Former GM Finance Division Files For Bankrupcy In Spite Of Bailout

Ally -- the former GMAC unit of General Motors that specializes in dealer floorplan financing and car loans -- is 74 percent-owned by the U.S. Treasury after receiving a $17.2 billion government bailout. In 2010, the Treasury failed to find a buyer for ResCap, which originates and services residential mortgages. Carpenter had said an initial public offering for Ally wouldn’t happen without progress on a resolution for ResCap.

ResCap’s board voted to declare bankruptcy and arrange a sale to Fortress Investment Group LLC and Nationstar Mortgage Holdings Inc. for about $2.3 billion, ResCap Chairman and CEO Thomas Marano, 50, said in an interview. Nationstar, which is majority-owned by Fortress, will buy a portfolio of servicing assets, as well as a mortgage-origination unit, and business will continue uninterrupted, he said. Mortgage servicers handle billing, collection and foreclosures.

Steve - 5/14/2012 12:40:01 PM

+2 Boost

That's weird. You mean throwing boat loads of money at an enterprise that doesn't know how to make a sustainable profile doesn't result in them becoming sustainably profitable?

Next thing you know you'll be telling me that the government didn't actually fix GM and Chrysler, and that they might also be back with their hands our for more tax-payer money. This doesn't sound at all like the "we rescued America from disaster" stuff we heard from the government representatives at the last round of bail-outs :-(

280SE - 5/14/2012 1:55:46 PM

+1 Boost

From the title it's clear you don't know what you are talking about. Ally is putting a subsidiary of theirs (ResCap) into bankruptcy to finally put an end to that failed part of the business. Ally is currently running a profitable auto loan business and this was a step in the right direction toward an IPO of Ally and some recovery for taxpayers.

Steve - 5/14/2012 2:24:01 PM

+2 Boost

280SE writes "...and some recovery for taxpayers."

Of which "recovery" do you speak? Currently, tax-payers are holding a megalithic debt, in the way of the federal government borrowing a ton of money to give to the auto-makers in the form of bail-outs, and buying a pile of GM common shares so much above market value (last trade pre-bankruptcy, first trade of "New GM" IPO, and "New GM" current market value), that the most optimistic of analysts don't believe they'll ever get their money back.

Perhaps by "some recovery" you mean instead of tax-payers holding a kajillion dollars of GM debt, that some time over the next 60 years GM stock *might* double in value, and they'll only be holding a kajillion dollars of GM debt, less a few million in increased stock value.

280SE - 5/14/2012 3:00:32 PM

+2 Boost

Yes, Steve -- I am not a supporter of the auto bailouts nor were my comments directed at your post or auto bailouts. Did you make the title for this post because I thought 009 did.

I was merely pointing out that the bailed out GM Finance division is NOT filing for bankruptcy. A subsidiary is. The parent (Ally Financial) is still around and eventually we will get some recovery for the STOCK (not debt, Steve) that we taxpayers hold in ALLY (not GM, Steve).

GM has a separate finance division of its own now, called GM Financial (formerly Americredit). This is completely separate from Ally (Old GM Financial) - the entity that this post is referring to.