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Quick Hits: GMAC, Bank Holding Company Reject

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Brief scrutiny of today's headlines.

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It doesn't look like GMAC will become a bank holding company, unlike Goldman Sachs (GS), Morgan Stanley (MS) and American Express (AXP).

GMAC, the financing arm of General Motors (GM), and its mortgage unit, Residential Capital, haven't been able to raise enough capital to make the switch, increasing the possibility that GMAC will file for bankruptcy protection.

GMAC's planned $38 billion debt exchange didn't attract enough interest from debt holders to complete the deal. The company is about $30 billion short of the minimum capital demanded by the Federal Reserve to become a bank holding company.

GMAC sought to become a bank holding company because it then would be permitted to accept customer deposits, creating a fresh source of funds and allowing it to participate in federal rescue programs. Congress appears to be wrapping up a bailout package for the automakers; the deal could be completed this week.

In November 2006, General Motors sold about 51% of GMAC to a private equity group led by Cerberus Capital Management. GMAC has lost about $8 billion in the last 5 quarters, due to declining GM sales and mortgage defaults.
No positions in stocks mentioned.
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