Back when Ally Financial was known as GMAC Financial, the U.S. Treasury gave it $17.2 billion in TARP funds to weather the global economic crisis. GMAC is now Ally Financial, and although it has repaid $5.4 billion of what it was loaned, there doesn't seem to be a clear path for repaying the outstanding amount. Bloomberg reports that Ally's mortgage unit, Residential Captial (ResCap), is teetering on the ledge of bankrupcty, and its banking operations didn't perform well in the Federal Reserve's stress tests that assess a bank's health.
An IPO for the entire company faces dim prospects (one was rumored back in April of 2011), so in a private equity ploy, the Treasury would like Ally to divvy itself up and sell the pieces to unlock value. Estimates are that the pieces could fetch $23.1 to $28.6 billion. The plan is supported by Elliott Management Corp, a shareholder that holds 2.3 percent of Ally stock. However, Ally's CEO and its board don't want to break the company up, and the Treasury – which holds 74 percent – doesn't want to lean on the leadership too hard for fear of "appearing as a heavy-handed owner."

In addition, the looming bankruptcy of ResCap will have an unknown effect on Ally's ability to do anything. Before the mortgage implosion, GMAC's auto unit was struggling and ResCap was restructured as a separate entity so that it wouldn't be dragged down by the captive finance department. The situation is reversed now, with ResCap in trouble and the captive finance arm supporting itself, but Elliot feels that the restructuring won't be enough to shield Ally from perhaps 18 months of litigation and billions in claims.

Ally execs feel differently, but no one will know until the trigger is pulled and the courts weigh in. With the Treasury reluctant to compel a move, it could be some time before it sees its $11.8 billion again.


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  • 21 Comments
      turbomonkey2k
      • 2 Years Ago
      And this is how the new soft bailouts begin. It's been "suggested" that GM buy back Ally, the bank formerly known as GMAC. Really, enough already. Just STOP propping up the failures so they can continue to fail and drag us all down with them.
      Danaon
      • 2 Years Ago
      Ally is in really deep sh*t. Their books are filled to the brim with subprime loans and they completely undervalued the amount of risk on these loans. Ally will likely need a lot more government support to keep operating... really they should let it go under. A financial institution going broke isn't the end of the world. This is a country of, for, and by the PEOPLE, not the banks. Let the banks reap what they sow. If they lend irresponsibly they should go bankrupt.
        • 2 Years Ago
        @Danaon
        [blocked]
          You guy
          • 2 Years Ago
          Didn't Countrywide get snapped up by a BoA or Chase or some other megabank?
      over9000
      • 2 Years Ago
      GM is going to fail again.
        • 2 Years Ago
        @over9000
        [blocked]
          • 2 Years Ago
          [blocked]
          turbomonkey2k
          • 2 Years Ago
          If the Treas can force ANYONE to buy this pig then THAT is the problem. There shouldn't even be the opportunity for a relationship to exist that permits the Treasury to force its will. That is most certainly not what it's there for.
      SugahStar2
      • 2 Years Ago
      So these let us review what these Wall Street geniuses have done with our country: - bankrupted Chrysler, - Tried to force GM to buy GMAC. When GM refused, they stopped financing GM cars. GM went bankrupt. - They turn GMAC into a commercial bank and called it Ally. They ask the federal government for $17.2 billion. Then they are about to go bankrupt. Genius, pure genius...
      ojfltx
      • 2 Years Ago
      Short answer: no. They separated for a reason.
      Basil Exposition
      • 2 Years Ago
      GM is still recovering itself, it doesn't need to be buying troubled anything.
        Toneron
        • 2 Years Ago
        @Basil Exposition
        All reports say they are now profitable - paying huge salaries and benefits for all employees - "need to be" taking care of those who bailed their a55es out.
          ngiotta
          • 2 Years Ago
          @Toneron
          GM's execs are compensated just fine... Akerson makes about $750,000/mo. Sure, no one is making Alan Mulally wages over at GM, but then again, they don't have an Alan Mulally over at GM.
          Danaon
          • 2 Years Ago
          @Toneron
          Actually GM isn't "paying huge salaries and benefits", they are still severely limited in what they can pay executives.
      dukeisduke
      • 2 Years Ago
      GM should have never have sold GMAC to begin with - at the time, it was half of their revenue.
      Leeanne
      • 2 Years Ago
      Having just satisfied a car loan that originated with GMAC and was taken over by Ally via the purchase, I would personally do anything to avoid getting financing in the future from Ally. Their lack of customer service is appalling and the language and diction barrier to communicate with representatives is a serious challenge. I have tried in vain to get them to simply fax a copy of the lien release (they agree they received and cleared payment days ago) but apparently they do not have ready capabilities to fax a simple document. It's a blessing to have this paid off and to have no future dealings with the company. Love my new Lincoln and financing through the Lincoln brand of Ford financing (FMC/LMC) was a breeze!!
      Chris Gray Hollomon
      • 2 Years Ago
      This is too bad, I really like ALLY mortgage, they have been really amazing to work with and friendly. Probably one of the best banks I've ever worked with.
      GatorLCA
      • 2 Years Ago
      They're in trouble alright. I just bought a new 300C a few months ago and they came back with a 8.8% APR when I was getting financing and I was a current customer with excellent credit! (760). My previous loan I got through them had a really higher APR (9.8%) just to get out of my car and I rolled in a decent amount of negative equity so I didn't really bat an eye but 8.8% for a new car....whatever. I ended up going with SunTrust and I got a 2.9%.
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