The Fed today made a special exemption and allowed GMAC to become a bank holding company, giving it access to TARP funds. Just last week, GMACs application to convert was denied by the FDIC n the grounds that it did not have enough capital. GMAC tried to sell bonds backed by auto loans but investors wouldn't bite, worried about the quality of the underlying loans and a surge in defaults by car buyers.

That means that GMAC bank customers do not have to worry about the hassle of the parent company defaulting. While the parent company was not a bank holding company, GMAC bank was and still is a bank and deposits were fully covered by FDIC insurance. The change in status of the parent company means extra stability for the bank and its depositors.

GMAC Bank has been extremely competitive with rates lately. It currently has the top 6 month, 1 year, 18 month, 2 year, and 3 year Certificates of Deposit rates. It will remain to be seen if the change in its parent company and the injection of TARP funds will lead it to lower its consumer deposit rates.

GMAC today issued a statement commenting on the filing of its once parent corporation General Motors. The statement shows that while the financing company does have exposure to GM, bankruptcy will hopefully minimize the losses.

Ally Bank, a bank that has been in the news quite a bit over the last week due to its high rates on savings and certificates of deposit is a subsidiary of GMAC. Ally Bank was formerly known as GMAC Direct.

The statement on the GMAC site says:

DETROIT (June 1, 2009) -- GMAC Financial Services is a creditor of General Motors Corp. (GM) and as such is taking the appropriate steps to protect GMAC's interests during GM's restructuring.

GM has submitted a motion to the U.S. Bankruptcy Court that, pending approval, would allow its direct business with GMAC to continue in the ordinary course during GM's restructuring. In addition, GMAC has been advised by GM that GM will take appropriate steps in the bankruptcy court to authorize a purchaser of the assets to comply with all of the contracts with GMAC, including all payment obligations.

GMAC continues to provide automotive financing products and services to GM and Chrysler dealers and customers, including retail auto originations, wholesale financing, insurance products, and servicing of customer loans. The company's non-automotive activities also continue uninterrupted.

GMAC is a bank holding company with a newly appointed board of directors and a diversified ownership structure. GMAC has not filed for bankruptcy, nor does it intend to, and the company continues to meet all of its obligations.

The wording of this couldn't be more ambigious business-speak. GMAC is a creditor to GM, meaning that it does have exposure. I'm guessing that the majority of the exposure comes from loans to dealers to purchase cars from the automaker (wholesale financing). At the same time, the statement implies that the bankruptcy filing will ensure that GMAC is made whole for these transactions and will keep the financing relationship in place : "In addition, GMAC has been advised by GM that GM will take appropriate steps in the bankruptcy court to authorize a purchaser of the assets to comply with all of the contracts with GMAC, including all payment obligations."

So, for depositors of Ally Bank, this looks like a non-event for now. GMAC Finance issued a statement earlier today on an unrelated matter stating that the company was financially sound and had aqequate capital.

I've contacted GMAC and will post any further information that I receive.

Last year, FDIC and MCUA deposit insurance was temporarily increased from $100,000 to $250,000 until the end of 2008. The Helping Families Save Their Homes Act of 2009 (S. 896), signed by President Obama last week, includes a provision that extends the FDIC and NCUA deposit insurance limit off $250,000 until December 31, 2013.

The bulk of the bill deals with mortgages and foreclosures, so the extention was not widely covered in the media.