Jan. 30 (Bloomberg) -- The U.S. Treasury and the watchdog for its bailout program are sparring over whether the department has an adequate exit plan for auto lender Ally Financial Inc.
“While Treasury has noted that it has several options for possible divestment, including a public or private sale of stock or other sale of Ally assets, Treasury has not decided which of these exit paths to take,” the special inspector general for the Troubled Asset Relief Program said in a report today. “It is essential that when the government finally exits Ally that it do so forever.”
Timothy Massad, the Treasury’s assistant secretary for financial stability, said in a letter to the inspector general released yesterday that the exit plan involves “two strategic initiatives” -- the reorganization of Residential Capital LLC, the bankrupt mortgage company owned by Ally, and the sale of Ally’s international operations.
Detroit-based Ally, which received a $17.2 billion bailout, is 74 percent owned by the U.S. government. The special inspector general report said Ally still owes U.S. taxpayers $14.6 billion.
The debate over Ally is the latest in a series of spats between the Treasury and the special inspector general, or SIGTARP, the oversight body created as part of the TARP bailouts. In a Jan. 28 report, the SIGTARP said the Treasury had “failed to rein in excessive pay” at bailed-out American International Group Inc., General Motors Co. and Ally.
The quarterly report released today also showed that the special inspector general’s office is still growing as the bailout program winds down. SIGTARP had 173 employees as of Dec. 31, up from 168 at the end of 2011 and 139 in 2010, when the Treasury’s authority to initiate new TARP investments expired.
The watchdog’s headcount is about the same as the Treasury’s TARP office, which had 171 employees on Dec. 31, down from 209 a year earlier.
“The American people deserve transparency and critical oversight into these programs all the way to the end,” Christy Romero, the special inspector general, said in an interview last week. “If there’s fraud or crime in TARP it’s going to take some time to identify and stop that, and then investigate and hold those people accountable. Criminals who commit fraud against TARP are not going to get a get-out-of-jail-free card.”
Romero’s report today said while Treasury had described the rescue “as necessary to save the auto industry,” Ally, formerly known as GMAC Inc., used taxpayer-funded TARP money for its subprime mortgage business. “Because it financed GM cars, Treasury bailed out GMAC, one of the nation’s largest subprime mortgage lenders,” Romero said in a statement.
ResCap filed for reorganization in May. An examiner is due to issue a report in April.
“Ally is highly confident in its ability to repay the remaining U.S. Treasury investment in full,” Ally spokeswoman Gina Proia said in an e-mailed statement. “We have taken a number of steps in 2012 designed to best position the company to exit TARP, and there has been significant progress thus far.”
The Treasury is seeking to sell its remaining shares in GM in the next 12 to 15 months to end its ownership in the automaker, which received $50 billion in taxpayer money in a bailout that began in 2009.
The Congressional Budget Office estimated in October that TARP, which stabilized banks including Citigroup Inc., Bank of America Corp. and Morgan Stanley, would ultimately cost taxpayers $24 billion, less than the $109 billion projected in March 2010.
Congress authorized $700 billion for the financial rescue in October 2008, and the bill was signed into law by President George W. Bush. About $418 billion of the $700 billion has been used, and the Treasury has recovered $389 billion.
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