A piece by Reuters points out the interesting quandary Ally finds itself in, offering particularly interesting insight.
Ally finally seems ready to rid itself of Rescap, its downward spiraling mortgage unit. Rescap has been circling the bankruptcy drain for years, and has been on taxpayer dime since 2008, and has sucked up almost all of the $17.2 billion the U.S. Treasury pushed over to Ally.
Chapter 11 may now finally be on the table, but as the authors point out: “Ally needs to ensure its mortgage misery comes to a clean ending.”
In 2005, Ally (then GMAC), adjusted ResCap’s structure so that it was completely independent in order to protect the mortgage lender from problems that might arise at GM and the auto finance arm. Now Elliott Capital Magagement — which owns 2.3% of Ally — isn’t so sure about the level of protection the arrangement offers, according to Reuters.
“It’s concerned a bankrupt ResCap could still drag its arms-length parent into another protracted mess,” write the authors.
The opinion is worth a read.
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