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Ally Bank Announces Intent to Pay Government $6 Billion, Will Still Owe $5 Billion

• August 21, 2013 3:03 pm

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Ally Bank announced their intent to repay the Treasury Department $6 billion on Tuesday, which will leave about $5 billion left on the $17 billion bailout it received from taxpayers in 2008.

The bank will sell nearly $1 billion in stock in order to make the payment, according to Reuters.

Ally, formerly known as GMAC, served as General Motors’ lending arm for decades before becoming an independent financial institution in 2006. The financial firm was brought to the brink of insolvency by bad mortgage investments and received the multi-billion bailout as part of the deal to keep GM alive.

However, the bank has repeatedly failed Federal Reserve stress tests and entered its mortgage unit, known as ResCap, into bankruptcy earlier this year. GM has begun purchasing Ally lending operations to help capture more revenue and avoid disruption if Ally fails.

Taxpayers still own a 65 percent share of the bank.

"Ally has made great progress in restructuring and strengthening its business in order to repay the taxpayer, and we look forward to continuing to work with the company to recover the remaining investment," Assistant Treasury Secretary for Financial Stability Tim Massad said in a statement to Reuters.

The federal government is expected to lose $25 billion on the auto bailout, according to an August 2012 Treasury Department analysis.

Update: The post has been updated to note that the bank plans to pay the government $6 billion.

Published under: Financial Industry, Obama Economy