Source: Bloomberg.com

GMAC LLC won Federal Reserve approval to become a bank holding company, a switch that may enable the money-losing auto and home lender to tap U.S. financial bailout programs and help keep General Motors Corp. in business.

The Fed used emergency powers yesterday to grant Detroit- based GMAC’s request, citing turmoil in financial markets and the potential impact on GM, the biggest U.S. automaker, which has warned it’s running out of cash. GM and Cerberus Capital Management LP, GMAC’s majority owner, will give up control of the lender to comply with federal rules on who can own banks.

Saving GMAC is a step toward salvaging GM, which received a temporary bailout earlier this month. The $9.4 billion loan will sustain GM at least until January, when President-elect Barack Obama must find a more permanent way to save millions of auto industry jobs and avoid deepening the year-old recession. Dealers and analysts say a GM rescue is more likely to work if GMAC is still around to make car loans, which the Fed’s action ensures.

“It will certainly lessen any questions about their survivability,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York. “They should be able to change their operations enough that they’ll be able to continue to provide at least some minimal form of financing operations for the auto business.”

The Fed order said the plan “would benefit the public by strengthening GMAC’s ability to fund the purchases of vehicles manufactured by GM.” GMAC finances about three-quarters of GM dealers’ inventory, and last year handled about 35 percent of their retail customers. The lender was shut out of credit markets this year after piling up $7.9 billion in losses dating from the middle of 2007.

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