Ally Financial today returned $5.9 billion to taxpayers. With
this latest payment, taxpayers will have recovered $12.3 billion, or more than
70 percent of the total investment provided.
During the financial crisis, the American auto industry was
on the verge of collapse. With no
private financing available, General Motors and Chrysler were near
bankruptcy. Uncontrolled liquidations
would have deepened the recession and resulted in job losses of 1 million or
more. That is why Treasury acted as a
lender of last resort, not only to GM and Chrysler, but also to Ally, because
it provided auto loans to consumers and auto dealers. Without that financing, the rescue of the
auto industry would not have succeeded.
Last Friday, the Board of Governors of the Federal Reserve
informed Ally that it did not object to the company’s revised capital
plan. This action allows the company to
repurchase all of the Mandatory Convertible Preferred shares Treasury received
in return for providing assistance to Ally during the financial crisis. Ally raised
more than $1 billion from investors to facilitate the transaction, and the
recent approval from the Fed reflected the significant progress Ally has made
since those dark days.
Over the last two years, the company has executed a
substantial restructuring plan that Treasury announced in May 2012 as a pathway
to exit. Ally has since sold its
international operations for more than $9 billion. It is addressing the legacy mortgage
liabilities from its subsidiary, Residential Capital or “ResCap.” Today, Ally is a viable and profitable auto
lending business that continues to support the auto industry recovery.
With the proceeds from today’s payment, taxpayers have
recovered $430 billion on the TARP investments when one includes all of
Treasury’s income from the sale of AIG shares. This compares to $421 billion disbursed under TARP for those investments
and the housing programs.
While it’s important that we recover the taxpayers’
investments in these companies, it’s even more important to remember why this
assistance was provided in the first place. The Obama Administration provided
financial assistance to the auto industry to protect the broader economy and
the American people from the incredible pain that could have occurred if it had
collapsed. In fact, more than 340,000
jobs have been created since June 2009 when GM and Chrysler emerged from
bankruptcy. All of GM, Ford and Chrysler
are now profitable.
Taxpayers are now in a stronger position to maximize the
value of their remaining investment in Ally. As with all of our investments, Treasury’s objective is to balance the
speed of the recovery with maximizing returns for the taxpayers. Going forward, Treasury will work with Ally
on a public offering or private sale of its common shares or sales of assets to
complete its exit.
There is still considerable work to be done, but Ally’s
latest repayment is another reminder that the decision to provide assistance to
the auto industry helped the economy recover from the financial crisis and
enabled the auto industry to come roaring back.
Timothy Bowler is the Deputy Assistant Secretary for the Office of Financial Stability at the U.S. Department of the Treasury.