A banking division of GMAC is being taken to task for offering interest rates that are allegedly excessive in an effort to bring in new depositors. Ally Bank is a subsidiary of GMAC. GMAC, of course, was the dedicated financing division of (the now bankrupt) General Motors before being purchase in part by Cerberus Capital Management LP. The government has given large chunks of cash to GMAC in recent months (enough to hold more than a thirty-five percent stake in the company) as a show of confidence in its ability to keep writing auto loans for consumers through the domestic car industry crisis. Some of Ally’s competitors are claiming that the bank’s rates are infeasible, and a sign that the bank is in trouble.
Ally’s management dismissed the “highly inappropriate” claims of the American Bankers Association (of which Ally is not a member), and accused the ABA of protectionism. Alvaro de Molina, the head of GMAC, snippily informed the ABA that Ally was simply channeling the sum of its resources “to deliver fairly priced credit to small businesses and consumers that need it” and that the rates will be paid out to customers in the form of deposits stemming from such an “attractive return.”
Historically, freakishly high savings rates have been an indicator that a bank is in trouble and willing to resort to last-ditch efforts to get new business in the door. The FDIC does maintain rules against smaller financial institutions charging “abnormally high” rates of interest, but has not investigated Ally or told them to stop advertising their high rates. Ally’s rates were the highest in three of eight deposit categories being compared on industry review sites like Bankrate.com on Monday.
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