TROUBLED ASSET 

RELIEF PROGRAM

Government’s 

Exposure to Ally 

Financial Lessens as 

Treasury’s Ownership 

Share Declines

Report to Congressional Committees

August 2014

GAO-14-698

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-698, a report to 

congressional committees

August 2014

TROUBLED ASSET RELIEF PROGRAM 

Government’s Exposure to Ally Financial Lessens as 

Treasury’s Ownership Share Declines 

Why GAO Did This Study

As part of its Automotive Industry 

Financing Program, funded through the 

Troubled Asset Relief Program 

(TARP), Treasury provided $17.2

billion of assistance to Ally Financial

(formerly known as GMAC). Ally 

Financial is a large financial holding 

company, the primary business of 

which is auto financing. 

TARP’s authorizing legislation 

mandates that GAO report every 60 

days on TARP activities. This report 

examines (1) the status of Treasury’s 

investments in Ally Financial and its 

efforts to wind down those investments 

and (2) the financial condition of Ally 

Financial. 

To address these issues, GAO 

reviewed and analyzed available 

industry, financial, and regulatory data 

from 2009 through June 2014. GAO 

also reviewed rating agency analyses, 

Treasury reports and documentation 

detailing Treasury’s investments in Ally 

Financial and its divestments from the 

company, as well as Ally Financial’s

financial filings and reports. GAO also 

interviewed officials from the Federal 

Deposit Insurance Corporation (FDIC),

Federal Reserve, and Treasury, and 

representatives from Ally Financial. 

GAO provided a draft of this report to 

FDIC, the Federal Reserve, Treasury, 

and Ally Financial. Treasury generally 

concurred with GAO’s findings. Ally 

Financial provided technical 

comments, which GAO has

incorporated, as appropriate. FDIC and 

the Federal Reserve did not provide 

comments.

GAO makes no recommendations in 

this report. 

What GAO Found

The Department of the Treasury (Treasury) reduced its ownership stake in Ally 

Financial Inc. (Ally Financial) from 74 percent in October 2013, to 16 percent as

of June 30, 2014. As shown in the figure below, the pace of Treasury’s reduction 

in its ownership share of Ally Financial accelerated in 2013 and corresponds with 

two key events. First, in November 2013, the Board of Governors of the Federal 

Reserve System (Federal Reserve) did not object to Ally Financial’s resubmitted 

2013 capital plan, which allowed Ally Financial to repurchase preferred shares 

from Treasury and complete a private placement of common shares. Second, in 

December 2013 the bankruptcy proceedings of Ally Financial’s mortgage 

subsidiary, Residential Capital LLC (ResCap), were substantially resolved. The 

confirmed Chapter 11 plan broadly released Ally Financial from any and all legal 

claims by ResCap and, subject to certain exceptions, all other third parties, in 

exchange for $2.1 billion in cash from Ally Financial and its insurers. As of June 

30, 2014, Treasury had received $17.8 billion in sales proceeds and interest and 

dividend payments on its total assistance to Ally Financial of $17.2 billion. 

Treasury’s Ownership Share of Ally Financial Inc., 2010-2014

Ally Financial’s financial condition has continued to stabilize in late 2013 and 

early 2014 as illustrated by multiple capital, profitability, and liquidity measures. 

For example, Ally Financial’s capital ratios have remained above regulatory 

minimum levels since 2009, which indicates that it is in a better position to absorb 

financial losses. In addition, the company raised significant levels of common 

equity through private and public share offerings. According to recent credit 

rating agency analyses, Ally Financial is competitive in automotive financing, 

particularly in the floor-plan business segment, which focuses on dealer 

financing. However, analysts reported that the company faces potential 

competitive challenges, such as the loss of certain exclusive relationships with 

General Motors Company and Chrysler Group LLC. 

View GAO-14-698. For more information, 

contact A. Nicole Clowers at (202) 512-8678

or clowersa@gao.gov.
Page i GAO-14-698 Troubled Asset Relief Program

Letter 1 

Background 3

Resolution of Major Regulatory and Legal Issues Was Key to 

Treasury Reducing Its Ownership Share in Ally Financial 8

Ally Financial’s Business Structure Has Been Evolving and Its 

Financial Condition Has Continued to Stabilize 14

Agency Comments 25

Appendix I Objectives, Scope, and Methodology 28

Appendix II Comments from the Department of the Treasury 30

Appendix III Contact and Staff Acknowledgments 31

Tables

Table 1: Ally Financial Capital Ratios, 2009-2013 16

Table 2: Net Interest Spread, Return on Assets, and 

Nonperforming Asset Ratio for Ally Financial, 2009-2013 18

Figures

Figure 1: Treasury’s Ownership Share of Ally Financial, 2010-

2014 12

Figure 2: Ally Financial Net Income (Loss) by Operating Unit, 

2009-2013 17

Figure 3: Ally Financial Liquidity Ratio, September 2009-March 

2014 20

Figure 4: Ally Financial Operating Cash Flow, September 2009-

March 2014 21

Figure 5: Dollar Amount of Consumer Automobile Loans for Five 

Large Bank Holding Companies, 2011-2014 24

Contents
Page ii GAO-14-698 Troubled Asset Relief Program

Abbreviations

AIFP Automotive Industry Financing Program

CCAR Comprehensive Capital Analysis and Review

CPP Capital Purchase Program

EESA Emergency Economic Stabilization Act of 2008

FDIC Federal Deposit Insurance Corporation

GM General Motors Company

GMAC General Motors Acceptance Corporation

IPO initial public offering

ResCap Residential Capital LLC

ROA return on assets

SEC Securities and Exchange Commission

TARP Troubled Asset Relief Program

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-14-698 Troubled Asset Relief Program

441 G St. N.W.

Washington, DC 20548

August 5, 2014

Congressional Committees

In 2008 and 2009, the Department of the Treasury (Treasury) provided 

significant support to the automotive industry—including automotive 

finance companies—after deteriorating economic conditions resulted in a 

dramatic decline in automobile sales and significant financial losses in the 

industry. Through the Automotive Industry Financing Program (AIFP) 

under the Troubled Asset Relief Program (TARP), Treasury provided 

$17.2 billion of assistance to GMAC LLC (General Motors Acceptance 

Corporation), a financial services company that provided consumer 

financing for vehicle purchases and dealer financing for inventory.1 In 

2010, GMAC became Ally Financial Inc. (Ally Financial).2

The Emergency Economic Stabilization Act of 2008 (EESA) provides 

GAO with broad oversight authorities for actions taken under TARP, 

including assistance under AIFP.

As a result of its 

actions to provide assistance to the company, the federal government 

had an almost 74 percent interest in Ally Financial in 2010.

3 We have analyzed and monitored 

Treasury’s activities in implementing TARP in a number of reports. More 

specifically, in our October 2013 report, we analyzed Treasury’s 

assistance to Ally Financial and its efforts to wind down its investments.4

 

1

Pub. L. No. 110-343, § 101, 122 Stat. 3765, 3767 (codified at 12 U.S.C. § 5211). The 

total amount disbursed includes $16.3 billion committed by Treasury directly to GMAC/Ally 

Financial as well as an $884 million Treasury loan to General Motors Corporation (GM) 

that Treasury exchanged for a 35.4 percent common ownership share in GMAC. This 

report focuses on Ally Financial and does not examine the assistance provided to other 

automobile manufacturers or auto financing companies through AIFP, including GM and 

Chrysler Group LLC. 

This report examines (1) the status of Treasury’s investments in Ally 

Financial as of June 30, 2014, and its efforts to wind down those 

2

In 2009, GMAC expanded its depository banking operation under the name of Ally Bank. 

For activities and events that predate the name change, we refer to the company as 

GMAC. 

3

Pub. L. No. 110-343, § 116, 122 Stat. 3765, 3783 (codified at 12 U.S.C. § 5226). 

