMAC is negotiating with Treasury over how much it will receive. Company representatives did not immediately return a call for comment Monday afternoon.

The test results in May found that 10 of the 19 largest banks needed an extra cushion of capital to withstand deeper losses they would see if the recession worsened. They were given six months to raise a total of $74.6 billion of capital. The Fed said Monday that they have raised a total of $77 billion.

GMAC could not raise money in part because investors needed to charge high interest rates to offset the risk that the company could fail.

The other nine banks, including Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., raised the money from private investors, by selling assets or by converting preferred equity into common shares.

The stress test envisioned what would happen if unemployment reached 8.9 percent in 2009. Unemployment now stands at 10.2 percent.

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AP Business Writer Stephen Manning contributed to this report.

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