The Treasury Department said Wednesday it has sold trust preferred securities the government held in Ally Financial for $2.7 billion, the latest step in its efforts to recoup the costs of the $700 billion financial bailout.
The department also hopes to get back more taxpayer money through an initial public offering of the former General Motors finance arm.
The government owns most of the company through its holdings of $5.9 billion of preferred stock and 74 percent of the company's common stock. The public stock offering is expected to occur in the second half of this year.
Ally Financial received $17.2 billion in government support during the financial crisis. With the sale of the $2.7 billion in trust-preferred securities and previous payments of $2.19 billion in dividends and interest, Ally has returned $4.89 billion to the government.
The sale of the $2.7 billion in trust-preferred securities is scheduled to close Monday. A trust-preferred security is an investment that has characteristics of both a stock and a bond.
Ally CEO Michael A. Carpenter said the sale marked a key step in the company's plan to repay U.S. taxpayers in full for the money it received from the government bailout fund, the Troubled Asset Relief Program.
"We are grateful for the taxpayer's investment in the company during the financial crisis, which enabled Ally to play an integral role in the U.S. auto recovery and ensure that thousands of automotive dealers and millions of consumers had access to credit," Carpenter said in a statement.
Ally makes loans to GM customers and finances dealer inventories. The government first bailed out the company, then known as GMAC Inc., in late 2008 as part of the Bush administration's aid to the auto industry. The Obama administration provided additional funding in May and December 2009.
While the Treasury Department has said Ally has made good progress in restructuring its operations, a congressional oversight panel in January criticized Treasury's "hands off" approach toward Ally. The panel noted that Treasury declined to block GM's purchase of Texas-based AmeriCredit even though that financial firm may end up competing against Ally.
Treasury said that with the sale of Ally's trust-preferred securities, the TARP has received repayments and income amounting to about $280 billion. In President Barack Obama's new budget, released last month, the administration estimated that the final cost of TARP to the taxpayer will be around $48 billion.
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