4

GAO, Troubled Asset Relief Program: Status of Treasury’s Investments in General 

Motors and Ally Financial, GAO-14-6 (Washington, D.C.: Oct. 29, 2013).
 

Page 2 GAO-14-698 Troubled Asset Relief Program

investments and (2) the financial condition of Ally Financial through March 

31, 2014.

To determine the status of Treasury’s investments in Ally Financial, we 

reviewed Treasury’s monthly reports to Congress detailing the levels of 

the investments made in the company, including the number of shares 

owned by Treasury, and Treasury’s daily transactions reports.5 To 

analyze Treasury’s efforts to wind down those investments, we reviewed 

Treasury documentation relating to its exit from Ally Financial. We 

reviewed Ally Financial regulatory filings, including Securities and 

Exchange Commission (SEC) filings; and publicly available reports from 

the Board of Governors of the Federal Reserve System (Federal 

Reserve) on its 2014 stress tests of bank holding companies and 2014 

Comprehensive Capital Analysis and Review (CCAR).6

 

5

Under EESA, every 30 days, Treasury must submit to Congress reports on TARP-related 

actions taken and funds obligated and spent during the reporting period as well as 

detailed financial statements that include agreements made, assets purchased, and 

transactions realized, and the valuation or pricing method used for each transaction. § 

105(a), 122 Stat. at 3771-72 (codified at 12 U.S.C. § 5215).

We also 

interviewed officials from Treasury, Federal Reserve, Federal Deposit 

Insurance Corporation (FDIC), and representatives from Ally Financial. To 

assess the financial condition of Ally Financial, we measured the 

institution’s capital ratios, net income, net interest spread margin, return

on assets, nonperforming asset ratio, liquidity ratio, bank deposits, and 

operating cash flow, generally from 2009 through the first quarter (March 

31) of 2014. We obtained these data from SNL Financial, a provider of 

financial information. We also reviewed reports by several credit rating 

agencies on how they rate Ally Financial’s financial strength. We 

assessed the completeness and accuracy of all data used in this report 

and determined they were sufficiently reliable for the purposes of this 

report. For a more detailed discussion of the scope and methodology, see 

appendix I.

6

Stress testing helps bank supervisors measure whether a bank holding company has 

enough capital to support its operations throughout periods of stress. The Dodd-Frank 

Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Federal 

Reserve to perform an annual stress test of bank holding companies with $50 billion or 

more in total consolidated assets. Pub. L. No. 111-203, § 165(i)(1)(A), 124 Stat. 1376, 

1430 (2010)(codified at 12 U.S.C. § 5365(i)(1)(A)). CCARs are the Federal Reserve’s 

annual assessments of the internal capital planning process and capital adequacy of 

large, complex U.S. bank holding companies. 12 C.F.R. § 225.8.
 

Page 3 GAO-14-698 Troubled Asset Relief Program

We conducted this performance audit from March 2014 to August 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings based 

on our audit objectives.

Ally Financial is one of the country’s largest financial holding companies, 

with total assets of $148.5 billion as of March 31, 2014.7 Its primary line of 

business is automotive financing—both consumer financing and leasing 

and dealer floor-plan financing.8 Ally Financial (when it was known as 

GMAC) formerly served as General Motors Company’s (GM) captive 

automotive finance company.9

 

7

Ally Financial is a bank holding company that elected to become a financial holding 

company in December 2013. A financial holding company is a bank holding company that 

is allowed to engage in a broad range of financial activities, including securities 

underwriting and dealing, insurance underwriting, and merchant banking activities. Ally 

Financial was the twentieth-largest bank holding company in the United States as of 

March 31, 2014. 

GMAC’s subsidiaries offered financial 

services such as auto insurance and residential mortgages. In 2006, 

Cerberus Capital Management purchased 51 percent of the company 

(GM retained 49 percent). As the housing market declined in the late 

2000s, the previously profitable GMAC mortgage business unit began 

producing significant losses. For example, the company’s Residential 

Capital LLC (ResCap) subsidiary lost approximately $17 billion from 2007 

through 2009. During the same period, U.S. automobile sales dropped 

from 16.4 million to 10.4 million cars and light trucks, negatively affecting 

the company’s core automobile financing business. On May 14, 2012, 

ResCap and certain of its wholly owned direct and indirect subsidiaries 

8

Floor-plan, or wholesale, financing is a form of retail goods inventory financing in which 

each loan advance is made against a specific piece of collateral. As each piece of 

collateral is sold by the dealer, the loan advance against that piece of collateral is repaid 

or other acceptable collateral is substituted. Items commonly subject to floor-plan debt 

include automobiles, large home appliances, furniture, television and stereo equipment, 

boats, and mobile homes.

9

A captive automotive lender’s primary business is to finance the purchase of a specific 

manufacturer’s automobiles. Prior to bankruptcy reorganization, GM’s legal name was 

General Motors Corporation. General Motors Company is a new legal entity created 

through the bankruptcy process to purchase the operating assets of the prereorganization 

company.

Background
 

Page 4 GAO-14-698 Troubled Asset Relief Program

filed voluntary petitions for relief under Chapter 11 of the Bankruptcy 

Code in the U.S. Bankruptcy Court for the Southern District of New York 

(Bankruptcy Court). The bankruptcy created uncertainties about Ally 

Financial’s financial obligations.

As a financial holding company, Ally Financial is regulated and 

supervised by the Federal Reserve.10 Under the Dodd-Frank Act and 

implementing regulations, the Federal Reserve conducts an annual 

supervisory stress test of bank holding companies with $50 billion or more 

in total consolidated assets to evaluate whether the companies have 

sufficient capital to absorb losses resulting from adverse economic 

conditions. For the stress tests, the Federal Reserve projects revenue, 

expenses, losses, and resulting post-test capital levels, and regulatory 

capital ratios, including the tier 1 capital ratio and the tier 1 common ratio, 

under three economic scenarios (baseline, adverse, and severely 

adverse).11

 

1012 U.S.C. § 1844(b)-(c).

In addition, the Federal Reserve requires the same bank 

holding companies to conduct an annual company-run stress test using 

the same macroeconomic scenarios that the Federal Reserve uses to 

conduct its supervisory stress test.

11Tier 1 capital is currently considered the most stable and readily available capital that a 

banking institution can have to support its operations by absorbing unexpected financial 

losses. It consists of core capital elements, such as common stockholders’ equity and 

noncumulative perpetual preferred stock. As defined in the Federal Reserve’s Risk-Based 

Capital Adequacy Guidelines, tier 1 capital is composed of common and non-common 

equity elements, some of which are subject to limits on their inclusion in tier 1 capital. See 

12 CFR § 225, Appendix A, § II.A.1. These elements include common stockholders’ 

equity, qualifying perpetual preferred stock, certain minority interests, and trust preferred 

securities. Certain intangible assets, including goodwill and deferred tax assets, are 

deducted from tier 1 capital or are included subject to limits. See 12 CFR § 225, Appendix 

A, § II.B. Tier 1 common capital is tier 1 capital less the non-common elements of tier 1 

capital, including perpetual preferred stock and related surplus, minority interest in 

subsidiaries, trust preferred securities, and mandatory convertible preferred securities. 12 

CFR § 225.8(c)(10). Common equity is considered the most loss-absorbing form of 

capital. In July 2013, the federal banking regulators issued revised requirements for 

minimum capital, regulatory capital, and additional capital “buffers” to enhance the 

resiliency of banking organizations during periods of financial stress. These new 

standards will be implemented over multiple years. Regulatory Capital Rules: Regulatory 

Capital, Implementation of Basel III, Capital Adequacy, Transition Provisions, Prompt 

Corrective Action, Standardized Approach for Risk-Weighted Assets, Market Discipline 

and Disclosure Requirements, Advanced Approaches Risk-Based Capital Rule, and 

Market Risk Capital Rule, 78 Fed. Reg. 62019 (Oct. 11, 2013) (Federal Reserve and 

Office of the Comptroller of the Currency); 78 Fed. Reg. 55340 (Sept. 10, 2013) (FDIC). 

