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GMAC Applies to Become Bank Holding Company and Seeks Bailout Funds


The parent of GMAC Bank, GMAC Financial Services, just announced that it has submitted an application to the Federal Reserve Board for approval to become a bank holding company. It also announced that that it submitted an application to the Treasury to participate in the Capital Purchase Program. This would give them access to the $700 billion intended to bailout the banks. More details of this is described in this CNN article.

The plan to become a bank holding company isn't new, but GMAC must be more confident that regulators will approve the application. Earlier this month I posted on a Bloomberg article which reported on GMAC's third quarter performance. It also mentioned the bank holding company plan:
GMAC has been shut out of some credit markets, and the firm today repeated its hopes of converting to a bank holding company, which could make it eligible for help from the Treasury's $700 billion bailout fund. It's unclear whether regulators will approve GMAC's application, Chief Financial Officer Robert Hull said on a conference call.

That Bloomberg article also mentioned how GMAC Bank was "paying above-market rates to attract deposits through its bank." GMAC Bank continues to pay very attractive savings account and CD rates.

I'm not sure how this change at GMAC will affect GMAC Bank. GMAC's problems may be helping keep deposit rates up at GMAC Bank, so bailout funds may take some pressure off and allow GMAC Bank to be less aggressive with its rates. But if the bailout funds can help stabilize GMAC, I would think it would be better for GMAC Bank in the long term.

There was some concern early in the year that GMAC may be forced to divest GMAC Bank or to terminate the FDIC status. As this MarketWatch article describes, this issue was resolved in July when the FDIC granted GMAC a 10-year waiver. With GMAC becoming a bank holding company, this waiver may no longer be necessary.

I have more details on GMAC Bank and its savings accounts and CDs in this GMAC Bank review post. I've been very happy with my GMAC Bank accounts. Besides the high rates, the best part of GMAC Bank has been their ACH transfer system. I can easily add links to many other external accounts. Transfers are fast (often completing in one or two days), and hold times are no more than two days.

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  |     |   Comment #1
What will happen to GMAC Demand Notes?
  |     |   Comment #2
Regarding the Demand Notes - I'd like to know the same thing. I assume they (the Demand Notes) are on risky ground since they're not FDIC insured?
  |     |   Comment #3
The GMAC demand notes are senior unsubordinated debt of GMAC and as such, are not insured. They are the same as the Ford Interest Advantage demand notes offered by Ford Motor Credit, i.e., no longer creditworthy and highly speculative. If I owned either of these companies' demand notes, I'd redeem them and place them in something comparable (but more creditworthy)such as the GE Interest Plus notes or find an FDIC-insured money market deposit account that pays what passes for a decent rate in this environment.
  |     |   Comment #4
Will GMAC change to bank holding status insure the Demand Notes?
  |     |   Comment #5
GMAC to participate in The Capital Purchase Program will only make the bank stronger and will build customer confidence. So that move should be a good thing for the small savings investor. I have 12 months CDs, and savings that's all I can tolerate right now.
  |     |   Comment #6
I have used the FDIC insured products (MMA) for years. They are the best/easiest to use.
The ACH easiest to set up of any bank, transfers both ways and also give you access checks.

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