Oct. 14 (Bloomberg) -- GMAC Inc., the lender that received two U.S. bailouts, has attracted $2.9 billion of new deposits and riled its rivals by offering the highest interest rates and running advertisements that portray bankers as deceptive.

Ally Bank, GMAC’s Internet arm, boosted deposits 13 percent to $25.4 billion in the second quarter, according to regulatory filings, enabling the Detroit-based company to help the U.S. prop up automakers by funding car loans. Analysts say Ally is attracting “hot money” from depositors concerned only about yield who will pull out as soon as someone else offers more.

“The government has created an artificial competitor,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics and creator of the IRA Bank Monitor, which rates the health of banks for consumers. “Every bank in the U.S. is at a disadvantage because our government is picking losers as winners.”

Ally’s campaign may set up a clash with competitors and regulators concerned that rate wars will put pressure on healthy banks. U.S. officials have said IndyMac Bancorp Inc. and Corus Bankshares Inc. paid too much before they collapsed, and GMAC has drawn fire from lenders and the American Bankers Association, whose members also are vying for more of the nation’s $9 trillion in deposits.

Ally Lowering Rate

The Ally Web site offered 12-month CDs at 2.05 percent on Oct. 7, the highest in the nation and more than a quarter of a percent better than the U.S. average of 1.70 percent, according to Bankrate.com, which tracks deposit and loan rates.

“Our intention is to offer competitive deposit rates, but not to be a price leader when benchmarked against a broad market comparison,” said Jeff Brown, GMAC’s treasurer. Ally will lower the rate on its 12-month CD to 2 percent this Friday, he said.

The rates are linked to an ad campaign started in May to introduce Ally, the name adopted after the GMAC Bank brand became tainted by GMAC’s near-collapse in 2008. The ads, created by BBH New York, include television, online and print outlets such as the New Yorker, the Wall Street Journal and Wired magazine.

Television Ads

The television ads feature a tall male banker who offers toys to small children and then changes what they actually get. In one, a boy plays with a bright red pickup truck for a few seconds until the banker grabs it away and gives the boy a cardboard replica. When the boy complains, the man says the limited play time was explained in tiny writing on the truck’s underbody. A voice-over delivers the punch line: “Even kids know it’s wrong to hide behind fine print -- why don’t banks?”

Ally’s Web site promises no minimum deposits or balances, no monthly fees and, in capital letters, “No sneaky disclaimers.” Print ads include the slogan, “It’s just the right thing to do.”

Chief Financial Officer Robert Hull credited GMAC’s marketing for drawing new customers. “Deposit gathering is something we think we do a very good job at,” Hull said during the second-quarter earnings call.

‘Irritating’ Banking Industry

Like its competitors, Ally offers accounts guaranteed up to $250,000 by the U.S., freeing consumers to choose the best rate without concern about a bank’s health.

GMAC averted collapse last year when the U.S. declared the firm crucial to the auto industry and pumped in $13.5 billion. The U.S. has a 35.4 percent stake, GMAC spokeswoman Gina Proia said.

“It’s irritating for the community banking industry to see someone who has failed in their business dealings now turning around and saying they are so smart,” said Paul Merski, chief economist of the Independent Community Bankers of America in Washington, which represents almost 5,000 banks. GMAC’s rates “are way out of line with the rest of the industry.”

In May, Edward Yingling, president of the Washington-based American Bankers Association, wrote a letter to the Federal Deposit Insurance Corp. criticizing Ally Bank’s interest rates. The group declined to comment for this article.

Bank Objects

“The hypocrisy of Ally Bank’s ad campaign is dramatic given the company’s true history and the exceptional governmental assistance given to its parent company,” said Christopher Nunn, chief financial officer at Security Bancorp of Tennessee Inc. The Halls, Tennessee-based lender has $569 million in deposits, about 6.6 percent more than a year earlier, according to FDIC data.

