The Congressional Oversight Panel criticized the Treasury Department last week for its decision to save the struggling GMAC Financial Services without requiring it to provide an exit strategy, proof of viability or plan to fully repay taxpayers.

The oversight panel oversaw the $700 billion financial bailout that Congress passed in October 2008 and released the 170-page report last Thursday. It said the department’s move prevented GMAC from preserving its auto finance unit while ridding the former captive of its troubled mortgage unit through bankruptcy.

The White House’s Office of Budget and Management estimated the decision could cost taxpayers $6.3 billion or more, according to the panel’s report on GMAC’s treatment under the Troubled Asset Relief Program (TARP).

The federal government poured $17.2 billion in TARP funds to rescue GMAC and now owns 56.3 percent of the company. GMAC converted into a bank-holding company, while fellow TARP-fund recipients General Motors and Chrysler were forced into bankruptcy.

Under its new status, GMAC was included in the government run-stress tests in 2009, which it failed. The Treasury Department then stepped in to provide GMAC with capital it needed but could not raise in the private markets.

“If GMAC had not been included in the stress tests, Treasury might have had options other than committing new public capital, such as orchestrating a bankruptcy or isolating the auto financing business, which could have put the company on a stronger economic footing,” the watchdog group wrote.

If GMAC was forced into bankruptcy, like General Motors and Chrysler were, then it could’ve preserved its stronger auto finance unit, the panel said. Instead, the Treasury treated GMAC similarly to the banks that received bailouts, and did not hold the company accountable for the TARP funds it received, the panel said.

“This bankruptcy could have preserved GMAC’s automotive lending functions while winding down its other, less significant operations … and putting the company on sounder economic footing,” the panel said in its report.

GMAC’s mortgage operation, ResCap, has struggled in the last three years because of the housing price depreciation and the frozen credit markets. In the fourth quarter 2009, it posted a loss of more than $4 billion, as the company incurred a $3.3 billion charge related to its efforts to sell its trouble home lending business.

In contrast, GMAC’s automotive operations earned $369 million during the fourth quarter, compared to a $405 million loss in the year-ago period. Company official said the company’s auto unit will continue to be the main focus going forward.

The congressional panel said while the Treasury’s actions to preserve GMAC have helped

“There is no doubt that the Treasury’s actions to preserve GMAC played a major role in supporting the domestic automotive industry. These same steps, however, have reinforced GMAC’s dominance in automotive floorplan financing, perhaps obstructing the growth of a more competitive lending market,” the panel said.