Regulation and 

Supervision of Ally 

Financial
 

Page 5 GAO-14-698 Troubled Asset Relief Program

The Federal Reserve also conducts an annual exercise, CCAR, to help 

ensure that large bank holding companies have robust, forward-looking 

capital planning processes that take into account their unique risks and 

set aside sufficient capital to operate during periods of economic and 

financial stress.12 The Federal Reserve evaluates capital adequacy; 

internal processes for assessing capital adequacy; plans for capital 

distributions, such as dividend payments or stock repurchases; and other 

actions that affect capital.13

The Federal Reserve may object to a capital plan because of significant 

deficiencies in the planning process or because one or more capital ratios 

would fall below required levels under the assumption of stress and 

planned distributions.14 If the Federal Reserve objects to a proposed 

capital plan, the bank holding company is permitted to make capital 

distributions only if the Federal Reserve indicates in writing that it does 

not object.15 The company also must resubmit the capital plan after 

remediating the deficiencies.16

In March 2013, the Federal Reserve reported the results of its 2013 

supervisory stress test and of the CCAR exercise.17

 

12In November 2011, the Federal Reserve issued a regulation requiring large bank holding 

companies to submit an annual capital plan. Capital Plans, 76 Fed. Reg. 74631 (Dec. 1, 

2011) (codified at 12 C.F.R. § 225.8). 

The Federal Reserve 

1312 C.F.R. § 225.8(d).

1412 C.F.R. § 225.8(e)(2)(ii). A capital distribution is defined as a redemption or 

repurchase of any debt or equity capital instrument, a payment of common or preferred 

stock dividends, a payment that may be temporarily or permanently suspended by the 

issuer on any instrument that is eligible for inclusion in the numerator of any minimum 

regulatory capital ratio, and any similar transaction that the Federal Reserve determines to 

be in substance a distribution of capital. 12 C.F.R. § 225.8(c)(2) .

1512 C.F.R. § 225.8(e)(2)(iv) 

1612 C.F.R. § 225.8(d)(4).

17In 2013, 18 bank holding companies were subject to stress tests and to CCAR. These 

were Ally Financial Inc., American Express Company, Bank of America Corporation, The 

Bank of New York Mellon Corporation, BB&T Corporation, Capital One Financial 

Corporation, Citigroup Inc., Fifth Third Bancorp, The Goldman Sachs Group, Inc., 

JPMorgan Chase & Co., KeyCorp, Morgan Stanley, The PNC Financial Services Group, 

Inc., Regions Financial Corporation, State Street Corporation, Sun Trust Banks, Inc., U.S. 

Bancorp, and Wells Fargo & Co. The same 18 bank holding companies subject to the 

stress tests were subject to CCAR. In 2013, the Federal Reserve expanded to 30 the 

number of bank holding companies subject to stress tests and CCAR.
 

Page 6 GAO-14-698 Troubled Asset Relief Program

found that Ally Financial’s tier 1 common capital ratio fell below the 

required 5 percent under the severely adverse scenario. Ally Financial 

was the only one of the 18 bank holding companies tested that fell below 

this required level. The Federal Reserve objected to Ally Financial’s 

capital plan during the 2013 CCAR.18

Ally Financial owns Ally Bank, an Internet- and telephone-based bank. 

Ally Bank is a state-chartered nonmember bank supervised by FDIC and 

the Utah Department of Financial Institutions. Ally Bank had more than 

$55.9 billion in total deposits as of March 31, 2014.

According to the Federal Reserve, 

Ally Financial’s capital ratios did not meet the required minimums under 

the proposed capital plan. Specifically, the Federal Reserve reported that 

under stress conditions, Ally Financial’s plan resulted in a tier 1 common 

ratio of 1.52 percent, which is below the required level of 5 percent under 

the capital plan rule. According to the Federal Reserve CCAR results 

paper, these results assumed that Ally Financial remained subject to 

contingent liabilities associated with ResCap. The Federal Reserve 

required Ally Financial to resubmit its capital plan, which Ally Financial did 

in September 2013.

To help stabilize the automotive industry and avoid further economic 

disruptions, Treasury disbursed $79.7 billion through AIFP from 

December 2008 through June 2009. The assistance was used to support 

two automakers, Chrysler and GM, and their automotive finance 

companies, Chrysler Financial and GMAC.19

• exiting its investments as soon as practicable in a timely and orderly 

manner that minimizes financial market and economic impact;

In July 2009, Treasury 

outlined guiding principles for the investments, including

• protecting taxpayer investment and maximizing overall investment 

returns within competing constraints;

 

18Of the 18 bank holding companies reviewed in 2013, the Federal Reserve also objected 

to one other company’s capital plans. 

19Before the bankruptcy reorganization, Chrysler’s legal name was Chrysler LLC. Chrysler 

Group LLC is a new legal entity created through the bankruptcy process to purchase the 

operating assets of the prereorganization company. 

Treasury Assistance 

through TARP
 

Page 7 GAO-14-698 Troubled Asset Relief Program

• improving the strength and viability of GM and Chrysler so that they 

could contribute to economic growth and jobs without government 

involvement; and

• managing its ownership stake in a hands-off, commercial manner, 

including voting its shares only on core governance issues, such as 

the selection of a company’s board of directors and major corporation 

events or transactions.20

In late December 2008, as a part of AIFP, Treasury agreed to purchase 

$5 billion in senior preferred equity from GMAC and received an 

additional $250 million in preferred shares through warrants that Treasury 

exercised immediately.21

Treasury subsequently provided GMAC with additional assistance 

through TARP.

• In May 2009, Treasury purchased $7.5 billion of mandatory 

convertible preferred shares from GMAC. Also, in May 2009, Treasury 

exercised its option to exchange an $884 million loan to GM for a 35.4 

percent common ownership share in GMAC.22

• In December 2009, Treasury made additional investments in Ally 

Financial—$2.5 billion of trust preferred securities and approximately 

 

20Treasury established two other programs under AIFP—the Auto Supplier Support

Program and the Auto Warranty Commitment Program. The Auto Supplier Support 

Program was designed to ensure that automakers received the parts and components 

they needed to manufacture vehicles and that suppliers had access to liquidity on their 

receivables. Under this program, GM and Chrysler received loans, all of which have been 

repaid. The Auto Warranty Commitment Program was designed to mitigate consumer 

uncertainty about purchasing vehicles from the restructuring automakers by providing 

funding to guarantee the warranties on new vehicles from those automakers. Funds were 

provided to GM and Chrysler under this program, but both companies were able to 

continue to honor consumer warranties and the funds have been repaid in full.

21GMAC applied to participate in the TARP Capital Purchase Program (CPP), but, as a 

commercial company, was not initially eligible for assistance. To become eligible, GMAC 

sought to convert its charter from an industrial loan company to a commercial bank in 

2008 and applied to the Federal Reserve for bank holding company status. GMAC also 

submitted an application to participate in CPP, conditional upon becoming a bank holding 

company. The Federal Reserve approved GMAC’s bank holding company application in 

December 2008. However, GMAC did not participate in CPP. 

22Mandatory convertible preferred stock is a type of preferred share that must be 

converted to common stock on or before a certain contractual date. 
 

Page 8 GAO-14-698 Troubled Asset Relief Program

$1.3 billion of mandatory convertible preferred shares.23

• In December 2010, Treasury converted $5.5 billion of existing 

mandatory convertible preferred shares into common stock, 

increasing its common equity ownership to approximately 74 percent 

of Ally Financial.

Also, in 

December 2009, Treasury converted $3 billion of existing mandatory 

convertible preferred shares into common stock, increasing its 

common equity ownership from 35 to 56.3 percent.

