In 2008 and 2009, collapsing world credit markets and a slowing global economy combined to create the weakest market in decades for production, financing, and sale of motor vehicles in the United States and many other industrial countries. The production and sales slides were serious business challenges for all automakers, and rippled through the large and interconnected motor vehicle industry supply chain, touching suppliers, auto dealers, and the communities where automaking is a major industry. Old GM and Old Chrysler, in addition to being affected by the downdraft of the recession, were in especially precarious financial positions. As the supply of credit tightened, they lost the ability to finance their operations through private capital markets and sought federal financial assistance in 2008. The separate companies that financed GM and Chrysler vehicles, GMAC and Chrysler Financial, were also experiencing financial difficulties, with GMAC suffering from large losses in the mortgage markets as well. With 91% of U.S. passenger vehicle sales depending upon financial intermediaries to provide loans or leases, the auto financing companies' inability to lend damaged the prospects of Old GM and Old Chrysler pulling out of the slump, particularly because other sources of credit, such as banks and credit unions, were also reluctant to lend due to ongoing financial market disruptions. When Congress did not pass auto industry loan legislation, the George W. Bush Administration turned to the Troubled Asset Relief Program (TARP) to fund assistance for both automakers and for GMAC and Chrysler Financial. TARP had been created by the Emergency Economic Stabilization Act (EESA) in October 2008 to address the financial crisis. This statute specifically authorized the Secretary of the Treasury to purchase troubled assets from "financial firms," the definition of which did not specifically mention manufacturing companies or auto financing companies. The authorities within EESA were very broad, and both the Bush and Obama Administrations used TARP's Automotive Industry Financing Program to provide financial assistance ultimately totaling more than $80 billion to the two manufacturers and two finance companies. This assistance was not without controversy, and questions were raised about the legal basis for the assistance and the manner in which it was carried out. The financial assistance provided to private companies by the government during the financial crisis can broadly be divided into (1) assistance for solvent companies facing temporary difficulties due to the upheaval in financial markets and (2) assistance for more deeply troubled firms whose failure was thought likely to cause additional difficulties throughout the financial system and broader economy. As a large financial institution, GMAC might have been eligible for various programs and loan facilities intended for solvent institutions, particularly after its conversion to a bank holding company. Whether or not GMAC was actually solvent, however, remains unclear. Ultimately, the TARP assistance provided to the company came from the Auto Industry Financing Program, not the programs for assisting banks. GMAC/Ally Financial also received assistance from Federal Reserve (Fed) and Federal Deposit Insurance Corporation (FDIC) programs intended for healthy banks facing temporary funding issues. Table 1 below summarizes the TARP assistance given to the U.S. motor vehicle industry. Of the two auto financing companies, Chrysler Financial received relatively minor amounts of TARP assistance ($1.5 billion) and repaid this loan relatively quickly with interest. GMAC, however, ultimately required much more extensive assistance which resulted in the federal government taking a majority ownership stake in the company. In addition, during the crisis, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion permitted by the Fed due to emergency conditions in the financial markets. This conversion allowed access to Fed lending facilities and also increased regulatory oversight of the company. In March 2011, the company, now renamed Ally Financial, filed with the Securities and Exchange Commission (SEC) for an initial public offering (IPO) of shares. The IPO was a major step in unwinding the government involvement in GMAC/Ally Financial. The price at which the government was able to sell shares during and after an IPO was instrumental in determining whether the government was able to recoup its assistance for GMAC/Ally Financial. In July 2011, Ally put its IPO on hold because of what one news story called the "near shutdown in global equity capital markets." The IPO process was ultimately completed in May 2014. Sales of government shares during the IPO reduced the government ownership to 15.6% of the company. In addition to auto financing, GMAC was a large participant in the mortgage markets, particularly through subsidiaries known as ResCap. The bursting of the housing bubble and the 2008-2009 financial crisis resulted in substantially negative returns from the company's mortgage operations with prospects of future losses. The financial status of ResCap was a factor in Ally not undertaking an IPO in 2011 as the uncertainty surrounding future losses from mortgages had been a drag on the