NEW YORK — The U.S. Treasury
Department, which put $17.2
billion into a bailout of Ally Financial Inc., has indicated it would prefer a breakup and sale of the lender
— including selling the company's captive finance auto business back to General Motors Co., its original owner.
People familiar with the matter told Bloomberg
that Treasury wants to make such moves because it no longer believes an initial
public offering of Ally stock would succeed.
GM previously owned Ally when it was known as GMAC Financial
Services. GM spokesman Jim
Cain declined to comment on the report.
Treasury officials are telling Ally
executives, directors and financial advisers that an IPO is unlikely soon
because of the company’s high cost of capital relative to other banks, the
potential bankruptcy of a mortgage unit, and its recent performance in Federal Reserve Board stress tests, said the people, who asked not
to be identified because the talks are private.
Treasury instead is pushing for Ally to split into at least two
pieces, the people said. One part would be Ally’s auto finance unit, one of the
largest in the U.S., and the other would be its online banking business, which
had almost $28 billion in retail deposits at year end. Ally shareholder Elliott Management
Corp. also recommends a
sale, according to a letter sent to the board by Elliott and obtained by
Bloomberg News.
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