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FDIC Starts to Crack Down on Ally Bank's Deposit Rates


GMAC filed a Form 8-K with the SEC stating that it was notified by the FDIC on June 4th of various new requirements. Here's the link to the 8-K on the SEC's website. It appears that the FDIC will limit the guaranteed debt that GMAC can issue via the Temporary Liquidity Guarantee Program (TLGP) based on Ally Bank's deposit rates. Here are excerpts of the 8-K:
As indicated in the attached correspondence, requests by GMAC for further issuances of debt that is guaranteed by the FDIC pursuant to the TLGP will be administered by the FDIC according to the following plan: (1) GMAC's access to the TLGP will be phased in over time in specific increments; (2) the FDIC will inform GMAC of the amount of guaranteed debt available to be issued upon receiving a request from GMAC; and (3) the FDIC will require certain information from Ally Bank (a wholly-owned subsidiary of GMAC) to be considered in the decision made pursuant to item (2) above, which includes (a) a detailed list of Ally Bank's deposit products updated as products are added to or deleted from the list; (b) Ally Bank's ranking among the top ten deposit-rate payers and the methodology used to determine its ranking each week during any period in which TLGP debt of Ally Bank or GMAC is outstanding; and (c) the number of basis points the interest rate paid on certificate of deposit products and other deposit products exceeds the average rates for such products listed on Bankrate.com.

This doesn't look good for Ally Bank and depositors like us who depend on their competitive deposit rates. It didn't take long for the FDIC to acquiesce to the American Bankers Association's pressures (see post). Ally Bank did some major rate cuts last Friday. I wonder if we'll see even more tomorrow.

Update 3:00pm PDT: CNN just published an article on this issue. Here's an excerpt which explains the pressure GMAC is under:
The letter requires Ally to report to the agency [FDIC] on its deposit rates and how they compare with other banks whenever it seeks to tap funds under a federal debt guarantee program.

Update 6/19/09: New York Times commentary on this issue.

Voice Your Concerns: Ally Bank has a special page where you can read the ABA letter and the response of GMAC's CEO. There's also a contact form that allows you to voice your concerns to the ABA. In addition, if you want to give your opinions to the FDIC on this issue, I included contact information in my ABA-letter post.

Other recent posts related to this issue:

Thanks to the reader Tuphat who mentioned this news in the Daily News & Deals Page.
Related Pages: Ally Bank
The Dweller on the Threshold
  |     |   Comment #1
I'm fairly certain this is true, but please confirm or correct: They cannot adjust rates for CDs already in existence. I missed that last rate cut by a day "thinking about it." I hit it the next day but shudder to think it might be possible for a retroactive rate adjustment. My impression was a CD was a contract with the bank at a set rate. But these days the idea of a contract with a bank seems like pretty shaky territory.
Banking Guy
  |     |   Comment #2
Yes, I think that's true. The rates of your existing Ally Bank CDs should not be changed. Typically, the only way those may change is if the bank fails and is taken over by another bank.
  |     |   Comment #3
I left several messages with FDIC last week and nobody called me back.
I sent several e-mails, nobody responded back.
It seams, FDIC could care less about our input or concerns. They are under control of the FEDs and the ABA complaint was just a cover up to limit the interest rate agenda dictated by Ben Bernanke.
Ally is just a scape goat for FDIC strong arm rules and will spread to other banks when Ally will be punished by FDIC.
As always, people loose when it comes to deal with Washington bureaucrats.
Our concerns will wind up in the trash can.
  |     |   Comment #4
Banking Guy,
Your statement about CD interest rate may be true, however, FDIC may bring special rule that can be retroactive to existing CD accounts for failure to comply or simply Ally will close those account.
CD contracts are revocable by the bank at any time, it is written in the fine print when the accounts are open and no reason is needed for such action.
  |     |   Comment #5
My account is still in the process of being set-up. If rates are further lowered all my time, energy and enthusiasm will be certainly gone :(
  |     |   Comment #6
In So Cal the movie "A Day Without a Mexican" engendered considerable thought and discussion. It may be time for "A Day Without a Saver." What if no-one put any money into banks? What would they lend? Are we savers a discriminated-against minority? What do you think?
  |     |   Comment #7
re: Anonymous @9:05 AM - What do I think? I think you're dreaming if you believe that it would be possible to get even 50% of all savers to withdraw their funds for some short period of time -- and then there's the question of whether the banks would comply by handing over all those funds at once. What, they're just going to send checks to every depositor for the entire balance of each account? And then there are CDs, which impose penalties if you withdraw funds before the maturity date. I think your idea is idiotic. We're all frustrated and disappointed with how things are going, but let's try to exercise a little common sense.
  |     |   Comment #8
Dear Anonymous 9.05 AM,
I appreciate you thoughtfulness in addressing the issue. Discussion, especially among those who feel they have no power, has always been an important component of change.
  |     |   Comment #9
I reality, we commoners are powerless to change government policies. If we did have the power, we wouldn't be troubled by the meager interest paid out to bank depositors. Today, in the U.S., to have power, you have to have money and if we had that much money to have enough power to change things, extremely low deposit rates wouldn't concern us.

