In a hugely controversial move between those who support the bailout, the Federal Reserve granted GM’s financial arm, the GMAC Financial Services division, access to the $700 billion bailout fund provided to financial industry corporations by declaring GMAC Financial Services to be a bank holding company.

The declaration as a holding company grants GM access to a portion of the bailout fund, as well as allowing them access to emergency loans from the Fed. Analysts speculated last week that without the help, GMAC would be forced to declare bankruptcy “post haste,” allowing the Federal Reserve to cite “emergency conditions” as their prime justification.

The Fed’s decision was announced Wednesday after the markets closed.

“This is a very significant positive step for the company, and it marks a key turning point in our 89-year history, GMAC believes becoming a bank holding company is the best long-term solution to provide automotive and mortgage financing to consumers and business, including auto dealers,” says an employee of GMAC.

A decision on Chrysler Financial, the Chrysler parallel to GMAC is still entirely uncertain at this point. Chrysler Financial announced recently that they may have to cease providing financing to Chrysler dealers, a decision which would have a catastrophic effect on the approximately 75% of Chrysler dealers dependent on the financial arm to provide financing.

This comes after the White House guaranteed access to emergency funds in excess of $10 billion dollars to the Detroit based auto companies.

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