(By Mayur Pahilajani - iStockAnalyst Writer)  Washington, D.C. - GMAC Financial Services reported Thursday that it has filed an application to the U.S. Federal Reserve Board of Governors for approval to become a bank holding company to access government funds.

Under the Bank Holding Company Act of 1956, GMAC Financial Services, which is a financial segment of General Motors Corp. (NYSE: GM), wants to access emergency cash under the U.S. Treasury's Capital Purchase Program.

General Motors owns a 49 percent stake in GMAC, and the majority of the total shares is owned by Cerberus Capital Management LP, which holds 80 per cent of Chrysler's total stake. Cerberus had reportedly proposed to give Chrysler's automotive operations to GM and in return the later would give up its partial ownership stake in GMAC, according to reports on their preliminary talks.

The parent company of the firm is already struggling to raise capital from the U.S. government to prevent it from collapsing amid unprecedented economic and credit market turmoil.

"As a bank holding company, GMAC would obtain increased flexibility and stability to fulfill its core mission of providing automotive and mortgage financing to consumers and businesses," the company said in a statement on Thursday. It added, "GMAC also expects to have expanded opportunities for funding and for access to capital as a bank holding company."

GMAC also announced that it has launched separate private exchange and cash tender offers to swap debt held by its units and mortgage business Residential Capital LLC for either cash or newly issued equity notes, potentially providing bondholders a stake in the firm.

"The purpose of the offers is to increase GMAC's capital levels while reducing the amount of GMAC's and Residential Capital's outstanding debt in connection with GMAC's capital plan relating to its application to become a bank holding company," the company said in the statement.

The industry is under pressure as the Detroit's Big Three automakers have failed to convince the government on the importance of the additional bailout of $25 billion to the sector. General Motors may file for reorganization under Chapter 11 of the U.S. Bankruptcy Code, following the lead of other U.S.-based automakers including Dana Corp. and Delphi Corp.

Shares of GM dropped by 29 cents or 10.39 percent to $2.50 in pre-market trading on Thursday, extending losses from yesterday,  when it plunged by 30 cents or 9.71 percent closing at $2.79 on New York Stock Exchange composite trading.

The market analysts on Wall Street are expecting GM to drop below $1-per-share level on declining sales, depleting cash and bankruptcy risk by the end of the year.

Source: http://media.gmacfs.com/index.php?s=43&item=288