24

Ally Financial announced a plan in 2012 to repurchase Treasury’s 

mandatory convertible preferred shares, worth $5.9 billion, to reduce 

Treasury’s investment in the company. However, this plan stalled after 

the Federal Reserve objected to Ally Financial’s initial 2013 capital plan 

submission, partly because of uncertainty about the company’s 

obligations associated with the ResCap bankruptcy.

Two key regulatory and legal developments allowed Ally Financial and 

Treasury to move ahead with plans to reduce Treasury’s investments in 

the company in late 2013. First, in November 2013, the Federal Reserve 

did not object to Ally Financial’s resubmitted capital plan. Second, in 

December 2013, the bankruptcy proceedings of Ally Financial’s mortgage 

subsidiary, ResCap, were substantially resolved. Following the resolution 

of these issues, Treasury significantly reduced its ownership stake in Ally 

Financial—primarily through sales of common stock—from 74 to 16 

percent as of June 30, 2014. Also as of June 30, 2014, Treasury had

received $17.8 billion (including interest and dividends), which exceeds 

the total Treasury assistance to the company of $17.2 billion.25

 

23A trust preferred security is a security that has both equity and debt characteristics, and 

is created by establishing a trust and issuing debt to it. The Dodd-Frank Act restricted the 

use of such securities in meeting certain capital requirements. Pub. L. No. 111-203, § 171, 

124 Stat. 1376, 1435 (2010).

24In March 2011, Treasury received approximately $2.7 billion in proceeds from the sale of 

Ally Financial trust preferred securities.

25Treasury assistance to Ally Financial of $17.2 billion included $16.3 billion committed 

directly to GMAC/Ally Financial as well as the $884 million GM loan to Ally Financial that 

Treasury funded. The $17.8 billion that Treasury received from Ally Financial represents 

gross proceeds before deduction of commissions for sale of Ally Financial stock.

Resolution of Major 

Regulatory and Legal 

Issues Was Key to 

Treasury Reducing Its 

Ownership Share in 

Ally Financial
 

Page 9 GAO-14-698 Troubled Asset Relief Program

Two key regulatory and legal developments in the second half of 2013 

helped Treasury accelerate the wind-down of its investments in Ally 

Financial.

• Federal Reserve did not object to Ally Financial’s resubmitted 

capital plan: In November 2013 Ally Financial received a 

“nonobjection” from the Federal Reserve to its resubmitted 2013 

CCAR capital plan, which enabled Ally Financial to move forward on 

its repurchase of $5.9 billion of the remaining Treasury-owned 

mandatory convertible preferred shares. As we previously reported, 

Treasury and Ally Financial agreed in August 2013 that Ally would 

repurchase the mandatory convertible preferred shares, conditioned 

on receiving a nonobjection on the resubmitted capital plan and the 

closing of a private placement securities transaction.26 Ally Financial 

resubmitted its plan in September 2013 and the Federal Reserve 

approved it on November 15, 2013. The Federal Reserve 

nonobjection enabled Ally Financial to complete the private placement 

of common shares valued at $1.3 billion announced in August 2013. 

The private placement, intended in part to help finance the repurchase 

of the $5.9 billion remaining Treasury-owned mandatory convertible 

preferred shares, was completed in November 2013, as was the 

repurchase of the Treasury shares. More recently, Ally Financial 

received a nonobjection from the Federal Reserve in March 2014 on 

its annual capital plan.27

 

26GAO-14-6. During 2013, Ally Financial completed the sale of its international automobile 

finance businesses, with the exception of its joint venture in China, which the company 

expects to complete in 2014 depending on the pace of government approvals in China. 

27In 2014, the Federal Reserve conducted stress tests and reviewed capital plans under 

its CCAR for 30 bank holding companies. These companies were Ally Financial Inc.; 

American Express Company; Bank of America Corporation; The Bank of New York Mellon 

Corporation; BB&T Corporation; BBVA Compass Bancshares, Inc.; BMO Financial Corp.; 

Capital One Financial Corporation; Citigroup, Inc.; Comerica Incorporated; Discover 

Financial Services; Fifth Third Bancorp; The Goldman Sachs Group, Inc.; HSBC North 

America Holdings Inc.; Huntington Bancorporation Incorporated; JPMorgan Chase & Co.; 

Keycorp; M&T Bank Corporation; Morgan Stanley; Northern Trust Corporation; The PNC 

Financial Services Group, Inc.; RBS Citizens Financial Group, Inc.; Regions Financial 

Corporation; Santander Holdings USA, Inc.; State Street Corporation; SunTrust Banks, 

Inc.; U.S. Bancorp; UnionBanCal Corp.; Wells Fargo & Co.; and Zions Bancorporation. In 

2013, the Financial Stability Oversight Council designated three non-bank financial 

companies for consolidated supervision by the Federal Reserve and enhanced prudential 

standards: American International Group, Inc., General Electric Capital Corporation, Inc., 

and Prudential Financial, Inc.

Resolution of Regulatory 

and Legal Issues 

Removed Uncertainty 

about Ally Financial
 

Page 10 GAO-14-698 Troubled Asset Relief Program

• Completion of the ResCap bankruptcy: In December 2013, the 

bankruptcy of Ally Financial’s ResCap subsidiary was substantially 

resolved.

28 The Bankruptcy Court entered an order confirming a 

bankruptcy plan on December 11, 2013, which became effective on 

December 17, 2013. The final bankruptcy agreement included a 

settlement, which the bankruptcy court judge had approved in June 

2013, releasing Ally Financial from any and all legal claims by 

ResCap and, subject to certain exceptions, all other third parties, in 

exchange for $2.1 billion in cash from Ally Financial and its insurers.29

Other regulatory issues were also resolved in 2013, which removed 

additional elements of uncertainty, according to Treasury officials and 

rating agency analyses. In December 2013, Ally Financial received 

approval from the Federal Reserve for its filing to elect financial holding 

company status. As a bank holding company that had not made an 

election to be treated as a financial holding company, Ally Financial would 

have been restricted from carrying out certain nonbanking activities, such 

as insurance underwriting. However, when Ally Financial (then known as 

GMAC) received approval to become a bank holding company in 2008, 

Ally Financial was able to continue to offer certain existing insurance 

services on a temporary basis under the authority of section 4(a)(2) of the 

Bank Holding Company Act of 1956.

According to Ally Financial, its mortgage operations were a significant 

portion of its operations and were conducted primarily through 

ResCap. With the completion of the ResCap settlement, Ally Financial 

largely exited the mortgage origination and servicing business.

30

 

28See Order Confirming Second Amended Joint Chapter 11 Plan Proposed by Residential 

Capital, LLC, et al., and the Official Committee of Unsecured Creditors, In re Residential 

Capital, LLC, No. 1:12-12020 (Bankr. S.D.N.Y. Dec. 11, 2013); Notice of Entry of 

Confirmation Order Confirming the Second Amended Joint Chapter 11 Plan Proposed by 

Residential Capital, LLC, et al., and the Official Committee of Unsecured Creditors and 

Occurrence of Effective Date, In re Residential Capital, LLC, No. 1:12-12020 (Bankr. 

S.D.N.Y. Dec. 17, 2013).

The authority expired on the fifth 

anniversary of the date that Ally Financial became a bank holding 

company, or December 24, 2013. Gaining financial holding company 

status enabled Ally Financial to continue to offer its insurance and auction 

lines of business, according to Ally Financial. Further, in December 2013 

29See Order Confirming Second Amended Joint Chapter 11 Plan Proposed by Residential 

Capital, LLC, et al., and the Official Committee of Unsecured Creditors at 55, 62, In re 

Residential Capital, LLC, No. 1:12-12020 (Bankr. S.D.N.Y. Dec. 11, 2013). 

30Pub. L. No. 84-511, § 4(a)(2), 70 Stat. 133, 135 (codified at 12 U.S.C. § 1843(a)(2)).
 

