Ally Bank to sell some assets, place another in bankruptcy, to pay off taxpayers
Detroit's Ally Bank, formerly known as GMAC, says it will sell off foreign subsidiaries and put its mortgage division into bankruptcy, in an attempt to pay back its government bailout.
The U.S. Treasury gave more than $17 billion to GMAC when it bailed out GM.
The money was meant to prevent the collapse of loan availability for GM vehicles and GM dealers.
So far, GMAC, now Ally Bank, has paid back $ 5.5 billion.
But it was unclear how the company would pay back the rest. Its mortgage arm loses money every quarter on subprime mortgage loans made before the bank crisis of 2008.
Now Ally says it will put its mortgage division into bankruptcy, and sell off foreign subsidiaries. The company says that will allow it to repay a total of 2/3 of what it owes the Treasury before the end of the year, leaving a balance of about $6 billion.
Ally officials say they will provide bankruptcy financing for the mortgage arm, known as Res Cap, and strike a financial deal with the company's creditors, so that Ally can come out of the mortgage division's bankruptcy with no additional liabilities.