company. Ultimately the ResCap subsidiaries filed for Chapter 11 bankruptcy in May 2012. This bankruptcy was possible because the ResCap operations were legally separate from Ally Financial. Ally Financial took an approximately $1.3 billion charge due to the bankruptcy. The authority to purchase assets under TARP expired during the 111 th Congress, as did the TARP Congressional Oversight Panel, a temporary panel created in the TARP statute. Congress, however, conducted TARP oversight hearings in the House during 113 th Congress. Auto financing companies have a dual role in auto retailing. Because of the high price of motor vehicles, more than 90% of customers finance or lease their vehicle. While outside financial institutions such as credit unions and banks also lend to finance such purchases, the automobile companies themselves have long offered financing and leasing to consumers through related finance companies (such as GMAC, Chrysler Financial, Ford Motor Credit, and Toyota Motor Credit). In addition to the financing of retail auto purchases, dealers have traditionally used the manufacturers' finance arms to purchase the automobile inventory from the manufacturers. These loans are called floor plan financing. As the banking crisis intensified in 2008-2009, floor plan and retail financing were seriously affected as the financing companies were unable to raise the capital to fund the manufacturer-dealer-consumer pipeline. Thus, in order to assist the auto manufacturers, it was deemed important to assist the auto financing companies. General Motors Acceptance Corporation (GMAC) was created by Old GM in 1919 to provide credit for its customers and dealers. Over the decades, GMAC expanded into providing other financial products, including auto insurance (beginning in 1939) and residential mortgages (beginning in 1985), but remained a wholly owned subsidiary of Old GM. GMAC's operations were generally profitable over the years. In 2003, for example, the company contributed $2.8 billion to Old GM's bottom line with total assets of $288 billion. In 2006, Old GM spun off GMAC into an independent company, with Cerberus Capital Management purchasing 51% of GMAC for approximately $14 billion; GM retained a 49% share. At the time the automaker was under financial pressure to locate additional capital. In 2005, Old GM had recorded its largest annual loss since 1992, stemming primarily from its auto business. GM's overall corporate credit rating declined and caused GMAC's credit rating to be lowered to junk status, making it more difficult for the finance unit to raise capital. In turn, the lower credit rating increased GMAC's cost of financing GM vehicle sales. It was reported that GMAC paid interest rates of up to 5.4 percentage points above comparable Treasury securities on its debt, versus 1.7 to 2.7 percentage points above in 2004. It was thought that selling the controlling stake to Cerberus would provide GMAC with lower credit costs through better access to capital markets. After the spinoff, providing financing for Old GM customers and dealers remained a large portion of GMAC's business, and the two companies remained linked through numerous contracts and through Old GM's continued 49% ownership stake in GMAC. As the early 2000s housing boom turned to the late 2000s housing bust, the previously profitable GMAC mortgage operations began generating significant losses. GMAC was exposed to the mortgage markets both as an investor and as a participant. For example, in 2006, GMAC held approximately $135.1 billion in mortgage assets. GMAC's ResCap subsidiary was the country's sixth-largest mortgage originator and fifth-largest mortgage servicer in 2008. GMAC as a whole produced more than $51 billion in mortgage-backed securities in that year. At the same time the housing market was encountering difficulties, automobile sales were dropping, which negatively affected GMAC's core auto financing business. In addition, GMAC, along with nearly all financial firms, faced difficulties in accessing capital markets for funding that previously had been relatively routine. Prior to the crisis, GMAC's banking operations had been operating as an industrial loan corporation (ILC) rather than under a federal bank holding company charter. Much of the federal government support offered in response to the financial crisis at the time, particularly the initial assistance provided under the TARP Capital Purchase Program, was not available to GMAC because it was organized as an ILC. GMAC applied for federal bank holding company status in November 2008, and the Federal Reserve approved the application in an expedited manner in December 2008. As part of the approval, neither Old GM nor Cerberus was allowed to maintain a controlling interest in GMAC and some of the links between Old GM and GMAC were gradually unwound. Since the transformation into a bank holding company, GMAC renamed itself Ally Financial, Inc. and expanded its depository banking operations under the name Ally Bank. In December 2013, the Fed approved Ally Financial's application for financial holding company status, which allows the company to engage in a broader range of businesses, such as insurance, than would have been permissible as a bank holding company. At the time, Ally faced increasing