Page 11 GAO-14-698 Troubled Asset Relief Program

Ally Financial settled allegations of violations of the Equal Credit 

Opportunity Act by paying $98 million relating to the execution of consent 

orders issued by the Department of Justice and the Consumer Financial 

Protection Bureau.31

After the legal and regulatory developments in late 2013, the pace of 

Treasury’s reduction in its ownership share of Ally Financial accelerated. 

From December 2013 through June 2014, Treasury reduced its 

ownership share of Ally Financial by almost 80 percent (see fig. 1). In 

November 2013, Ally Financial made cash payments totaling $5.9 billion 

to repurchase all remaining mandatory convertible preferred shares 

outstanding and terminate an existing share adjustment provision.32

 

31Consent Order, United States v. Ally Financial Inc. and Ally Bank, No. 2:13-cv-15180, 

(E.D. Mich. Dec. 23, 2013); Consent Order, In the Matter of Ally Financial Inc.; and Ally 

Bank, File No. 2013-CFPB-0010 (Dec. 20, 2013). The settlement required Ally Financial to 

provide $80 million in compensation to victims of discrimination and $18 million to the 

Consumer Financial Protection Bureau’s Civil Penalty Fund.

Additionally, Ally Financial issued $1.3 billion of common equity to thirdparty investors, reducing Treasury’s ownership share from 74 to 63 

percent. In January 2014, Treasury completed a private placement of Ally 

Financial common stock valued at approximately $3 billion, further 

reducing Treasury’s ownership share of Ally Financial to 37 percent. 

According to Treasury, the decision to undertake a private placement at 

that time was based on market conditions, as well as information 

Treasury received about increasing investor interest from the underwriter 

of two previous private placements of Ally Financial shares—the $1.3 

billion private placement Ally Financial completed in November 2013 and 

an approximate $900 million private offering by GM of its remaining Ally 

Financial stock in December 2013. These transactions contributed to 

building an investor base for the stock, according to Treasury and Ally 

Financial.

32The share adjustment provision provided Treasury with the right to purchase additional 

shares of Ally Financial common stock. 

Since December 2013, 

Treasury’s Ownership 

Share in Ally Financial Has 

Declined at an Accelerated 

Pace
 

Page 12 GAO-14-698 Troubled Asset Relief Program

Figure 1: Treasury’s Ownership Share of Ally Financial, 2010-2014

Notes:

a

CCAR—Comprehensive Capital Analysis and Review—is an annual Federal Reserve assessment of 

the internal capital planning process and capital adequacy of large, complex U.S. bank holding 

companies.

b

Financial holding company status enables Ally Financial to continue to engage in insurance 

underwriting and other nonbanking activities.
 

Page 13 GAO-14-698 Troubled Asset Relief Program

Treasury said the positive results of the March 2014 Federal Reserve 

stress test and CCAR contributed to the decision to further reduce its 

ownership share. The day after the release of the CCAR results in March 

2014, Treasury announced that it would sell Ally Financial common stock 

in an initial public offering (IPO) and in April 2014, completed the IPO of 

95 million Treasury shares at $25 per share. The $2.4 billion sale reduced 

Treasury’s ownership share to approximately 17 percent. Following the 

IPO, Ally Financial became a publicly held company. In May 2014, 

Treasury received $181 million from the sale of additional shares after 

underwriters exercised the option to purchase an additional 7 million 

shares from Treasury at the IPO price. This additional sale reduced 

Treasury’s ownership share to approximately 16 percent. As of June 30, 

2014, Treasury had received $17.8 billion in sales proceeds and interest 

and dividend payments on its total assistance to Ally Financial of $17.2 

billion.33

Based on the stock prices, as of June 30, 2014, Treasury’s remaining 

investment in Ally Financial, which consists of common stock, was valued 

at almost $1.8 billion. Treasury stated that it would like to divest its 

ownership stake in Ally Financial in a manner that balances the speed of 

recovery with maximizing returns for taxpayers. Treasury officials told us 

that Treasury does not have a specific date by which it intends to fully 

divest from the company, but that its decision on timing will be based on 

market conditions. These market conditions, in part, will reflect Ally 

Financial’s financial performance.

 

33In addition to repayments on the initial investment, Treasury has received dividends and 

other income from Ally Financial worth approximately $4.6 billion. For example, Treasury 

received a 9.0 percent fixed dividend annually from Ally Financial for the mandatory 

convertible preferred shares held until November 2013.
 

Page 14 GAO-14-698 Troubled Asset Relief Program

Since 2013, Ally Financial has continued its evolution into a publicly held, 

monoline finance company in the automotive sector with an Internet bank. 

Ally Financial’s financial condition continued to stabilize in late 2013 and 

early 2014 and the company raised significant levels of common equity 

through private and public share offerings. According to recent rating 

agency analyses, Ally Financial is competitive in automotive financing, 

particularly in the floor-plan business segment, but faces potential 

competitive challenges, such as its reliance on GM and Chrysler auto 

financing relationships.34

Ally Financial’s business structure has been simplified and clarified over 

the past year, according to rating agency analyses and federal regulatory 

officials. Specifically, the completion of the ResCap bankruptcy marked 

the company’s exit from the mortgage origination and servicing business. 

Ally Financial became a financial holding company in December 2013, 

which, according to the company, enabled it to retain its insurance and 

auction lines of business and maintain its full suite of products for dealers. 

Ally Financial also completed sales of its European and Latin American 

automotive finance operations to GM Financial, GM’s captive financing 

company, and its Canadian operations to Royal Bank of Canada.35 Ally 

Financial expects to complete GM Financial’s acquisition of its remaining 

international operation—its China joint venture, in which the company is a 

40 percent owner—in 2014, subject to government approvals in China.

Since our last review in 2013, Ally Financial’s financial performance has 

continued to stabilize as illustrated by multiple capital, profitability, and 

liquidity measures. Taking into account the resolution of ResCap, the sale 

of international operations, and other factors, the three largest credit 

rating agencies upgraded Ally Financial’s ratings, although the ratings 

remain below investment grade.

 

34As discussed previously, floor-plan, or wholesale, lending is a form of retail goods 

inventory financing in which each loan advance is made against a specific piece of 

collateral.

35As we reported in GAO-14-6, in 2009, GM acquired AmeriCredit Corporation 

(AmeriCredit), a subprime automobile finance company, to serve its subprime customers. 

AmeriCredit was renamed GM Financial and made a wholly owned subsidiary of GM. Its 

target lending market is consumers who have difficulty securing automobile financing from 

banks and credit unions.

Ally Financial’s 

Business Structure 

Has Been Evolving 

and Its Financial 

Condition Has 

Continued to Stabilize

Ally Financial’s Evolving 

Business Structure

Ally Financial’s Financial 

Condition Has Continued 

to Stabilize
 

Page 15 GAO-14-698 Troubled Asset Relief Program

Ally Financial’s capital position has remained the same or improved since 

2009—the year it became subject to regulatory and reporting 

requirements following its conversion to a bank holding company in 

December 2008. Capital can be measured in several ways, but we 

focused on tier 1 capital because it is currently the strongest form of 

capital (see table 1). We examined Ally Financial’s tier 1 capital ratio and 

tier 1 leverage ratio and compared them to minimums required under the 

Federal Reserve’s capital adequacy guidelines for bank holding 

companies. We also examined Ally Financial’s tier 1 common ratio. The 

Federal Reserve has long held the view that bank holding companies 

generally should operate with capital positions well above the minimum 

regulatory capital ratios, with the amount of capital held commensurate 

with a bank holding company’s risk profile.36

• Tier 1 capital and tier 1 common capital ratios: Higher tier 1 capital 

and common capital ratios may indicate that a bank holding company 

is in a better position to absorb financial losses. A tier 1 capital ratio 

measures tier 1 capital as a percentage of risk-weighted assets. As 

shown in table 1, Ally Financial’s tier 1 capital ratio increased from 

2009 to 2010 but has declined slightly since 2011. Federal Reserve 

Capital Adequacy Guidelines require bank holding companies to have 

a tier 1 risk-based capital ratio of at least 4 percent.37

 

36Capital Plans, 76 Fed. Reg. 74631, 74632 (Dec. 1, 2011); see also Capital Adequacy 

Guidelines for Bank Holding Companies, 12 CFR § 225, Appendix A, § I.

