Nov. 6 (Bloomberg) -- Cerberus Capital Management LP may forfeit control of GMAC LLC as part of a plan to convert the faltering auto-loan company into a bank with greater access to government funds, three people familiar with the matter said.

Cerberus is weighing a plan to distribute its GMAC stake to investors in its private-equity funds, according to the people, who declined to be identified because the deliberations aren't public. The tactic, one of several options under discussion, may enable Detroit-based GMAC to become a bank and get funding from the U.S. Treasury and Federal Reserve without subjecting Cerberus to banking regulations.

Led by former Drexel Burnham Lambert Inc. trader Stephen Feinberg, Cerberus is looking for ways to salvage its bet on the U.S. auto industry after automakers posted their lowest sales since 1991 in October and GMAC had a fifth straight quarterly loss. In related talks, the New York-based investment firm is pursuing a merger of Chrysler LLC, which it bought last year, with General Motors Corp.

``They may prefer losing control and preserving some value to maintaining control over an investment worth zero,'' said Jonathan Macey, a law professor at Yale University, of the GMAC investment. ``For this to succeed, Cerberus has to actually give up control, which is contrary to the private-equity strategy.''

A person with knowledge of Cerberus's plans said no decision has been made about GMAC's structure. The private- equity firm leads a group that bought a 51 percent stake in the auto lender from GM for $7.4 billion in 2006.

Rescue Fund

In the last two years, GMAC's home-lending unit has lost $9.1 billion and the firm has been shut out of some credit markets. The company said on Oct. 30 it's seeking permission from federal regulators to be overseen as a bank holding company, a step that may let it get money from the Treasury's bank-industry rescue fund and get direct loans from the Fed.

Federal guidelines issued in September say that owners of more than 33 percent of a bank-holding company may themselves be subject to banking regulations, which place limits on leverage and non-banking activities. In addition to Chrysler and GMAC, Cerberus holds stakes in everything from television stations to gun makers.

``GMAC is in discussions with the federal regulators,'' said Gina Proia, a GMAC spokeswoman. ``We're working through the structure.''

She referred questions on Cerberus' plans for its holdings to the private-equity firm, which declined to comment. GM and Chrysler are not commenting on merger talks.

GM Options

GM, too, would have to reduce its 49 percent stake in GMAC to avoid the banking regulations, said two people familiar with those talks. Under the terms of the merger under discussion with Chrysler, GM would reduce its stake in GMAC to less than 10 percent, the people said.

GMAC, the primary lender to buyers of GM automobiles, said yesterday it had a record $2.52 billion quarterly loss in the third quarter and said its mortgage unit, Residential Capital, may not survive. GMAC has cut off auto loans to customers who don't have the highest credit ratings and trimmed operations.

GMAC seeks to follow the largest U.S. securities firms, Goldman Sachs Group Inc. and Morgan Stanley, in making the switch to a bank holding company. Those Wall Street firms won the status in September to boost market confidence in their operations and to gain permanent access to Federal Reserve lending.

``Right now the market perceives being regulated by the Fed as a good thing,'' said Mark Tenhundfeld, director of regulatory policy at the American Bankers Association, a Washington -based trade association. ``Optically, it's a real advantage.''

GM dropped 76 cents, or 14 percent, to $4.80 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have lost 81 percent since Jan. 1.

To contact the reporters on this story: Zachary R. Mider in New York at zmider1@bloomberg.net; Jonathan Keehner in New York jkeehner@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net.

Last Updated: November 6, 2008 16:37 EST