General Motors is attempting to buy out part of America’s worst performing bailout recipient, Ally Bank.
Ally, formerly known as GMAC, is the company’s former auto-lending arm and rode the automaker’s coattails to bailout billions.
GM, which still owes U.S. taxpayers about half of its $50 billion bailout, is making a play for the bank’s international lending arm. Taxpayers own about 75 percent of Ally, which has paid back only $2.5 billion of the $17 billion bailout taxpayers sent its way.
Ally has performed worse than any other bailout recipient in the wake of the global crisis, repeatedly failing stress tests administered by TARP watchdogs. The U.S. government hoped to spin off the distressed bank, but transitioned toward bankruptcy after the auto-lender’s books revealed a slew of sub-prime auto loans that it was using to recover from its disastrous sub-prime home loans. Industry insiders criticized the Treasury Department for not withdrawing from the bank and allowing it to enter bankruptcy. Christopher Whalen, cofounder of Institutional Risk Analytics, claimed the Obama administration was motivated by politics rather than responsible stewardship of taxpayer dollars.
“Geithner and the rest of Treasury doesn’t want to admit that it is a mess and they’ve been lying to us for three years,” Whalen told the Washington Free Beacon in April. “They’re waiting until after the election [to sell the bank].”
Ally’s presence in the marketplace has hurt GM. While every other car company is able to use in-house lending, GM must split the loan profits with Ally.
The attempted buyout is part of GM’s push to stabilize its European and Chinese operations. The company signed a $600 million endorsement deal with English soccer team Manchester United, the most expensive endorsement deal in history.