Fed Approval of GMAC pulls GM up 13% but longer-term nationalization is the only choice for Obama
Sonia Jeffrey
Dec. 26, 2008

GM rose 42 cents, or 13%, to $3.67, after the U.S. Federal Reserve on Wednesday approved the application for bank holding status of GMAC, the lending outfit controlled by Ceberebrus Capital and General Motors.

GMAC can now get portions of the Federal TARP bailout funds and can borrow under the Fed’s discount lending window. The implication is a lot more people will be able to borrow to buy GM cars. In turn, GM and Cerberus will relinquish some of their stake in the financing company.

GM will transfer part of its stake in GMAC to a trust whose trustee also will be approved by the Treasury. The trust will in turn sell off its piece of the GMAC stake over three years. Cerberus, which also owns Chrysler, must reduce its majority interest to a maximum of 14.9% in voting shares and 33% in total equity. It will do this by distributing its positions in GMAC directly to Cerberus investors.

However, longer term GM faces no-hope situation. President elect Obama will have to nationalize the car company completely and stop foreign imports selling massive number of cars in the US.

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