Ally Financial fails the Federal Reserves "Stress Test"

[XDCX]

I thought it was noteworthy that Ally Financial was one of only four banks to fail the Federal Reserve's recent "Stress Test" - Here's a link to a Bloomberg report with more information - click here

The automotive operations for Ally are performing fine, it's their real estate operations, or ResCap, that's causing the problems. In fact, there's speculation that Ally may try to dump ResCap using the bankruptcy process.

For those who love irony, President Obama and his Task Force determined that GMAC (Now Ally) would be the sole captive lender for both GM and Chrysler because Chrysler Financial was too far gone to save. A little over two years later and the reality is Ally has received over $17 Billion in capital from the government and they're still crippled but Cerberus managed to sell off Chrysler Financial for over $6 Billion. In fact, Cerberus made so much money off of the sale of Chrysler Financial that it almost covered all of the losses they incurred with Chrysler.

It makes me wonder - was the Task Force blinded by politics or were they just clueless. My guess is it's a combination of both.

[crowe]

Cerberus controlled GMAC, Chrysler & CF. As punishment for asking for bailout they were “fired” from management of GMAC & Chrysler & thought to be left hanging out to dry on CF.

IMO the President Obama and his Task Force mismanaged the entire auto bailout & bankruptcy fiasco & TO THIS DAY STILL DO NOT HAVE A CLUE about the car business.

However there's no lost love for Cerberus implied here from me.

[possum]

Crowe, and XDCX, have it covered. And, it was (is) a fiasco, to put it mildly. Corruption, ignorance, narcist, conspiracy, or whatever, and it was all so unnecessary.

[The StraightShooter]

It was hard to find out at the age of 31 that we don't really live in a "free" market.

[birch3x]

It was only a matter of time...there's plenty of things the government does well, and managing the US auto market is not one of them. If anyone here is floorplanned with Ally it might be a good time to look for another source. I know some dealers who were glad to get something different.

[XDCX]

Originally Posted by crowe

Cerberus controlled GMAC, Chrysler & CF. As punishment for asking for bailout they were “fired” from management of GMAC & Chrysler & thought to be left hanging out to dry on CF.

IMO the President Obama and his Task Force mismanaged the entire auto bailout & bankruptcy fiasco & TO THIS DAY STILL DO NOT HAVE A CLUE about the car business.

However there's no lost love for Cerberus implied here from me.

We're mostly on the same page but my spin is Cerberus was punished by the Obama Administration for using their political clout to try and put a last minute deal together before Bush left office. Cerberus had almost completed a deal which would have merged Chrysler and GM and left GMAC and Chrysler Financial for Cerberus. In fact, I still remember watching Phil Le Beau on CNBC report that is was mostly a "done deal."

Cerberus has heavy ties to the Republican Party and it was rumored they were using their clout with Goldman Sachs to pressure the Treasury to fund the deal. (I have no idea why the deal fell apart but I'm guessing that Bush didn't want to have his legacy tied to a Chrysler/GM merger and preferred to let Obama deal with the mess.)

Like you, I have no love for Cerberus but I do think the U.S. Taxpayers got screwed over because the Task Force was so determined to punish Cerberus that they couldn't see the forest for the trees.

[XDCX]

Originally Posted by birch3x

If anyone here is floorplanned with Ally it might be a good time to look for another source. I know some dealers who were glad to get something different.

Are there any lenders who are getting back in the flooring business? The last update I heard suggested the banks are still scared of the car business and they haven't been pushing to gain new flooring accounts.

[conn02]

there seems to be a lot of interest from the other lenders in the last 6 months

[XDCX]

Originally Posted by conn02

there seems to be a lot of interest from the other lenders in the last 6 months

Thanks for the information - that's good news.

I wonder if any of the banks will extend a new floorline without demanding a personal guarantee from the Dealer? It would be cool if Ally started to lose enough business that they removed that requirement from their Dealer Agreement.

[Moparguy]

Relief may be in the wind. TD-Bank out of Canada currently owns the remains of the old Chrysler Financial and are working to re-enter the car business in a larger way. Maybe there is some light at the end of the tunnel.

[XDCX]

Originally Posted by Moparguy

Relief may be in the wind. TD-Bank out of Canada currently owns the remains of the old Chrysler Financial and are working to re-enter the car business in a larger way. Maybe there is some light at the end of the tunnel.

That would be great - the more lenders competing for the dealers' business the better.

I also noticed that Chase Bank was running a full-page ad in Automotive News and they listed their services as "Prime, Near-Prime, Sub-Prime and Floorplan." I was also surprised to see that Chase was the captive lender for Mazda, Subaru, Land Rover and Jaguar.

Here's a link to Chase's Dealer Website - click here