Consumers Beware: Ally Bank is GMAC
Who knew? Ally Bank is running all those TV ads belittling the “fine print” used by other banks. But as the Wall Street Journal detailed on Tuesday, the ads do not disclose that Ally is a unit of troubled GMAC Financial Services, the former financing arm of GM, now seeking its third multi-billion taxpayer bailout.
Ally had been offering some of the highest CD interest rates in the nation until federal bank regulators pressured Ally to reduce them. Lower rates are one thing but there is another compelling consideration when shopping CD rates. When you deposit your money with Ally, you abet the financial and auto bailouts.
Now this may not bother some people. Short-term Ally deposits are probably not at more risk than those at other FDIC-insured institutions. But if you believe that the Wall Street and automaker bailouts are an outrageous soaking of the taxpayer to the benefit of undeserving but politically well-connected firms and unions, it is time to vote with your dollars.
GMAC is now seeking another $2.8 billion taxpayer bailout. The two previous GMAC bailouts of $5 billion and $7.5 billion did not work. The later one gave the federal government a 35% stake in this rathole. Taxpayers are also guaranteeing billions more in GMAC debt. GMAC is not “too big to fail.” GMAC’s collapse would cost taxpayers but continued bailouts might cost even more. GMAC has been kept in business by the Obama administration for one reason: to prop up the United Auto Workers.
Of course, many other banks have been bailed out, and even the “pure” institutions enjoy FDIC deposit insurance. But because of the added dimension of the auto bailout, Ally is a twofer.
The Journal article explains why Ally is so important to the bailed-out auto companies:
The company (GMAC) has sought to do much of its auto lending through Ally Bank, where bank deposits provide a cheap source of funding for the loans. It has been prohibitively expensive for GMAC's low-rated parent company to raise additional money in the bond market.
Those Ally TV ads seem to be everywhere, but you won’t see any more on Glenn Beck’s program on Fox News Channel. GMAC pulled its ads in response to a campaign by a group called Color of Change, founded by avowed Communist Van Jones, who resigned as Barack Obama’s “green jobs” czar.
Ally made this statement that contradicts itself:
Ally advertises on a broad spectrum of programs to reach our potential customers. Our advertising is not an endorsement of editorial content on any program. We have ceased to advertise on the Glenn Beck program.
If its advertising is “not an endorsement of editorial content,” then why did it pull it ads because of Beck’s anti-Obama content? This is what happens when you entangle private and public interests. Politics follows.
And then there is J. Ezra Merkin. Inserted as GMAC Chairman by private equity fund Cerberus, which bought a 51% controlling stake in GMAC in 2006, Merkin had to resign in January 2009. His Gabriel Fund had served as a feeder fund for Bernie Madoff. In April, Merkin was charged with civil fraud by New York state, for "secretly steering $2.4 billion in client money into Bernard Madoff's Ponzi fraud without their permission." Ally ads don’t mention Merkin, either.