Geithner: U.S. to give GMAC substantial support

By David Lawder and Glenn Somerville

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Friday the Obama administration will provide substantial support to troubled lender GMAC, a vital provider of financing for buyers of U.S.-made cars.

"It's likely, again, that GMAC will need to take additional capital from the government and we'll be prepared to provide that," Geithner said in an interview with Reuters Television.

The Treasury and U.S. banking regulators said on Thursday that GMAC needs to raise $11.5 billion to fill a capital hole it could face if the economy were to deteriorate further.

After "stress tests" were performed on the 19 largest U.S. banks, the Treasury and the Federal Reserve concluded that 10 of them need to raise a combined $74.6 billion to build a capital buffer to ensure they could keep lending even if faced with unexpectedly high losses.

Banks can seek private infusions of capital to try to avoid having to seek government help, but those unable to do so have a taxpayer-funded rescue as a last resort.

'LONG WAY TO GO'

Geithner said there were some signs that credit conditions were easing and fears of a catastrophic financial meltdown were waning. However, there was still "a long way to go" before the shaken financial system returns to full health.

GMAC, the former financing arm of General Motors Corp, has taken $5 billion from the government already. In addition, the Treasury has lent GM $884 million to support GMAC's lending activities. Under the restructuring of Chrysler Corp, GMAC is assuming the business of Chrysler Financial.