When the news hit the other day of the blockbuster settlement for abuses in the foreclosure process, there may have been one brand you didn’t immediately recognize. Here is the list: Bank of America, JPMorgan Chase, Citigroup and Wells Fargo. What about the fifth bank in the settlement, Ally? The name may not resonate because that brand has only been around since 2009. It used to be called GMAC, as in the financial arm of General Motors. That has been around since 1919. It lent people money to buy GM cars.
Now, there are two major stories swirling around Ally. Sources tell the Associated Press that a plan for Ally to raise money by selling an initial public offering of stock may be falling apart. The reason suggested is fascinating. When the feds bailed out General Motors after financial collapse in 2008, the United States government — that is, you and me — ended up owning most of GMAC/Ally. The U.S. government eventually wants a bunch of its $17 billion in bailout money back and would therefore want taxpayers to get back a significant chunk of money raised through if the new Ally stock ever went onto the market through an IPO. While Ally is not commenting, the suggestion is that parts of Ally Financial might now be sold off.
Also there was another eye-opening story with a connection to Ally and the other four banks involved in the $25 billion foreclosure settlement. The Financial Times got a peek at the still undisclosed fine print on that settlement and it looks like the U.S. taxpayer may end up subsidizing the agreement, in part. According to the newspaper, banks will get to count as part of the settlement some mortgages that were already set to be lowered because of a federal subsidy. One consumer advocate is quoted saying while this arrangement could help homeowners in the long run, the revelation if it is confirmed suggests the banks are “getting off easy.”
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