Due to a variety of factors, including that the restructurings of General Motors and Chrysler were accomplished with less disruption to GMAC than banking supervisors initially projected, Treasury will commit $3.8 billion of new capital to GMAC rather than the $5.6 billion originally announced, resulting in a $1.8 billion reduction in Treasury’s previously forecasted TARP expenditures.

Prior to today’s actions, Treasury had invested $12.5 billion in preferred stock of GMAC. Treasury owns $13.1 billion in preferred stock in GMAC, through purchases and the exercise of warrants, and 35 percent of the common equity in GMAC.

The new infusion raises the government’s stake in GMAC to 56 percent. All of the cash, because it originates from the unfunded Troubled Asset Relief Program, will be borrowed, mostly from abroad.

UPDATE: Although GMAC is best known for its auto loans, the new cash will go toward the company’s mortgage-financing arm, The Associated Press reports:

All of the money injected by the Treasury will essentially go to shoring up GMAC’s ResCap unit, the arm best known for ditech.com and other housing-boom related mortgage offers that crashed as housing prices withered over the past couple of years. GMAC said the move, along with a $3.3 billion write-down in mortgages at ResCap and Ally Bank, should allow it to explore a sale or other action for ResCap.

Fugetaboutit.

The Treasury Dept. announced last night that it will spend $6 billion from that fund to bail out GMAC, the flailing auto finance company whose reluctance to lend to riskier loan applicants has contributed significantly to the drop in car sales this year. (In the third quarter, GMAC issued 22 percent fewer loans worldwide than it did a year before, Dow Jones reports.)

The $6 billion — $5 billion of which yesterday went directly to purchase shares in the company — comes on top of the $17.4 billion that the Treasury agreed to provide to the Big Three from the Wall Street bailout earlier this month. GMAC, a majority of which is owned by Cerberus Capital Management, the private investment firm that owns Chrysler, said today that it will immediately relax its lending standards — from a minimum credit bureau score of 700 two months ago down to a score of 621. From a statement from GMAC President Bill Muir:

We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis. We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the U.S. [...]

[O]pening access to credit for those with CB scores of 621 or better will allow us to return to more normal levels of financing volume, and should help in efforts to stabilize the U.S. auto industry.

It’s not only the U.S. auto industry praying Muir is right. Everyone is struggling to sell cars — whether they be Hummers or Priuses — and a primary reason has been the credit freeze that’s made it tougher for consumers to finance new car purchases.

From Dodd’s opening statement during a panel hearing on Detroit:

In my view, if we’re going to insist on reforms by the auto industry as a condition of receiving federal funding, we ought to do the same for the financial companies. For that reason, I will do all I can to insist that any auto company bill also place tough conditions on any loans to financial firms, including provisions that require tax dollars to be used for responsible practices like lending that requires lenders to get much more aggressive about attacking the foreclosure crisis that is still at the root cause of the larger financial crisis and that prohibits executives from paying themselves obscene sums while they are essentially receiving a welfare check from the American taxpayer.

Half of the $700 billion Wall Street bailout has already been allocated for Treasury to spend wherever it pleases. But in order to tap the second $350 billion, the administration must first get approval from Congress — creating a good deal of leverage for Congress to make some demands. Even Republicans are starting to question the effectiveness and integrity of the White House program as the money continues going out, but the banks still won’t lend.

As Bloomberg points out this morning, there’s a new twist on this saga: Sheila Bair, head of the FDIC, has long pushed for a program tapping bailout funds to help homeowners directly, putting her at odds with the officials responsible for managing the bailout spending. That, of course, includes Tim Geithner, the head of New York’s Federal Reserve Bank who President-elect Obama recently named to be his Treasury secretary next year.

If Bloomberg is right, and Geithner really wants to run her out of office because she “isn’t a team player,” the immediate question is: What will be the response of Dodd and other Democrats on Capitol Hill who support Bair in her help-for-homeowners’ stance — including House Financial Services Committee Chairman Barney Frank (D-Mass.)?

Could this be the start of the first rift between Democratic leaders in Congress and the incoming Obama administration? Or will Obama, who has supported greater help for those facing foreclosure, rein in his newly appointed financial guru?

Only time will tell.

In a Dec. 3 letter to Treasury Sec. Henry M. Paulson Jr. and Federal Reserve Chairman Ben Bernanke, the Republicans questioned the changing nature of the now-misnamed Troubled Assets Relief Program, or TARP.

Changing conditions can require agility in policymakers’ responses. However, the seemingly ad hoc implementation of TARP has led many to wonder if uncertainty is being added to markets at precisely the time when they are desperately seeking a sense of direction.

[...]

The government has burned through nearly $350 billion of TARP funds and is pledging trillions of dollars more through other programs, yet little is understood about how these investments are contributing to the nation’s economic recovery.

Sounding like Democrats, the GOP leaders also asked for more transparency, blasting Paulson for his slow response to questions from House Minority Leader John Boehner (R-Ohio) sent before Halloween.

More than a month ago, on October 29, the House Republican Leader sent a letter to the Treasury Secretary questioning the use of TARP money for executive bonuses and bank acquisitions by other banks, as revealed by various news organizations. It was only today that Treasury provided a response, and the response did not answer the questions that were asked in the Leader’s letter.

White House spokeswoman Dana Perino was incredulous today at the thought that the administration has a history of being unresponsive to Congress. Perhaps today’s letter will trigger an epiphany.

Bush went first, explaining to the American people that Washington will invest $250 billion in the nation’s banks. The Treasury Dept. will take equity stakes in banks, which have been pressed into accepting partial nationalization in return for an investment of taxpayer money. The FDIC is set to talk about launching an insurance fund to guarantee new issues of bank debt.

Bush defended the move, saying it’s not an abandonment of the free market.

Angry Bear puts it this way:

I’ve always wanted to have my very own bank…

The Big Picture has a rundown of which banks will get the money – and how much they’ll get. And a little commentary on the fact that, as unthinkable as partially nationalizing banks may seem, it should have happened far sooner:

From Nouriel Roubini, famous for having predicted this whole mess:

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster.

Paul Krugman was equally blunt:

Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together, and need a shared solution.

Why this weekend? Because there happen to be two big meetings taking place in Washington: a meeting of top financial officials from the major advanced nations on Friday, then the annual International Monetary Fund/World Bank meeting Saturday and Sunday. If these meetings end without at least an agreement in principle on a global rescue plan — if everyone goes home with nothing more than vague assertions that they intend to stay on top of the situation — a golden opportunity will have been missed, and the downward spiral could easily get even worse.

What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.

Here’s British Prime Minister Gordon Brown on the British plan, which calls for injecting money directly into banks.

Don’t look just to Wall Street for developments in this crisis. Watch to see if the Treasury Dept. and the U.S. government take some aggressive steps in the next few days — including coordinating a global response.

If they don’t, yes, it is time to panic.