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Text size [+][-]  Saturday November 21 2009GLOBAL EDITION

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30 Dec 2008 18:59

Panic in Detroit

By Dwight Cass

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The US Treasury will purchase $5bn of preferred stock from finance company GMAC, bearing an 8% dividend, along with warrants for $250m more. It will lend General Motors $1bn to participate in GMAC’s rights offering.

The Federal Reserve approved GMAC’s application to become a bank holding company on December 24. 



 
To rescue GM, the Treasury has now ponied up $6bn for GMAC. But for the finance company to really crank up its lending, the Fed may have to take a liberal view of its capital levels. There are other signs the Treasury and Fed aren’t in accord, further damaging their credibility.

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