GAO Report Indicates|GM Bailout Worked

(CN) - U.S. taxpayers' share of the former finance arm of General Motors has declined from 74 percent in 2010 to 16 percent today, the Government Accountability Office said in a report on the Troubled Asset Relief Program, amid signs that the Great Recession that began in 2008 is starting to ease.

After taxpayers bailed out General Motors, it changed the name of its financing division to Ally Financial. The Treasury Department bailed out GM/Ally with $17.2 billion in assistance but has more than earned back its initial investment - nearly $18 billion from public stock sales, interest, and dividend payments, according to the GAO's Aug. 5 report to Congress: "Troubled Asset Relief Program - Government's Exposure to Ally Financial Lessens as Treasury's Ownership Share Declines."

Ally's financial outlook began improving in 2012, buoyed by stronger auto sales and a rise in its Internet banking deposits. But the government put the brakes on Ally's plans to pay off its TARP loan in 2013 amid concerns over its exposure to the bankruptcy of home-loan subsidiary Residential Capital.

But late last year, a bankruptcy judge released Ally from most legal claims stemming from its affiliation with ResCap, and the bank also settled a discriminatory lending complaint with the Justice Department for $98 million.

This paved the way to private placement of Treasury-held Ally shares this January, and an initial public offering of another 95 million shares in April.

By May - with the sale of 7 million more Treasury-held shares - U.S. taxpayers owned just 16 percent of Ally Financial, or about $1.8 billion, based on Ally's stock price on June 30, according to the GAO report.

Treasury officials said they plan to fully divest the government's ownership of Ally, but declined to set a specific date.

The Utah-based bank has sold off its international operations and continues to stabilize. But while the three major credit rating agencies have upgraded Ally its ratings remain below investment grade, the GAO said.

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