GMAC Financial Services' $12.5 billion in federal aid is apparently not enough as it is negotiating for additional taxpayer funds because it has not raised sufficient capital to endure a deepening recession, according to a statement from the Federal Reserve. Out of the 10 large banks ordered last May to raise capital, GMAC was the only one that didn't meet its goal.
The Fed said that the GMAC is expected to meet its remaining buffer need by accessing the TARP Automotive Industry Financing Program.
The auto lender is currently in discussions with the U.S. Treasury on the structure of its investment. The U.S. Treasury and Fed ordered the banks to take stress tests last spring in a bid to reassure investors that they would be able to withstand a deepening recession.
Following the stress test results in early May, GMAC was asked to raise $11.5 billion in six months, with a deadline of Monday.
GMAC had then quickly received a $7.5 billion federal capital injection and has sold U.S.-backed debt. The investment came on top of emergency government aid GMAC received in December to keep it out of bankruptcy.
GMAC said that it will need less funds than were expected at the time of the tests in May, the U.S. Treasury said.
Department officials said that they had predicted that the government would need to contribute more capital to GMAC, which had little ability to sell shares because it was a privately held firm.