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Ally Exits TARP - Effects on Ally Bank?


On Friday it was announced that the Treasury had sold its entire remaining stake in Ally Financial. This marks the exit of Ally Financial from the Troubled Asset Relief Program (TARP), the program the U.S. government started during the financial crisis to bail out banks and automakers. It also marks the last major TARP investment. According to the Detroit News, the "Treasury holds investments in 35 small banks totaling less than $1 billion."

Thanks to the DA readers who reported on this news in the comments.

This news might be helpful for Ally Bank customers. The FDIC should no longer have reasons to pressure Ally Bank to keep their deposit rates low. Back in 2009 the Wall Street Journal reported that the FDIC asked Ally officials to keep the rates on deposits low enough so the bank wasn't one of the nation's top five rate payers, as measured by Bankrate.com. This came after the American Bankers Association complained to the FDIC about Ally's deposit rates. The ABA thought it was risky for Ally to be allowed to pay above-market rates since Ally was receiving government assistance.

Even though Ally Bank may be free of rate restrictions from the FDIC, it doesn’t mean Ally will be a rate leader. Ally Bank has been successful in growing deposits. Over the last year its deposits have grown by $4.4 billion (8.39%) to $56.8 billion. Thus, Ally Bank doesn’t need to be a rate leader. Nevertheless, Ally should have the freedom to offer higher rates if they they want to, and that’s good news for savers.

Ally Bank may already be using this new freedom. Ally Bank has raised the rates of its savings account and some of its CDs for two straight weeks. This year Ally has only changed the savings account rate four times. So Ally appears to have become more aggressive on its rates. I reviewed this latest rate hike on Friday.

Related Pages: Ally Bank

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  |     |   Comment #1
Not much change expected, with or without the FED breathing into their necks, the environment has changed and the competition is fierce.
  |     |   Comment #2
Yeah, - competition over who can exploit depositors most successfully.                   
  |     |   Comment #3
Every bank has an obligation to lend at the maximum and borrow (CD's in this case) at the minimum. Anything less is a disservice to shareholders. Make any poster on this forum a bank president and I guarantee they would either do the above or pack their bags. The going rate for a 1-year, FDIC insured CD is in the 1% range. There are plenty of 3-4% dividend stocks for sale if anyone is unhappy about CD rates.
  |     |   Comment #4
No thank you.  The last time I tried that,  I got a 4% dividend along with a 25% decline in the asset value. 
  |     |   Comment #6
You're doing it wrong. ;-)
  |     |   Comment #5
It is not an either/or question.  If "you" like to be a shareholder with the diluted rights today, go for it!

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