It now appears likely that GMAC Financial Services will be taxed along with a number of large U.S. banks under the terms of a new White House sponsored proposal designed to recoup taxpayer funded bailouts. GMAC Financial Services’ parent company, General Motors Company, along with Chrysler Group, is being exempted from the proposed levies.
In an email sent yesterday, a Treasury Department spokeswoman who requested that she not be identified said, “GMAC will likely be subject to the fee.”
The Obama administration has not yet decided exactly which financial institutions will be required to pay levies or the exact amounts each will be required to pay according to the Treasury Department spokeswoman.
The proposal must be approved by the Congress and would then require financial institutions to repay $90 billion over 10 years to cover the majority of the $117 billion in Troubled Asset Relief Program (TARP) funds approved by the Bush administration in late 2008. Among the banks that could be included in the proposal are Bank of America, J.P. Morgan Chase & Company and Citigroup Incorporated.
GMAC Financial Services provides consumer auto loans and floorplan financing to both GM and Chrysler dealers and its stability is seen as crucial to the auto industry as a whole. The organization has received $16.3 billion in federal assistance over the last year in exchange for a 56% stake in the company.
In an email statement, GMAC spokeswoman Gina Proia said, “GMAC is focused on taking steps, like those recently announced, to stabilize the company and improve financial performance to best position us to repay the government investment on a timely basis. We are committed to supporting the U.S. auto industry and being a premier auto finance company for dealers and their customers.”
According to a recently released Treasury Department document, the proposed tax would be levied on companies with over $50 billion in assets and more than 60% of the projected revenue would be paid by the 10 largest financial institutions.
As of September 30, GMAC had assets of $178 billion according to Proia. The company anticipates a net loss of $5 billion during the fourth quarter of 2009 due in large part to the company’s residential mortgage business.
Lobbying against the administration’s proposal has been fierce with banks arguing that the new taxes would hinder their ability to provide much needed lending. They also contend that the new taxes would, in essence, saddle them with the $65 billion cost of the GM and Chrysler bailouts.
Furthermore, the taxes might also include financial institutions that have already repaid the loans they received from the TARP initiative.
In his January 16 radio address President Obama said, “Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect,” and claimed, “The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty.”
In addition to GM and Chrysler, Freddie Mac and Fannie Mae are exempt from the new tax proposal. Both mortgage lenders have long been under government conservatorship.
The administration plans to include the new tax proposal in its 2011 fiscal budget which will be released in February.
For more current news on the automotive industry, please visit hyperlink.