Ally Says Fed’s Stress Test Was ‘Fundamentally Flawed’
Ally Financial Inc. (ALLY), the auto lender majority-owned by the U.S., disputed results of the Federal Reserve’s stress tests, calling the analysis “fundamentally flawed.”
“The analysis is inconsistent with historical experience in the most-stressed periods in our business,” the Detroit- based lender said in a statement today.
Loss assumptions for automotive finance are “implausible, even in dire economic situations,” and Ally has strong capital levels and ample liquidity to support vehicle financing, the company said. The Fed could convert $5.9 billion into Tier 1 common equity at its own discretion, according the statement.
Ally benefited from more than $17 billion in U.S. bailouts during the financial crisis and plans to repay the funds by staging an initial public offering. Chief Executive Officer Michael Carpenter has put the idea on hold until after the fate of its bankrupt Residential Capital mortgage business is clear. The U.S. owns 74 percent of Ally.
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