Despite concerns about mixing banking and commerce, the Federal Reserve Board said Wednesday that it approved GMAC Financial Services' application to become a bank holding company.

GMAC is the finance arm of General Motors Corp. and it applied to become a bank holding company in November with hopes of tapping the Treasury Department's Troubled Asset Relief Program (TARP).

The Fed's approval, which also converts GMAC's Utah industrial loan company into a bank, comes less than a week after the Bush administration bailed out the Detroit automakers with a $17.4 billion loan.

In its order, the Fed acknowledged what it called "unique issues" presented by GMAC's application.

"Since founding GMAC, GM has held a significant ownership position in GMAC, and GMAC has been the primary source of financing to customers and dealerships seeking to purchase or lease GM vehicles," according to the Fed order.

But the central bank said GMAC would "diversify its activities and has modified in significant ways its agreement with GM to provide customer and dealership financing."

The Fed also ordered that GM and Cerberus Capital Management, the majority owner of GMAC, could not continue to hold controlling stakes in the new bank holding company since their business activities fall outside of financial services.

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