Troubled Asset Relief Program: Government's Exposure to Ally Financial Lessens as Treasury's Ownership Share Declines
Released: 2014-08-05T00:00:00

Letter

Background

Ally Financial is one of the country’s largest financial holding companies, with total assets of $148.5 billion as of March 31, 2014. Its primary line of business is automotive financing—both consumer financing and leasing and dealer floor-plan financing. Ally Financial (when it was known as GMAC) formerly served as General Motors Company’s (GM) captive automotive finance company. 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 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.

Regulation and Supervision of Ally Financial

As a financial holding company, Ally Financial is regulated and supervised by the Federal Reserve. 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).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.

In addition, the Federal Reserve requires the same bank 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. 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.

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. 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. The company also must resubmit the capital plan after remediating the deficiencies.

In March 2013, the Federal Reserve reported the results of its 2013 supervisory stress test and of the CCAR exercise.

The Federal Reserve 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. 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.

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.

Treasury Assistance through TARP

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.outlined guiding principles for the investments, including In July 2009, Treasury exiting its investments as soon as practicable in a timely and orderly manner that minimizes financial market and economic impact; protecting taxpayer investment and maximizing overall investment returns within competing constraints; 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.

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.

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.

In December 2009, Treasury made additional investments in Ally Financial—$2.5 billion of trust preferred securities and approximately $1.3 billion of mandatory convertible preferred shares.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.

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.

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.

Resolution of Major Regulatory and Legal Issues Was Key to Treasury Reducing Its Ownership Share in Ally Financial

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.

Resolution of Regulatory and Legal Issues Removed Uncertainty about Ally Financial

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. 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.

Completion of the ResCap bankruptcy: In December 2013, the bankruptcy of Ally Financial’s ResCap subsidiary was substantially resolved. 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.

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.

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

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.

Since December 2013, Treasury’s Ownership Share in Ally Financial Has Declined at an Accelerated Pace

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.Additionally, Ally Financial issued $1.3 billion of common equity to third- party 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.

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.

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.

Ally Financial’s Business Structure Has Been Evolving and Its Financial Condition Has Continued to Stabilize

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.

Ally Financial’s Evolving Business Structure

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

Ally Financial’s Financial Condition Has Continued to Stabilize

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.

Capital Position

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.

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. 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 risk- weighted assets. Ally Financial’s tier 1 common ratio has increased from 4.85 percent at the end of 2009 to 8.84 percent at the end of 2013.

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.

12 C.F.R. 225, Appendix D, § II. 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.

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).

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).

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.

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. 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.

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 derivative transactions, but were partially offset by sales and repayments of mortgage and automotive loans.

Ally Financial’s changing financial condition is reflected in its credit rating. Although Ally’s credit rating remains below investment grade, its long- term 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.

Ally Financial Continues to Face Competitive Challenges

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. 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 The captive exclusivity with regard to GM lending arrangements.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 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. 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.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.

Agency Comments

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.

Appendix I: Objectives, Scope, and Methodology

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). 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.

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. 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.

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)).

Review 2014: Assessment Framework and Results.interviewed officials from Treasury, the Federal Reserve, the 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 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.

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.

Appendix II: Comments from the Department of the Treasury

Appendix III: Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.