Ally Financial’s 

tier 1 capital ratio exceeded the required minimum each year from 

2009 through 2013. In 2013, Ally Financial reported that the tier 1 

capital ratio declined, in part, because of the repurchase of Treasury’s 

mandatory convertible preferred shares, which qualified as tier 1 

capital. A tier 1 common capital ratio measures common capital—that 

is, the common equity component of tier 1 capital as a share of riskweighted assets. Ally Financial’s tier 1 common ratio has increased 

3712 C.F.R. 225, Appendix A, § IV.A. Federal Reserve Capital Adequacy Guidelines 

require bank holding companies to have a minimum tier 1 risk-based capital ratio of 6 

percent to be considered well capitalized. 12 C.F.R. § 225.2(r)(1)(ii). 

Capital Position
 

Page 16 GAO-14-698 Troubled Asset Relief Program

from 4.85 percent at the end of 2009 to 8.84 percent at the end of 

2013.38

• Tier 1 leverage ratio: A tier 1 leverage ratio shows the relationship 

between a banking organization’s core capital and total assets. The 

tier 1 leverage ratio is calculated by dividing the tier 1 capital by the 

firm’s average total consolidated assets. Generally, a larger tier 1 

leverage ratio indicates that a company is less risky because it has 

more equity to absorb losses in the value of its assets. As shown in 

table 1, Ally Financial’s leverage ratio has been reduced by 20 

percent since 2009 but remains well above the regulatory minimum 

guideline of 3 or 4 percent, depending on the bank holding company’s 

composite rating.39

Table 1: Ally Financial Capital Ratios, 2009-2013

 2009 2010 2011 2012 2013

Tier 1 capital ratio 14.15% 15.00% 13.71% 13.13% 11.79% 

Tier 1 common capital ratioa 4.85 8.57 7.57 6.98 8.84 

Tier 1 leverage ratio 12.70 13.05 11.50 11.16 10.23 

Source: SNL. | GAO-14-698

a

Federal Reserve Capital Adequacy Guidelines do not require a minimum tier 1 common capital ratio. 

However, companies subject to the Federal Reserve’s capital plan rule must develop a capital plan 

that demonstrates the company’s ability to meet a tier 1 common ratio above 5 percent under 

stressed conditions. See 12 CFR 225.8(d)(2) (i)(B).

Ally Financial’s profitability continued to improve in early 2014, after 

declining in the fourth quarter of 2013 because of certain one-time 

expenses, as described later. We examined several measures of 

 

38This ratio is not a minimum ratio outside of the Federal Reserve’s CCAR. Ally Financial 

will become subject to a new regulatory capital framework beginning January 1, 2015.

Once fully phased in, the new rules will require that Ally Financial maintain a minimum 

common equity tier 1 risk-based capital ratio of 4.5 percent, a minimum tier 1 risk-based 

capital ratio of 6 percent, and a minimum total risk-based capital ratio of 8 percent. The 

new capital rules also revise the eligibility criteria for regulatory capital instruments. 

Regulatory Capital Rules: Regulatory Capital, Implementation of Basel III, Capital 

Adequacy, Transition Provisions, Prompt Corrective Action, Standardized Approach for 

Risk-weighted Assets, Market Discipline and Disclosure Requirements, Advanced 

Approaches Risk-Based Capital Rule, and Market Risk Capital Rule; Final Rule, 78 Fed. 

Reg. 62018 (Oct. 11, 2013).

3912 C.F.R. 225, Appendix D, § II.

Profitability
 

Page 17 GAO-14-698 Troubled Asset Relief Program

profitability, including net income (loss), net interest spread, return on 

assets, and nonperforming asset ratio.

• Net income (loss): Ally Financial suffered a net loss in 2009 of $10 

billion, but has reported net income for 4 of the last 5 years. As shown 

in figure 2, the 2009 loss was driven by substantial losses in its 

mortgage business operating unit. Ally Financial reported net income 

of $361 million in 2013, down from net income of $1.2 billion in 2012. 

The company attributed the decline to circumstances including a tax 

valuation adjustment of $1 billion in 2012; the 2013 payment of $1.4 

billion as part of the ResCap settlement agreement; and the $98 

million payment in connection with the Department of Justice and 

Consumer Financial Protection Bureau consent orders.

Figure 2: Ally Financial Net Income (Loss) by Operating Unit, 2009-2013

Notes: Data are the most recent reported values in Ally Financial reports on Form 10-K. Ally Financial 

reported a net loss in 2011 due to the accrual of foreclosure-related expenses. Total reported net 

income does not always equal the sum of the three operating units because of the exclusion of 

“other” income.
 

Page 18 GAO-14-698 Troubled Asset Relief Program

• Net interest spread: The net interest spread is the difference 

between the average rate on total interest-earning assets and the 

average rate on total interest-bearing liabilities, excluding 

discontinued operations for the period. In general, the larger the 

spread, the more a company is earning. Ally Financial’s net interest 

spread increased from a reported 0.31 percent at the end of 2009 to 

1.75 percent at the end of 2013, meaning that Ally Financial is earning 

more interest on its assets than it is paying interest on its liabilities 

(see table 2).40

• Return on assets (ROA): ROA is calculated by dividing a company’s 

net income by its total assets. It is an indication of how profitable a 

company is relative to its total assets and gives an idea of 

management’s efficiency in using its assets to generate earnings. A 

higher ROA suggests that a company is using its assets efficiently. 

Ally Financial reported improved ROA from 2009 to 2013, with a 

reported negative 5.81 percent ROA for 2009 and a positive 0.23 

percent in 2013.

• Nonperforming asset ratio: This ratio measures asset quality by 

dividing the value of nonperforming assets by the value of total 

assets. The lower the ratio, the fewer poorly performing assets a 

company holds. Ally Financial’s nonperforming asset ratio fell from 

4.36 percent in 2009 to 1.19 percent in 2013 (see table 2).

Table 2: Net Interest Spread, Return on Assets, and Nonperforming Asset Ratio for 

Ally Financial, 2009-2013

 2009 2010 2011 2012 2013

Net interest spread 0.31 0.81 0.69 1.18 1.75

Return on assets (5.81) 0.58 (0.09) 0.65 0.23

Nonperforming asset ratio 4.36 3.46 2.69 1.06 1.19

Source: GAO analysis of Ally Financial and SNL data. | GAO-14-698

Ally Financial’s liquidity position generally has stabilized since 2009. To 

examine Ally Financial’s liquidity position, we examined the company’s 

total liquidity ratio, bank deposits, and operating cash flow.

 

40Ally Financial Inc. Annual Report (Form 10-K) (Dec. 31, 2013). Ally Financial restated its 

net interest spread figures for prior years in its 2013 Form 10-K. 

Liquidity, Bank Deposits, and 

Cash Flow
 

Page 19 GAO-14-698 Troubled Asset Relief Program

• Total liquidity ratio: Liquidity ratios measure a bank’s total liquid 

assets against its total liabilities. Generally, the ratios indicate a 

bank’s ability to sell assets quickly to cover short-term debts—with a 

higher ratio providing a larger margin of safety.41

 

41In February 2014, the Federal Reserve issued a final rule to implement certain 

enhanced prudential standards under the Dodd-Frank Act for large bank holding 

companies. Enhanced Prudential Standards for Bank Holding Companies and Foreign 

Banking Organizations; Final Rule. 79 Fed. Reg. 17240 (Mar. 27, 2014) (codified at 12 

C.F.R. pt. 252). In its annual report (Form 10-K), Ally Financial reported that the final rule 

will, among other things, require the company to maintain a buffer of unencumbered highly 

liquid assets to meet projected net cash outflows for 30 days over the range of liquidity 

stress scenarios used in internal stress tests and to comply with a number of risk 

management and governance requirements, including liquidity risk management 

standards. The final rule has a general compliance date of January 1, 2015. 12 C.F.R. § 

252.31(c). 

