By John Crawley

WASHINGTON (Reuters) - A government bailoutwatchdog will review the General Motors Co $3.5billion all-cash purchase of auto finance company AmeriCreditCorp , a deal financed with federal bailout money.

Neil Barofsky, the special inspector general for theTreasury Department's corporate bailout program, said in aletter to U.S. Sen Charles Grassley obtained by ReutersWednesday that auditors for the Troubled Asset Relief Program also want to know what role Treasury officials played in"reviewing, approving or otherwise participating in theAmeriCredit decision."

The audit was triggered by a request from Grassley forBarofsky to look into that deal, which carried a 25 percentpremium over the AmeriCredit share price at the time. Grassleyalso requested an examination of GM's planned public shareoffering due later this year.

A Treasury Department spokesman said at the time of theAmeriCredit deal in July the agency had been notified inadvance but played no role in it.

GM said in a statement Wednesday that AmeriCredit willimprove competition and choice in the lease and subprimefinancing markets in the United States and Canada. The resultof the vote on the deal by AmeriCredit shareholders has notbeen announced.

Barofsky told the Reuters Washington Summit Tuesday thathe was planning to review the IPO to see whether the Treasury,which owns nearly 61 percent of GM, did all it could tomaximize the return for taxpayers.

He also said in his Aug. 30 letter to Grassley that hisoffice would look into underwriting and other costs associatedwith the IPO.

The government extended GM $50 billion in bailout andbankruptcy financing in 2009.

The AmeriCredit deal is expected to close in the fourthquarter.

It would give GM an in-house lending arm for the first timesince it sold a controlling stake in GMAC in 2006. GMAC, nowknown as Ally Financial , is 56-percent owned by theTreasury after receiving its own bailout capital.

Analysts have said the AmeriCredit deal addressed a risk toGM's sales momentum as it prepares for the IPO. Potentialinvestors view the deal as strategic as they look for stabilitywith GM dealers again able to offer customers in-housefinancing, a business component common to all majorautomakers.

Consumer loans underpin the overwhelming majority ofvehicle sales in the United States. AmeriCredit has a $9billion auto loan business. (Additional reporting by Kevin Krolicki and David Bailey inDetroit; editing by Carol Bishopric)