WASHINGTON -- GMAC Financial Services is likely to be taxed under a new Obama administration proposal to impose a levy on U.S. banks to recoup bailout money -- even as General Motors Co. and Chrysler Group are being exempted.
“GMAC will likely be subject to the fee,” a Treasury Department spokeswoman said yesterday in an e-mail.
The administration hasn't decided how much each bank would pay or when it would make a final decision on which institutions to include in its proposal, said the spokeswoman, who asked not to be identified.
If approved by Congress, the new tax would require banks including J.P. Morgan Chase & Co., Citigroup Inc. and Bank of America Corp. to pay a total of $90 billion over 10 years. The revenue would cover most of the expected $117 billion loss to Treasury's Troubled Asset Relief Program. The Bush administration initiated TARP in 2008 to bail out financial institutions.
GMAC's financial stability is crucial to the auto industry because it provides floorplan financing to GM and Chrysler dealerships and also finances consumer auto loans. GMAC has received a $16.3 billion investment from the federal government, which now owns 56 percent of the lender.
Trying to stabilize
In New York, GMAC spokeswoman Gina Proia declined to say whether the company is trying to dissuade the administration from taxing it.
“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,” she said in an e-mail. “We are committed to supporting the U.S. auto industry and being a premier auto finance company for dealers and their customers.”
The new tax would apply to companies with more than $50 billion in assets, a Treasury Department fact sheet said. Over 60 percent of the anticipated revenue probably would be paid by the 10 biggest financial institutions, it said.
GMAC had $178 billion in assets as of Sept. 30, Proia said.
GMAC expects a $5 billion net loss in the fourth quarter, primarily because of its residential mortgage business.
Meanwhile, GM and Chrysler, which together got more than $65 billion in U.S. bailout and bankruptcy financing, were spared from the tax. Treasury owns 60 percent of GM and about 10 percent of Chrysler.
Banks are lobbying fiercely against the administration proposal, arguing that it would limit their ability to lend and burden them with the cost of the automaker bailout.
The fee would hit institutions that already have repaid their TARP funds as well as those that have not.
“Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect,” President Barack Obama said in his Saturday, Jan. 16, radio address. “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.”
Also excluded from the so-called financial-crisis responsibility fee are mortgage lenders Fannie Mae and Freddie Mac, which are under government conservatorship.
The tax is to be included in the administration's fiscal 2011 budget, due to be released next month.