Chrysler Financial Repays Government Loans | TheDetroitBureau.com- htxurl.info

Chrysler Financial Repays Government Loans

Lending arm pays back $1.5 billion received in January.

by on Jul.14, 2009

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Last winter, lots of people predicted this day would never come. But mark this day down — one of the recipients of the government bailout money, Chrysler Financial, has repaid the U.S. Treasury, sending the $1.5 billion it received in January back to Washington.

Meanwhile while GMAC Financial Services Inc. said it will send the government a $271 million dividend check next month.

The repayment by Chrysler Financial and the special dividend from GMAC mark the first step toward repayment of the billions Detroit borrowed last winter when the U.S. auto industry and their finance companies were on the verge of collapse.

Interest Free!

Interest Free!

Chrysler Financial said Tuesday it has repaid in full the $1.5 billion of Troubled Asset Relief Program or TARP loans, which Congress approved last year to bailout troubled banks and the Obama administration used to help Detroit’s struggling automakers when Chrysler and GM were sinking fast. So far, the Treasury Department hasn’t asked for an early payment penalty.

Chrysler Financial had secured the TARP funding in January of this year to support Chrysler LLC in its efforts to remain viable. Chrysler Financial used the TARP loans to fund more than 85,000 consumer loans to support the sale of Chrysler, Jeep and Dodge vehicles.

Funds used to make the repayment of TARP were obtained through the completion of a AAA-rated automotive asset-backed securities through the Term Asset-Backed Securities Loan Facility, or TALF. Created last November, the TALF program is run by the Federal Reserve Board, which helps organize the sales of asset-back securities offered by major corporations to investors of various kinds.

TALF was specifically designed to stimulate consumer lending and reopen the securitization market. It has been now used by a number of automakers, including Honda, Nissan, Volkswagen and the Ford Motor Company.

Chrysler Financial spokeswoman Amber Gowen noted the original TARP loan from the U.S. Treasury contained provisions that increased the company’s costs over time, providing motivation for the company to pay off the loan as quickly as possible,

However, as a result of this $1.5 billion repayment, Chrysler Financial will have no further TARP loans outstanding, Gowen said.

GMAC Financial Services

GMAC logo

GMAC is still one of thention's weakest banks an is required to submit a recapitalization program to the Federal Reserve.

Meanwhile, Detroit-based GMAC Financial Services said it declared a quarterly dividend payment on the preferred stock issued to the federal government and to its own subsidiary, Preferred Blocker Inc.

The dividends were declared on Monday and are payable on Aug. 17.

Dividend payments declared on the preferred stock issued to the U.S. Treasury under the Troubled Asset Relief Program totaled $271 million; while the dividend payment on Preferred Blocker’s fixed rate perpetual preferred stock totaled $78.1 million, GMAC spokeswoman Gina Proia said.

 

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