Overall, Ally 

Financial’s liquidity ratio remained fairly stable from the third quarter of 

2009 through the fourth quarter of 2013 (see fig. 3). Declines in 

liquidity levels in 2012 and 2013 were associated with repayments of 

government assistance. For example, according to Ally Financial, the 

decline in liquidity in 2013 was due to the repurchase of the Treasury 

mandatory convertible preferred shares and the redemption of certain 

high-coupon, callable debt. For the quarter ending March 31, 2014, 

Ally Financial reported a total liquidity ratio of 16.01 percent.
 

Page 20 GAO-14-698 Troubled Asset Relief Program

Figure 3: Ally Financial Liquidity Ratio, September 2009-March 2014

• Bank deposits: Bank deposits are the funds that consumers and 

businesses place with a bank, and growth in deposits is an important 

factor in the bank’s liquidity position. From December 2008 to March 

2014, deposits at Ally Bank, Ally Financial’s Internet bank, grew 

almost 190 percent, from $19.3 billion to $55.9 billion, of which 

approximately $45.2 billion were retail (consumer) deposits. Deposits

accounted for 43 percent of Ally Financial’s total funding as of the first 

quarter of 2014, providing the company with a low-cost source of 

funding that is less sensitive to interest rate changes and market 

volatility than other sources of funding.

• Operating cash flow: From the first quarter of 2010 through the third 

quarter of 2013, Ally Financial generated positive cash flow from 

operating activities (see fig. 4). Since the third quarter of 2013, cash 

flows have varied, with Ally reporting negative cash flow in the fourth 

quarter of 2013 and positive cash flow at the end of the first quarter of 

2014. According to Ally Financial, 2013 declines in operating cash 

flow (compared with the prior year) were driven by the settlement of 
 

Page 21 GAO-14-698 Troubled Asset Relief Program

derivative transactions, but were partially offset by sales and 

repayments of mortgage and automotive loans.42

Figure 4: Ally Financial Operating Cash Flow, September 2009-March 2014

Ally Financial’s changing financial condition is reflected in its credit rating. 

Although Ally’s credit rating remains below investment grade, its longterm credit rating with the three largest credit rating agencies has been 

upgraded multiple times since 2009. Most recently, Ally’s long-term 

ratings with Moody’s, Standard and Poor’s, and Fitch Ratings were 

upgraded to Ba3, BB, and BB+, respectively.

 

42According to Ally Financial, the decrease was primarily due to higher cash outflows to 

settle derivatives during the year ended December 31, 2013. During 2013, Ally Financial 

completed the sale of its mortgage servicing rights assets and effectively exited the 

mortgage origination and servicing business. Further, the wind-down and ultimate 

termination of mortgage-related derivative activity was a driver of the operating cash 

outflows for the year ended December 31, 2013. These wind-down activities occurred 

throughout 2013 and were not isolated to the fourth quarter. 
 

Page 22 GAO-14-698 Troubled Asset Relief Program

According to rating agency analyses, Ally Financial is a strong competitor 

in automotive financing, although the company faces competitive 

challenges. Analysts have said that Ally Financial is competitive in 

automotive financing, particularly in the floor-plan business segment. In 

addition, as mentioned previously in this report, Ally Bank has continued 

to increase its level of retail deposits. 

Analysts have pointed to potential competitive challenges for Ally 

Financial, such as its reliance on GM and Chrysler automotive financing 

relationships. As we previously reported, GM and Chrysler have 

established captive financing units.43 Ally’s exclusive lending relationships 

with GM and Chrysler have ended as the two automakers have begun to 

rely on their captive financing units. For example, the agreement between 

GM and Ally Financial on dealer and consumer lending was revised in 

early 2014. Among other changes, Ally Financial no longer enjoys 

exclusivity with regard to GM lending arrangements.44

 

43As we previously reported, according to GM officials, the purpose of GM Financial is to 

drive incremental GM automobile sales by providing funding for GM dealers and 

consumers. In 2013, GM Financial increased its overall assets by purchasing Ally 

Financial’s international assets, including the dealer financing arrangements in these 

countries. In February 2013, Chrysler announced that it had entered into an agreement 

with Santander Consumer USA Inc., a subsidiary of Banco Santander, S.A., that 

specializes in subprime automotive financing, to provide a full spectrum of automotive 

financing services to Chrysler Group customers and dealers under the name of Chrysler 

Capital. Under the 10-year, private-label agreement, Santander Consumer USA was to 

establish a separate lending operation dedicated to providing financial services under the 

Chrysler Capital name, including financing for retail loans and leases, new and used 

vehicle inventory, dealership construction, real estate, working capital, and revolving lines 

of credit. The agreement grants Santander Consumer USA the right to a minimum 

percentage of Chrysler’s subvention—subsidy or financial support—volume and the right 

to use the Chrysler Capital name for automobile loan and lease offerings. Santander 

Consumer USA also will provide loans to Chrysler dealers to finance inventory, working 

capital, and capital improvements. On May 1, 2013, Chrysler Capital started its lending 

operations.

The captive 

financing units of GM and Chrysler have begun to increase their financing

activities. However, according to Ally Financial representatives, the 

company is the only automotive finance company that offers a suite of 

44Ally Financial reported that it entered into a new automotive financing agreement with 

GM (effective Mar. 1, 2014) that provides a general framework for dealer and consumer 

financing related to GM vehicles, as well as Ally Financial’s ongoing participation in GM 

subvention programs. The agreement does not provide Ally with any exclusivity or similar 

privileges related to the financing of GM vehicles, whether through subvention programs 

or otherwise. As a result, the agreement does not provide the economic benefits or 

impose the obligations that were included in the previous agreement with GM. 

Ally Financial Continues to 

Face Competitive 

Challenges
 

Page 23 GAO-14-698 Troubled Asset Relief Program

products to dealers (financing, insurance, and auction services) and as a 

result, the company expects to continue to be competitive in this 

segment. Moreover, Ally Financial representatives told us that the 

company has been focusing more on increasing profitability than on 

market share—consistent with its goals as a publicly held company, 

which include maximizing return to shareholders. Company 

representatives also have said in public statements that Ally Financial has 

been focusing on reducing its noninterest expenses and lowering its cost 

of funds.

Ally Financial also faces competition from other large bank holding 

companies in consumer automobile financing. We compared the amount 

of Ally Financial consumer automobile financing with that of four large 

bank holding companies (Bank of America Corporation, Capital One 

Financial Corporation, JPMorgan Chase & Company, and Wells Fargo & 

Company) that reported consumer automobile loans.45 These data do not 

include all types of automobile financing, such as automobile leasing and 

dealer financing, but only retail consumer automobile loans for the time 

period.46

 

45These four bank holding companies are also financial holding companies. 

Most recently, in the first quarter of 2014 Wells Fargo’s retail 

lending exceeded that of Ally Financial (see fig 5). The dollar amount of 

consumer automobile loans that Wells Fargo, JPMorgan Chase, and 

Capital One made increased from March 2011 through March 2014, while 

the dollar amount of Ally Financial financing has declined since the fourth

quarter of 2012. According to Federal Reserve officials, this decline likely 

reflects the sale of the international automotive finance operations.

46The Federal Reserve defines consumer automobile loans for bank holding company 

reporting purposes. They are all consumer loans extended for the purpose of purchasing 

new and used passenger cars and other vehicles such as minivans, vans, sport-utility 

vehicles, pickup trucks, and similar light trucks for personal use. These loans include both 

direct and indirect consumer automobile loans as well as retail installment sales papers 

purchased by the bank from automobile dealers. See Instructions for Preparation of 

Consolidated Financial Statements for Holding Companies, Reporting Form FR Y-9C, 

Schedule HC-Consolidated Balance Sheet.
 

