General Motors' financial arm is finally turning a profit since receiving a $17.2 billion cash infusion from the American taxpayer. But the money is going into the pockets of wealthy financers, not the U.S. government, according to Dealbook.
Though the Treasury Department owns 73.8 percent of the General Motors Acceptance Corporation, now called Ally Financial, instead of paying back its debt to the government Ally has given an associate mortgaging firm, ResCap, more than $1 billion in financial help.
Now ResCap could be bought by Democratic investor Warren Buffet, who would turn a profit as taxpayers stand on the sidelines, waiting for the bailout funds to be fully repaid.
DealBook reports:
One of Ally’s biggest creditors at that time was Mr. Buffett’s Berkshire Hathaway, which held more than $500 million of ResCap’s unsecured bonds and $900 million in ResCap’s junior secured bonds. Berkshire has since sold the unsecured bonds but has also joined the fray. It announced in June that it would bid for the mortgage servicer, and offer $1.45 billion for the legacy loan portfolio. The investment firm Lone Star Funds has also stated its interest in buying one or both.
Ally has now bowed out and Berkshire has replaced it as the stalking bidder for the loan portfolio. This fall, a bankruptcy court will hold an open auction for both businesses. We don’t know who will buy these businesses, but it won’t be Ally, which has left the scene after losing billions.
When asked for comment on why it was no longer bidding, an Ally spokesman expressed the intention for Ally to focus on its core businesses where Ally has a "leading position and competitive strengths, and that includes the auto finance and direct banking franchises."