competition. According to a Government Accountability Office report issued in October 2013, Ally Financial faces growing competition in both consumer lending and dealer financing from Chrysler Capital, GM Financial, and other large bank holding companies. This competition may affect the future profitability of Ally Financial, which could influence the share price of Ally Financial once the company becomes publicly traded and thus the timing of Treasury's exit. Following the government assistance and restructuring of the auto industry, GMAC/Ally Financial provided much of the floor plan and retail financing for New GM and New Chrysler. The relationship among the companies, however, has been in flux. In 2010, New GM acquired AmeriCredit Corporation, and renamed it General Motors Financial Company, a subsidiary now competing with GMAC/Ally Financial. GM added to the rebuilding of its own lending business when GM Financial purchased Ally's international auto lending operations in 2013, reportedly doubling the size of GM's in-house lender. According to GM, GM Financial offers financing for about 80% of GM's worldwide sales. Similarly, Chrysler re-established a unit that provides floor plan financing to its dealers, instead of using Ally Financial. In 2013, it established Chrysler Capital for that purpose, in conjunction with Spanish lender Banco Santander. Ally previously had preferred lender agreements with Chrysler and GM, but these expired in April 2013 and February 2014, respectively. It continues to support auto financing with the two Detroit automakers, but without an exclusive agreement to finance their respective vehicle sales incentive programs. As of September 30, 2014, Ally Financial was the 19 th -largest U.S. bank holding company, with approximately $149.2 billion in total assets. In its annual filing with the SEC in early 2014, Ally reported three major lines of business: Dealer Financial Services. These services include automotive finance and insurance, providing loans, leases, and commercial insurance to 16,000 auto dealers and 4 million retail customers. These operations had $116.4 billion of assets and generated $4.7 billion of total net revenue in 2013. Mortgages . GMAC/Ally Financial historically had significant mortgage operations, but Ally Financial exited the large portions of their residential mortgage operations with the ResCap bankruptcy filing and with the divestment of other mortgage financing activities. The bankruptcy court confirmed the bankruptcy plan in December 2013. Ally's mortgage operations had $8.2 billion of assets on December 31, 2013, and generated $76 million of total net revenue in 2013. Depository banking . Ally Bank raises deposits through the Internet, telephone, mobile, and mail channels. Its consumer banking activities include savings and money market accounts, certificates of deposit, interest-bearing checking accounts, and individual retirement accounts. At the end of 2013, it had $52.9 billion of deposits, including $43.2 billion of retail deposits. GMAC/Ally Financial's past role as a mortgage servicer led to further interactions with TARP as the company participated in the TARP Home Affordable Modification Program (HAMP). GMAC/Ally Financial has received approximately $96 million in servicer incentive payments for participating in HAMP. The company faced criticism for documentation issues in its foreclosure proceedings and reported a $230 million charge to the company's 2011 earnings due to foreclosure-related complaints. GMAC/Ally Financial benefited from both general and specific government assistance during the financial crisis. Such assistance included (1) Federal Reserve lending facilities, where an institution could borrow cash from the Fed in return for less liquid securities; (2) the FDIC's Temporary Liquidity Guarantee Program (TLGP), which guarantees debt issued by banks; and (3) the TARP, which primarily provided additional capital to strengthen the company's balance sheet. Historically, the Fed declined to identify individual institutions to which it lent funds. GMAC itself, however, reported that at the end of 2008, it had $7.6 billion outstanding from the Fed's Commercial Paper Funding Facility (CPFF). The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010, required the Fed to detail its emergency lending through the financial crisis; details of such lending were released in late 2010. This release did not include borrowing from non-emergency facilities, such as the discount window. Table 2 summarizes the information released by the Federal Reserve regarding GMAC/Ally Financial's borrowing from the CPFF and the Term Auction Facility (TAF). As part of its response to the then-ongoing financial crisis, the FDIC created the TLGP to encourage liquidity in the banking system. One component of this program guarantees senior unsecured debt issued by banks before October 31, 2009, with coverage until December 31, 2012. Based on its size, GMAC/Ally Financial was eligible to issue up to $7.4 billion of debt under the program and it did so in three tranches: $2.9 billion in October 2009 and $3.5 billion and $1 billion in December 2009. This debt matured in October and December 2012. In return for the guarantee, the FDIC received approximately $393 million in fees from