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:
- FDIC's Weekly National Rates and Rate Caps
- Did ebank cut rates to comply with the FDIC's rate caps?
- Rate Cuts at Ally Bank
- ABA's Letter and How to Voice Your Concerns
Thanks to the reader Tuphat who mentioned this news in the Daily News & Deals Page.