The US Treasury Department has to have a "concrete plan" to unwind the 2009 financial rescue of Ally Financial Inc., according to a report by Christy Romero, the Special Inspector General for the Troubled Assets Relief Program. The federal government still holds a 74-percent stake at the former auto-finance arm of General Motors, which owes around $14.6 billion in bailout money that allowed it to avoid bankruptcy.
Ally Financial went into financial trouble after venturing into home mortgage lending under its Residential Capital LLC unit. According to Romero, the home mortgages are still "a millstone around taxpayers' necks." SIGTARP insists that the US Treasury Department needs to divest the government’s stake in Ally. In a statement, Romero remarked that the Treasury and federal banking regulators must find a way to repay taxpayers while leaving Ally, GM and the auto industry in a position of strength going forward.
Residential Capital filed for bankruptcy protection in May 2012 with intentions to sell major assets as well as resolve legal claims pertinent to the mortgage loans. ResCap is selling its main loan portfolio to Berkshire Hathaway Inc. for $1.5 billion, which is expected to be finalized on Jan. 31.
The Treasury Department also holds a 19-percent stake in GM. The department disclosed in December 2012 plans to sell its stake in GM over the next 12 to 15 months. The White House Office of Management and Budget expects taxpayers to lose around $5.5 billion from the federal bailout of GMAC. Since the current Obama administration is trying to distance from the auto industry, it is expected to next offload the government’s shares in Ally.