GMAC/Ally Financial. GMAC applied for the Treasury's TARP Capital Purchase Program in 2008 at the same time as it applied to the Fed for permission to convert to a bank holding company. By the time the application was approved, Treasury had announced the Auto Industry Financing Program (AIFP) and the assistance received by GMAC/Ally Financial came under this program rather than the TARP bank assistance programs. GMAC received three large rounds of assistance through TARP: (1) $5.25 billion on December 30, 2008, (2) $7.5 billion on May 21, 2009, and (3) $3.98 billion on December 30, 2009. This assistance was provided through the purchase of various types of preferred equity in GMAC, including mandatory convertible preferred stock and trust preferred securities. Holders of preferred equity are entitled to dividends before any dividend is paid to holders of common stock, but they have no voting rights in the company. The Treasury received warrants for approximately $825 million in additional preferred equity in conjunction with these transactions and the preferred stock has paid dividends. In addition to the direct assistance for GMAC/Ally Financial, the company also received indirect TARP assistance in the form of an $884 million loan to Old GM for participation in a December 2008 rights offering for GMAC common stock. In early 2009, the Treasury and banking regulators conducted stress tests on large banks, including on GMAC. These tests were intended to identify financial institutions that needed additional capital. Such banks were to be eligible for the new TARP Capital Assistance Program if they proved unable to raise needed capital from the private markets. However, the Capital Assistance Program was never used because, other than GMAC, the banks, which were judged to need additional capital, were able to raise this capital from the private market. GMAC was unable to raise capital from the private market and instead received the two additional rounds of assistance from the Auto Industry Financing Program as detailed above. Since the initial assistance in 2008, the government not only injected additional capital into GMAC/Ally Financial, but also changed the form of the government investment. The $884 million loan to Old GM was converted in May 2009 into approximately 35% of common equity in GMAC/Ally held by the U.S. Treasury. In December 2009, $3 billion of preferred shares was converted into an additional 21% of common equity, raising the federal ownership to more than 56%. The warrants that came along with the assistance were also exercised. In December 2010, $5.5 billion of preferred equity was converted into approximately 17.5% of the company's common equity, raising federal ownership to 73.8%. The other large shareholders at that time were the GM Trust, 9.9% Cerberus Capital, 8.7% and other investors, 7.6%. The 73.8% government ownership stake was reduced to 63.4% through a share dilution in November 2013. Following this, the share eventually was reduced to 0% through both private and public equity sales by the government from January 2014 to December 2014. In total, the U.S. Treasury recouped $14.7 billion of the assistance principal and received $4.9 billion in dividends and other income from its involvement with GMAC/Ally between 2008 and 2014. The TARP assistance for GMAC/Ally Financial, like most of the TARP assistance, was initially provided through financial instruments that were expected to be repaid or repurchased by the recipients. In some cases, including GMAC/Ally Financial, the U.S. Treasury converted all or some of TARP assistance into common equity in the company. Assistance converted to common equity was not subject to repayment by the company, but represented an ownership stake in the company. Conversion into common equity meant that the government's ability to recoup its assistance depended on the price received when the government sold its shares. If the value of the shares when sold was less than the amount of the government's assistance, Ally Financial had no obligation to compensate the government for the difference. Conversely, if the common equity stake were sold for more than the amount of the assistance, the government would retain any excess. In addition to the funds repaid through asset sales, the TARP assistance also produced other income, such as interest, dividends, or capital gains, which could be considered as offsetting losses on common equity sales should such losses occur. As specified by the TARP statute, proceeds from TARP assistance "shall be paid into the general fund of the Treasury for reduction of the public debt." The outcomes of the government's holdings of common equity in other large TARP recipients varied: Citigroup. Early in 2009, $25 billion of TARP assistance to Citigroup was converted into approximately 34% of the equity in the company, which was then sold to private investors. This conversion proved beneficial for the government, with a capital gain of approximately $6.9 billion from the stock sale and nearly $1 billion in dividends and warrants sales. Other cases, however, have not provided similar gains. General Motors. In the case of New GM, approximately $40 billion out of a total of $50.2 billion in loans was converted into 60.8% of the common equity in the