Ally Bank can offer high rates because it doesn’t have the built-in costs of branch networks, Proia said. The company uses the deposits to make loans on homes and autos, including those sold by General Motors Co. and Chrysler Group LLC. Proia declined to say what the ad campaign cost.

Other Internet banks are also able to offer higher-than- average rates. ING Groep NV’s web-based lender, ING Direct, currently offers a 12-month CD at 2.10 percent, according to its Web site. An “Added Value” CD for new deposits offers a higher rate of 2.25 percent.

Robert Garsson, a spokesman for the Office of the Comptroller of the Currency, wasn’t available for comment and David Barr, an FDIC spokesman, said the agency doesn’t comment on open institutions.

Product Disparagement

Regulators criticized previous campaigns that allegedly maligned the industry. In September 2008, FDIC general counsel Sara Kelsey wrote a letter to Texas Dow Employees Credit Union objecting to the organization’s ads, which said money in a credit union was safer than in a bank, according to the trade journal Credit Union Times.

As for boosting interest rates, the FDIC in May forbade banks that are less than “well-capitalized” from offering rates that “significantly exceed” national averages. The previous rules were “allowing some weak banks to drive up costs for the rest of the industry,” FDIC Chairman Sheila Bair said in a statement.

Ally Bank is well-capitalized, according to a June 1 letter written by GMAC Chief Executive Officer Alvaro de Molina.

Concern about hot money typically centers on funds collected by brokers from individuals and then routed to banks with the highest rates. Ally Bank held $8.1 billion in brokered deposits at the end of June, a decrease from $10.2 billion a year earlier, according to the FDIC.

Still Hot Money

CreditSights Inc. analyst Adam Steer said Ally is using a different tactic by making sure it has the highest rate offered in Bankrate.com’s survey. The result is still hot money, he said, because consumers were attracted only by the extra yield. “This is not a brokered deposit, but it certainly has the same dynamics of one,” Steer said.

Proia said a survey conducted by the bank shows 80 percent of customers would recommend it to a friend or family member. “We are seeing higher than the industry retention rates,” she said. “It is not just exclusively about competitive rates; it is about offering value and service to the customer.”

Ally suffered a loss of $323 million in the second quarter, FDIC data show, while GMAC reported a $3.9 billion loss, its seventh in eight quarters, according to Bloomberg data. GMAC turned to retail deposits because the lender’s junk-level debt rating makes it too expensive to sell bonds on its own. The lender sold $4.5 billion in bonds through the FDIC’s Temporary Liquidity Guarantee Program, which pledges government backing.

FDIC Order

The FDIC said June 4 that GMAC must “diversify Ally Bank’s overall funding and, particularly, to focus on reducing Ally Bank’s overall deposit costs” as a condition of GMAC’s continued enrollment in the agency’s debt guarantee initiative.

Some lenders that tried to save themselves with high interest rates last year failed anyway. Pasadena-based IndyMac collapsed last year after $1.3 billion of deposits were withdrawn in 11 days. The FDIC’s Bair said in August 2008 that IndyMac relied on brokered deposits and high rates, a combination that made the company unattractive to buyers.

The U.S. Comptroller ordered Corus on Feb. 18 to restrict interest rates on deposits as losses mounted. The Chicago-based company said in an April 7 filing it historically had paid above-average rates to attract funds nationwide, and more than half its deposits came from outside Illinois -- and that didn’t count brokered money. Corus failed on Sept. 11.

The FDIC cited unsafe and unsound banking practices on July 16 when it ordered the banking unit of CIT Group Inc. not to accept any more brokered deposits. The New York-based parent company is teetering near bankruptcy.

“As a general proposition, regulators think that rapid growth can raise the risk profile of the organization,” said Richard Spillenkothen, former director of the Federal Reserve’s bank-supervision division and now with Deloitte & Touche LLP, without discussing Ally directly.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Last Updated: October 14, 2009 15:50 EDT