http://www.cqpolitics.com/wmspage.cfm?parm1=5&docID=cqmidday-000003001760Treasury More Likely To Seek Other Half of Bailout Fund
The Treasury Department’s plan to commit $6 billion from the financial bailout fund to bolster GMAC — the financing arm of auto giant General Motors — makes it more likely that Treasury will have to ask Congress for the second half of the $700 billion fund sooner rather than later.
Treasury has now made plans to spend more than the first $350 billion of the bailout fund, with most of that committed to capital infusions for banks. By agreeing to spend more than that initial $350 billion, Treasury likely will feel increasing pressure to request access to the second half of the bailout money.
Under the deal announced late Monday night, Treasury purchased $5 billion in senior preferred stock in GMAC and offered a $1 billion loan to GM. The move would allow the automaker to participate in a rights offering at GMAC. A Treasury official indicated Monday night that even though the first $350 billion has been allocated, Treasury still has the money to cover the GMAC injections. The official did not detail how much money remains out of the already allocated funds for the Treasury to work with before it must obtain access to the second tranche.
Treasury Secretary Henry M. Paulson Jr. , has repeatedly urged the release of the second $350 billion since the announcement of the $17.4 billion automotive bailout two weeks ago. The injection of funds into GM and Chrysler LLC effectively exhausted the first half of the fund. But Paulson has been reluctant to put the process into motion, likely because he would face a hostile Congress that could try and block the release of the funds. At the same time, a heated political fight over the second bailout installment could have disastrous effects on world-wide financial markets.
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