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GMAC Financial Services' CEO Responds to the ABA

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The CEO of GMAC Financial Services, Al de Molina, responded to the American Bankers Association's letter to the FDIC. Ally Bank, the subsidiary of GMAC Financial Services, has set up this special page where you can read Molina's letter and the ABA's letter. Last Friday, I posted on the ABA CEO's letter to the FDIC in which they were pushing for the FDIC to restrain Ally Bank's competitive deposit rates.

I'm glad to see GMAC Financial Services respond. Molina makes some important points. The most important is the fact that Ally Bank is well capitalized so the FDIC rules restricting deposit rates don't apply. Here's an excerpt:
[T]he FDIC rules that you cite relating to brokered deposits by troubled banks are irrelevant. Ally Bank has capital well in excess of FDIC requirements and is better capitalized than many of your members.

As I mentioned in yesterday's post there have been cases in which the rate restrictions have been applied to banks that were well capitalized. Hopefully, this won't happen to Ally Bank.

Ally Bank's special page includes a contact form that allows you to voice your concerns to the ABA. Also, if you want to give your opinions to the FDIC on this issue, I included contact information in my ABA-letter post.

Thanks to the reader who emailed me the link to Ally Bank's response.


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Comments
17 comments.
Comment #1 by Angelo_Frank (anonymous) posted on
Angelo_Frank
An excellent response by Ally Bank CEO Al de Molina to the ABA letter from Mr. Yingling. I added an email directed to the ABA and sent a thank you note to Ally Bank. We shouldn't just roll over and die on this issue.

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Comment #2 by Anonymous posted on
Anonymous
So have I.

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Comment #3 by Thomas (anonymous) posted on
Thomas
Thanks for the update BankingGuy. I wish Ally the best of luck and hope they continue their customer-based policies and rates far into the future.

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Comment #4 by Anonymous posted on
Anonymous
I have to admit that after the complaint attach on Ally Bank last week, I decided not to join Ally Bank as it appeared that they would be forced to become STATUS QUO. I look over the response letter from Ally Bank CEO Al de Molina this morning and see that Ally Bank is ready for the fight! I will be moving all my money (except checking) from B of A to Ally Bank today! I will also move my checking account as soon as Ally Bank has their checking account available. Thanks Mr. Al de Molina CEO of Ally Bank for standing up to your competitors and telling them like it is!!!

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Comment #5 by JOEY THE cod (anonymous) posted on
JOEY THE cod
SLYDER JOE

PERHAPS THE "OTHER" BANKS WHO ARE
ANGRY !!THEIR CEO'S WON'T GET
THEIR FAT BONUSES DUE THEIR GREED TO INVEST IN RISKY VENTURES THAT CAUSED THEM TO "NEED OUR GOV'T FUNDS" !!

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Comment #6 by Anonymous posted on
Anonymous
Uh, Joey the Cod/Slyder Joe? Thanks, we're all refreshed by your unique insights.

You want to try saying that again, only this time (1) not shouted in ALL CAPS, and (2) translated into coherent English?

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Comment #7 by Rob (anonymous) posted on
Rob
Interesting response from Al de Molina, considering he was Bank of America's CFO just prior to joining GMAC. This should add quite a bit of credibility to Ally, since it is not coming from an outsider but someone that was right in the thick of it a few years back.

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Comment #8 by Anonymous posted on
Anonymous
FDIC has no business dictating the interest rates, period.

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Comment #9 by Doug (anonymous) posted on
Doug
Saying that the FDIC has no business dictating interest rates is like saying the home insurance industry has no business dictating electrical wiring codes.

Undercapitalized banks can and do pay higher interest rates just to stay afloat, and the FDIC is right to limit this kind of thing.

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Comment #10 by IlliniBanker (anonymous) posted on
IlliniBanker
I agree- FDIC insurance is a two-way street, and the FDIC should have the right to not insure banks that don't follow its guidelines. That said, why punish a bank that's adequately capitalized and is just choosing to reward savers?

Maybe if the ABA's members paid higher interest rates, Mr. Yingling wouldn't need to write these letters.

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Comment #11 by Anonymous posted on
Anonymous
To Doug....

I did read the charter when FDIC was formed and its duties and obligations and all of the amendments there after,
THERE IS NO RIGHT GIVEN TO FDIC TO SET INTEREST RATES.

The FDIC insurance is not a consequence of interest rates but responsibilities to regulate banks.

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Comment #12 by Anonymous posted on
Anonymous
I agree with poster at 10:47 AM, June 02, 2009.

The FDIC is to protect the savers and not the banks from each others competition and forbid or regulate interest rates.

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Comment #13 by Anonymous posted on
Anonymous
The FDIC's authority to regulate the interest rates of undercapitalized banks is Section 38 of the Federal Deposit Insurance Act, as amended (12 USC 1831o(f)(2)(C)(i))

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Comment #14 by Angelo_Frank (anonymous) posted on
Angelo_Frank
Well, either Mr. Yingling or Mr. de Molina has some further explaining to do when it comes to the subject of "under capitalization". As far as I can tell, Ally Bank has not been identified as under capitalized by the FDIC. Of course, is this data releasable to the public? If Ally Bank is not identified as such, then Mr. Yingling needs to retract his accusations. We have not heard the end of this. The ABA will continue the relentless pressure on the FDIC to clamp-down on the deposit rates at Ally Bank. We shall see if Mr. de Molina can withstand the onslaught from the ABA lobbyists.

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Comment #15 by Anonymous posted on
Anonymous
To poster at 8:57 PM, June 02, 2009.

There is a huge deterrence between Restricting interest rates paid and setting new rates;

Bellow is insert from FDIC US Code law.

"(C) Restricting interest rates paid
(i) In general Restricting the interest rates that the institution pays on deposits to the prevailing rates of interest on deposits of comparable amounts and maturities in the region where the institution is located, as determined by the agency. "

As you can see FDIC can not tell ALLY a numerical rate set nor can interfere with the current rates paid by the banks, locally or nationally.

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Comment #16 by Angelo_Frank (anonymous) posted on
Angelo_Frank
It didn't take long for Ally Bank to succumb to the ABA's demands to lower deposit rates did it? CEO de Molina is all bluster when it comes to taking a stand.

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