Bailed-Out Ally Financial Unit Comes Full Circle Back to GM

Back in late 2008, the spigots of taxpayer money were open and GM had its cup out. In order for GM's lending arm (GMAC) to receive TARP funds, GM had to divest all but less than 10% of the company so that GMAC could be granted status as a bank holding company. Under President Bush's watch, the Federal Reserve approved the move and the company that is now known as Ally Financial eventually received about $17 billion of taxpayer money. GM itself would eventually end up with about $50 billion of taxpayer money, mostly distributed during Obama's term.

In return for the taxpayers' $17 billion, the government got a majority ownership stake in Ally Financial, which changed its name from GMAC back in May of 2010 to distance itself from its former parent, GM. Taxpayers are expected to lose money on the "investment" adding to the tens billions of dollars of losses on the auto bailouts. GM, however, is still able to benefit from having a relationship with a lender that is owned by the government. This can be seen in the sweet lease deals that Ally Financial offers on Chevy Volts which have been the driving force behind sales of the vehicles.

Government-owned Ally Financial is still the primary lender for GM's prime loans and dealership inventories in America. GM remains without a captive finance arm for its prime loans in the US; GM Financial handles the majority of sub-prime loans and has been pretty lenient with lending standards to those with shaky credit.

The Ally Financial end of the auto bailouts has often been overlooked. When you look at a recap of how things played out, it is hard not to feel that the dealings left taxpayers in a less than optimal position.

We will eventually see how successful GM's bankruptcy restructuring is if the government completely removes itself from the industry. This means getting taxpayers out of their ownership stakes in both GM and Ally Financial. It may be a few years before we know just how great a thing President Obama's orchestrated bankruptcy process for America's auto industry really was.

If GM's management is not up to the task or if UAW labor costs can not be kept in check, the company may end up going the way of Hostess, which recently filed for its second bankruptcy. Hostess will be liquidating this time around with blame being placed on both unions who would not agree to concessions and a management team that was not able to transform the company. Of course, a baker's union does not have the political clout of the UAW, but it is not hard to envision a future where Twinkie-eating Chevy Volt drivers do not exist if the government ends its intrusion into the auto industry and GM's management and labor do not focus on long-term sustainability.

Thanks for the ping. GMAC changed to Ally Financial May 2010. And the reason for that is b/c GMAC had a huge PR problem----Ezra Merkin---then head of GMAC---was caught providing Madoff with millions and getting a cut for himself.

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6/24/12---REUTERS---EXCERPT Money manager Ezra Merkin has agreed to pay $410 million to settle a lawsuit brought by the NYAG that accused Merkin of steering client money to Ponzi schemer Bernie Madoff...... Under the agreement, Merkin will pay $405 million to compensate investors over three years, the person said. The other $5 million will go to the state.

The settlement does not resolve a separate case brought against Merkin by Irving Picard, the trustee seeking money for all of Madoff's victims. Picard is trying to claw back $500 million that Merkin and his funds withdrew from accounts with Madoff.

The NYAG's lawsuit, brought in 2009 said Merkin "recklessly" fed money from investors in his funds into Madoff's Ponzi scheme, while claiming he actively managed their money. Merkin held himself out as an "investing guru" and collected more than $470 million in management and other fees while he was really a "master marketer," the lawsuit said. The lawsuit accused Merkin of self-dealing, reckless conduct and gross negligence. It sought restitution and damages and to stop Merkin from serving on any n/p organization or as an investment manager.

Merkin had some $2.4 billion invested with Madoff, according to the lawsuit. Merkin, a graduate of Columbia College and Harvard Law School, was a trustee, along with Madoff, of Yeshiva University. The university lost $110 million to Madoff. Charities and other nonprofits are among those whose funds went to Madoff through Merkin without their knowledge.

Merkin resigned as nonexecutive chairman of GMAC LLC, the financing arm of General Motors, after the Madoff scandal. GMAC is now Ally Financial.

SOURCE http://www.nypost.com/p/news/business/money_manager_ezra_merkin_york_settle_6H87PFWvtf0NVXHhqY2qXI#ixzz1yka9z7tZ

You could try a made in Mexico Fusion, which I hear are very good cars.

I understand that few here want to buy a UAW built car, but we've already lost Chrysler to Fiat and no one here wants to buy a GM. Assuming this country ever comes to its senses, we should have one remaining US auto manufacturer, so I'm willing to support Ford. If you are too but buying something made by the UAW is out of the question, then a foreign built Ford might be your best choice.

Just saying.

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