An administration watchdog said that the US Treasury needs a ‘concrete’ solution to unwind Ally Financial 2009 bailout.
Taxpayers own 74% of Ally and the auto-finance company still has to pay $14.6 billion for the 2009 bailout that helped former GMAC avoid bankruptcy. In 2006 Ally separated from GM becoming an independent company, but soon ran into trouble due to a foray into home mortgage lending under its Residential Capital LLC unit.
“Treasury and federal banking regulators must now develop a path to repay taxpayers while leaving Ally, as well as GM and the auto industry, in a position of strength going forward,” said Christy Romero, the special inspector general for the Troubled Assets Relief Program.
In May 2012 Residential Capital filed for bankruptcy protection, planning to sell important assets and also to solve legal claims linked to the mortgage loans. On January 31st, it is expected to close Berkshire Hathaway’s purchase of the $1.5 billion sale of ResCap’s main loan portfolio.
Now that the Obama administration plans to exit the auto industry, Ally’s shares owned by the government should reach the market soon. In 2011 Ally filed for an initial public offering, an opportunity for the Treasury to sell some of the government’s shares. Unfortunately the IPO did not occur.