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Economy

Ally Financial exits TARP; feds declare program success

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U.S. Treasury

Almost six years to the day it was bailed out by the federal Troubled Asset Relief Program, or TARP, Ally Financial has exited.

"With this sale, we are exiting the last major TARP investment and winding down the Auto Industry Financing Program," said Treasury Secretary Jacob Lew.

 
"This program was a crucial part of the Obama Administration’s effort to stop the financial crisis and protect the economy from slipping into a second Great Depression.  At the peak, more than 700 institutions were in the TARP bank program. Today, just 35 remain. "
 
In 2008, The U.S. Treasury invested $17.2 billion in Ally, converting much of the money to stock.  From Ally's loan repayments plus stock sales, Treasury garnered $19.6 billion including interest from its Ally bailout.

That makes Ally one of the TARP program's many success stories.

Ally used to be GMAC, GM's lending arm. 

The company had gotten into serious trouble with toxic mortgage holdings.  That part of the company was eventually spun off and terminated in bankruptcy court.

As part of its agreement with TARP, Ally provided loans for GM and Chrysler dealers and customers during the worst part of the financial collapse in 2008 and 2009.

Ally was separated from GM, and was permitted to restructure itself as a financial services company that included a bank, Ally Bank, while continuing its lending for dealers and car customers.

From Ally Financial's statement:

Since receiving the investment from the U.S,. Treasury, Ally financed 7.4 million vehicles to U.S. consumers through its expansive auto dealer network, which currently stands at approximately 16,000 dealers. This represents about one in every 12 new vehicles sold to U.S. consumers during this timeframe. Additionally, Ally provided inventory financing for nearly 23 million vehicles at more than 6,500 dealers since receiving the investment from the U.S. Treasury.

The TARP program lost about $9.2 billion on its bailout of Chrysler and General Motors.   But overall, the program was a far greater success than even its supporters dared hope.

Congress authorized $700 billion for TARP and related programs as the U.S. economy teetered on the brink of collapse. 

The amount actually invested was far less - $426.3 billion. 

As of November 30, 2014, cumulative collections under TARP, together with Treasury’s additional proceeds from the sale of non-TARP shares of AIG, have exceeded total disbursements by $14.0 billion.