Forget about voting for change. People have memory loss around election time and vote too many incumbents back in office over and over again.
  |     |   Comment #10
This is only if GMAC(Ally) asks for FUTURE money or debt guaranteed. It has nothing to do with current deposit rates or future deposit rates as long as they operate on their own.
Locked in CD rates CAN NOT BE CHANGED.
In the Deposit agreements CONTRACT book in states nowhere that cd rates may be changed by the issuing bank, or the FDIC. If they do, legal action by the owner of the account is possible.
In that regard, THEY are breaking the contract.
  |     |   Comment #11
AIG bank is offering 6-month cd @ 1.86%, 1-year @ 2.31% and savings for 10k @ 1.96%.
How is this different then what ALLY bank is offering????
They are 6th on bankrates list.
They also have 3 stars.
Why are they picking on ALLY????
  |     |   Comment #12
Are credit unions affected by these current FDIC rules? Or will credit unions eventually be affected by similar FDIC-like interest rate restrictions through the NCUA?? I hope not...but I wonder.
  |     |   Comment #13
re: anonymous 11:57, they may be picking on Ally because they have made a lot of banking enemies with their great commercials. And, they are very visible to the public because of it. Forcing Ally to eat their words from those commercials may be the motive.

re anon 9:05 My theory is that if banks did not have saver's money, banks would borrow from the government at low rates. Capital requirements would be lowered if it came to that. Not that it would. People will keep putting money into banks until they start charging them to do so. Safer than a mattress or investing.

Just my opinion.
  |     |   Comment #14
Bankrate is showing rate drops for CDs. On-line Savings looks like it is staying at 2.05%. Money Market going down to 1.80%.
  |     |   Comment #15
The banks don't need our money because they know they can get it from the government. WHEN did democracy go down the toilet with our CD rates?? I do hope readers will NOT give up without at least bugging everyone concerned with this fiasco about how angry we are about what is happening to our country. This is not just about savers being destroyed. It's about what America is turning in to. It's NOT just letters you are writing, it is about protecting your country for your children. Write, call, but do something!
  |     |   Comment #16
Banks don't need our money because there is nobody to lend it to. Businesses are declaring bankruptcy, people are out of work and the realization has finally set in that you should not borrow money that you can not pay back.
No jobs = No income = No borrowing = Tough times for all!
  |     |   Comment #17
Do you think that the Fed may be attempting to attract the CD savers to consider Treasury notes and bonds. The 2-10 year yields are rising and foreign interest may be waning. I known I am now watching very closely for a pop up in yields. They may become competitive - especially if you live in a high income tax state.

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