company. The Treasury sold off these shares between December 2010 and December 2013. The assistance for GM realized an $11.2 billion loss with additional income of $0.7 billion. AIG. In early 2011, $49.1 billion of TARP preferred share holdings was converted into common equity in AIG, with the government holdings peaking at more than 92% due to both TARP and Fed assistance for the company. This equity was sold over time, with sales finishing in December 2012. The loss recorded by the Treasury on the TARP portion of the AIG assistance amounted to $13.5 billion, although this was offset by $17.6 billion recouped from the shares that resulted from Fed assistance. The Treasury also recorded $1.0 billion in income from the AIG assistance. Chrysler. Treasury's 6.6% common equity holding in New Chrysler was sold to Fiat in a direct sale for $500 million, with another $60 million paid for equity rights that were held by the U.S. Treasury. The government realized a $2.9 billion loss on the assistance principal with $1.7 billion in income received. The Treasury's 73.8% common equity holding in Ally Financial was sold partly to third party investors and partly to Ally itself. Through these sales and the sale of preferred equity that was not converted, the government was repaid $14.7 billion of the $17.2 billion of assistance principal, realizing a $2.5 billion loss. In addition, however, the government received a total of $4.9 billion in dividends and other income from its support for GMAC/Ally Financial. Thus, the government recouped a total of $19.6 billion, $2.4 billion more than the $17.2 billion in assistance originally provided. This gain is not correctly referred to as a "profit," as the calculation does not take into account factors, such as the Treasury's cost to borrow the funds extended to GMAC/Ally Financial, the time value of money, and an appropriate risk premium to compensate the taxpayers for the possibility that the assistance would not be recouped. Were those factors also included, the government's economic gain from TARP assistance would be lower.

Summary:
Ally Financial, formerly known as General Motors Acceptance Corporation or GMAC, provides auto financing, insurance, online banking, and mortgage and commercial financing. For most of its history, it was a subsidiary of General Motors Corporation. Like some of the automakers, it faced serious financial difficulties due to a downturn in the market for automobiles during the 2008-2009 financial crisis and recession, while also suffering from large losses in the mortgage markets. With more than 90% of all U.S. passenger vehicles financed or leased, GMAC's inability to lend was particularly threatening to GM's retail sales and dealer-financing capabilities. The Bush and Obama Administrations used the Troubled Asset Relief Program (TARP) to provide assistance for the U.S. auto industry, concluding that the failure of one or two large U.S. automakers would cause additional layoffs at a time of already high unemployment, prompt difficulties and failures in other parts of the economy, and disrupt other markets. The decision to aid the auto industry was not without controversy, with questions raised as to the legal basis for the assistance and the manner in which it was carried out. The nearly $80 billion in TARP assistance for the auto industry included approximately $17.2 billion for GMAC, which changed its name to Ally Financial in 2010. The government's aid for GMAC was accomplished primarily through U.S. Treasury purchases of the company's preferred shares. Many of these preferred shares were later converted into common equity, resulting in the federal government acquiring a 73.8% ownership stake. This conversion from preferred to common equity significantly changed the outlook for the future government recoupment of the TARP assistance. After such a conversion, if the government's common equity were to end up being worth less than the assistance provided, the company would have no responsibility to compensate the government for the difference. Conversely, if the common equity were to be worth more than the assistance, the gain from this difference would accrue to the U.S. Treasury (and be used to pay down the national debt, as specified in the TARP statute). Beginning in November 2013, the government's stake in Ally Financial began dropping due to share dilution and the sale of the government's stock through both private placements and open market sales. The final sale of the government's Ally stock was completed in December 2014. With the completion of the sale, the government received a total of $14.7 billion in repayment for its assistance, leading the Treasury to recognize a loss of $2.5 billion. However, the government also received $4.9 billion in dividends and other income due to the TARP assistance to GMAC/Ally Financial. In addition to TARP assistance, during the financial crisis in 2008, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion that was permitted by the Federal Reserve (Fed) due to prevailing emergency conditions in the financial markets. This change increased access to government assistance, including Fed lending facilities and Federal Deposit Insurance Corporation (FDIC) guarantees, and also increased regulatory oversight of the company.