In an effort to stimulate lending in the auto sector, the Federal Reserve Board is easing restrictions on affiliate transactions for GMAC Bank.
The change will allow GMAC LLC, which received further capital support from the Treasury Department last week, to direct up to $20 billion to its affiliates. Section 23(a) of the Federal Reserve Act typically limits a financial institution's transactions with any of its other arms to 10% of the institution's capital.
In a letter last week granting the waiver, the Fed acknowledged that the move could increase GMAC's credit risk. But the central bank instituted several restrictions to the waiver, including an unspecified minimum credit score that borrowers would need to receive some of the $20 billion.