Page 24 GAO-14-698 Troubled Asset Relief Program

Figure 5: Dollar Amount of Consumer Automobile Loans for Five Large Bank 

Holding Companies, 2011-2014

Another potential area of competition is retail banking. Ally Bank, as an 

Internet bank, may have less of an ability to retain customers than 

traditional banks, according to analysts. However, as discussed 

previously, Ally Bank’s retail deposits have continued to rise over the past 

year. The company expects deposits to continue to increase by about $5 

billion per year for the next few years. Ally Financial representatives also 

told us that Ally Bank has high brand awareness and a high retention rate 

for products such as certificates of deposit. Ally Bank also has been able 

to reduce the interest rates it pays on deposits, while retaining customers. 

For example, Ally Bank is no longer among the top seven rate payers, 

according to Ally Financial representatives.
 

Page 25 GAO-14-698 Troubled Asset Relief Program

We provided a draft of this report to FDIC, the Federal Reserve, and 

Treasury for their review and comment. In addition, we provided a copy of 

the draft report to Ally Financial to help ensure the accuracy of our report. 

Treasury provided written comments that are reprinted in appendix II. Ally 

Financial provided technical comments, which we have incorporated, as 

appropriate. FDIC and the Federal Reserve did not provide comments.

In its written comments, Treasury generally concurred with our findings. 

Treasury noted that approximately $17.8 billion has been recovered to 

date from Ally Financial through repayments, a private placement, and an 

initial public offering. Treasury also noted that it will unwind its remaining 

ownership stake in a way that balances the speed of recovery with 

maximizing returns to taxpayers.

We are sending copies of this report to FDIC, the Federal Reserve, and 

Treasury, and the appropriate congressional committees. This report will 

also be available at no charge on our website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-8678 or clowersa@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Key contributors to this report are listed in 

appendix III.

A. Nicole Clowers

Director

Financial Markets and Community Investment

Agency Comments
 

Page 26 GAO-14-698 Troubled Asset Relief Program

List of Committees

The Honorable Barbara Mikulski 

Chairwoman

The Honorable Richard C. Shelby 

Vice Chairman

Committee on Appropriations 

United States Senate

The Honorable Tim Johnson

Chairman

The Honorable Mike Crapo

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Patty Murray

Chairman

The Honorable Jeff Sessions

Ranking Member

Committee on the Budget

United States Senate

The Honorable Ron Wyden

Chairman

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Hal Rogers

Chairman

The Honorable Nita Lowey

Ranking Member

Committee on Appropriations

House of Representatives

The Honorable Paul Ryan

Chairman

The Honorable Chris Van Hollen

Ranking Member

Committee on the Budget

House of Representatives
 

Page 27 GAO-14-698 Troubled Asset Relief Program

The Honorable Jeb Hensarling

Chairman

The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

House of Representatives

The Honorable Dave Camp

Chairman

The Honorable Sander Levin

Ranking Member

Committee on Ways and Means

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 28 GAO-14-698 Troubled Asset Relief Program

This report is based on our continuing analysis and monitoring of the 

Department of the Treasury’s (Treasury) activities in implementing the 

Emergency Economic Stabilization Act of 2008 (EESA), which provided 

us with broad oversight authorities for actions taken under the Troubled 

Asset Relief Program (TARP).1

To examine the status of Treasury’s investments, we reviewed TARP 

reports, which included monthly reports to Congress and daily TARP 

updates regarding the Automotive Industry Financing Program (AIFP) 

program data. Using the AIFP program data, we analyzed Treasury’s 

equity ownership and recovery of funds in Ally Financial for the time 

period from January 2009 through June 2014. We have previously 

assessed the reliability of the AIFP program data from Treasury. For 

example, we tested the Office of Financial Stability’s internal controls over 

financial reporting as they related to our annual audit of the office’s 

financial statements and found the information to be sufficiently reliable 

based on the results of our audit of the TARP financial statements for 

fiscal years 2009—2013. AIFP was included in these financial audits.

This report examines (1) the status of 

Treasury’s investments in Ally Financial Inc. (Ally Financial) as of June 

30, 2014, and its efforts to wind down those investments; and (2) the 

financial condition of Ally Financial through March 31, 2014.

2

To analyze Treasury’s efforts to wind down its investments in Ally 

Financial, we reviewed Treasury documentation relating to its exit from 

Ally Financial. We reviewed Ally Financial regulatory filings, including 

Securities and Exchange Commission (SEC) filings; and publicly 

available reports from the Board of Governors of the Federal Reserve 

System (Federal Reserve) on the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act) stress test and capital plan 

analysis, Dodd-Frank Act Stress Test 2014: Supervisory Stress Test 

Methodology and Results; and Comprehensive Capital Analysis and 

In 

addition, for this review, we reviewed the data for completeness and 

obvious errors such as outliers. Based on this review, we determined that 

the data were sufficiently reliable for our purposes.

 

1

Pub. L. No. 110-343, § 116, 122 Stat. 3765, 3783 (codified at 12 U.S.C. § 5226).

2

EESA, which was signed into law on October 3, 2008, established the Office of Financial 

Stability within Treasury and provided it with broad, flexible authorities to buy or guarantee 

troubled mortgage-related assets or any other financial instruments necessary to stabilize 

the financial markets. § 101(a), 122 Stat. at 3767 (codified at 12 U.S.C. § 5211(a)).

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 29 GAO-14-698 Troubled Asset Relief Program

Review 2014: Assessment Framework and Results.3

To assess the financial condition of Ally Financial, we measured the 

institution’s capital ratios, net income, net interest spread margin, return 

on assets, nonperforming asset ratio, liquidity ratio, bank deposits, and 

operating cash flow, generally from 2009 through the first quarter (March 

31) of 2014. We obtained these data from SNL Financial, a provider of 

financial information. We have determined that SNL Financial data are 

sufficiently reliable for past reports, and we reviewed past GAO data 

reliability assessments to ensure that we, in all material respects, used 

the data in a similar manner and for similar purposes. We also reviewed 

reports by several credit rating agencies on how they rate Ally Financial’s 

financial strength. Although we have reported on actions needed to 

improve the oversight of rating agencies, we included these ratings 

because the ratings are widely used by Ally Financial, Treasury, and 

market participants. To obtain information on the financial ratios and 

indicators used in the analyses of Ally Financial’s financial condition, we 

reviewed relevant documentation and interviewed officials from FDIC, the 

Federal Reserve, Treasury, and representatives from Ally Financial. For 

the comparison of retail (consumer) automotive lending for five large bank 

holding companies, including Ally Financial, we used Federal Reserve 

regulatory filings (Form FR-Y9C). For each data source we reviewed the 

data for completeness and obvious errors and determined that these data 

were sufficiently reliable for our purposes.

In addition, we 

interviewed officials from Treasury, the Federal Reserve, the Federal 

Deposit Insurance Corporation (FDIC), and representatives from Ally 

Financial.

We conducted this performance audit from March 2014 to August 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 

3

Pub. L. No. 111-203, 124 Stat. 1376 (2010). 
Appendix II: Comments from the Department 

of the Treasury

Page 30 GAO-14-698 Troubled Asset Relief Program

Appendix II: Comments from the Department 

of the Treasury 
Appendix III: Contact and Staff 

Acknowledgments

Page 31 GAO-14-698 Troubled Asset Relief Program

A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov

In addition to the contact named above, Karen Tremba (Assistant 

Director), Catherine Gelb (Analyst-in-Charge), Bethany Benitez, William 

Chatlos, Risto Laboski, Terence Lam, Barbara Roesmann, and Jena 

Sinkfield made significant contributions to this report.

Appendix III: Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(100014)
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