The Treasury Department plans to purchase $5 billion in equity from GMAC, and lend another $1 billion to the automobile-financing company.

The money will come out of the Treasury's Troubled Asset Relief Program, which until recently had focused exclusively on banks and financial services providers. However, earlier this month the Treasury agreed to lend $13.4 billion to General Motors and Chrysler after the Senate failed to pass legislation to help the troubled automakers.

GMAC is the lending arm of GM and is partly owned by Cerberus Capital, the private equity firm that controls Chrysler. As part of the new financing, the Treasury will receive $5 billion in senior preferred equity with an 8 percent dividend from GMAC. GMAC will also issue warrants to the Treasury, in the form of additional preferred equity, in an amount equal to 5 percent of the preferred stock purchase that will pay a 9 percent dividend if exercised.

In addition, the Treasury has agreed to lend up to $1 billion to GM so the automaker can participate in a rights offering in support of GMAC's reorganization as a bank-holding company.

In announcing the GM and Chrysler loans earlier this month, Treasury Secretary Henry Paulson said the Treasury had used up all of the $350 billion that Congress has allotted so far from the overall $700 billion rescue package, but that the Treasury would soon need the balance of the funds. The Treasury said Tuesday that it would work with Congress and President-elect Barack Obama's transition team on "the appropriate timing for release of the remainder of the TARP funds to support financial market stability."

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