With 91% of U.S. passenger vehicle sales depending upon financial intermediaries to provide loans or leases, the auto financing companies' inability to lend damaged the prospects of Old GM and Old Chrysler pulling out of the slump, particularly because other sources of credit, such as banks and credit unions, were also reluctant to lend due to ongoing financial market disruptions. The authorities within EESA were very broad, and both the Bush and Obama Administrations used TARP's Automotive Industry Financing Program to provide financial assistance ultimately totaling more than $80 billion to the two manufacturers and two finance companies. This assistance was not without controversy, and questions were raised about the legal basis for the assistance and the manner in which it was carried out. The financial assistance provided to private companies by the government during the financial crisis can broadly be divided into (1) assistance for solvent companies facing temporary difficulties due to the upheaval in financial markets and (2) assistance for more deeply troubled firms whose failure was thought likely to cause additional difficulties throughout the financial system and broader economy. GMAC/Ally Financial also received assistance from Federal Reserve (Fed) and Federal Deposit Insurance Corporation (FDIC) programs intended for healthy banks facing temporary funding issues. GMAC, however, ultimately required much more extensive assistance which resulted in the federal government taking a majority ownership stake in the company. In addition, during the crisis, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion permitted by the Fed due to emergency conditions in the financial markets. This conversion allowed access to Fed lending facilities and also increased regulatory oversight of the company. In addition to auto financing, GMAC was a large participant in the mortgage markets, particularly through subsidiaries known as ResCap. Mortgages . TARP Assistance

GMAC applied for the Treasury's TARP Capital Purchase Program in 2008 at the same time as it applied to the Fed for permission to convert to a bank holding company. In December 2010, $5.5 billion of preferred equity was converted into approximately 17.5% of the company's common equity, raising federal ownership to 73.8%. The 73.8% government ownership stake was reduced to 63.4% through a share dilution in November 2013. In total, the U.S. Treasury recouped $14.7 billion of the assistance principal and received $4.9 billion in dividends and other income from its involvement with GMAC/Ally between 2008 and 2014. Ultimate Cost of GMAC/Ally Financial Assistance

The TARP assistance for GMAC/Ally Financial, like most of the TARP assistance, was initially provided through financial instruments that were expected to be repaid or repurchased by the recipients. In some cases, including GMAC/Ally Financial, the U.S. Treasury converted all or some of TARP assistance into common equity in the company. Conversion into common equity meant that the government's ability to recoup its assistance depended on the price received when the government sold its shares. If the value of the shares when sold was less than the amount of the government's assistance, Ally Financial had no obligation to compensate the government for the difference. Conversely, if the common equity stake were sold for more than the amount of the assistance, the government would retain any excess. General Motors. Through these sales and the sale of preferred equity that was not converted, the government was repaid $14.7 billion of the $17.2 billion of assistance principal, realizing a $2.5 billion loss. In addition, however, the government received a total of $4.9 billion in dividends and other income from its support for GMAC/Ally Financial.
Ally Financial, formerly known as General Motors Acceptance Corporation or GMAC, provides auto financing, insurance, online banking, and mortgage and commercial financing. For most of its history, it was a subsidiary of General Motors Corporation. Like some of the automakers, it faced serious financial difficulties due to a downturn in the market for automobiles during the 2008-2009 financial crisis and recession, while also suffering from large losses in the mortgage markets. With more than 90% of all U.S. passenger vehicles financed or leased, GMAC's inability to lend was particularly threatening to GM's retail sales and dealer-financing capabilities.
The Bush and Obama Administrations used the Troubled Asset Relief Program (TARP) to provide assistance for the U.S. auto industry, concluding that the failure of one or two large U.S. automakers would cause additional layoffs at a time of already high unemployment, prompt difficulties and failures in other parts of the economy, and disrupt other markets. The decision to aid the auto industry was not without controversy, with questions raised as to the legal basis for the assistance and the manner in which it was carried out. The nearly $80 billion in TARP assistance for the auto industry included approximately $17.2 billion for GMAC, which changed its name to Ally Financial in 2010.
The government's aid for GMAC was accomplished primarily through U.S. Treasury purchases of the company's preferred shares. Many of these preferred shares were later converted into common equity, resulting in the federal government acquiring a 73.8% ownership stake. This conversion from preferred to common equity significantly changed the outlook for the future government recoupment of the TARP assistance. After such a conversion, if the government's common equity were to end up being worth less than the assistance provided, the company would have no responsibility to compensate the government for the difference. Conversely, if the common equity were to be worth more than the assistance, the gain from this difference would accrue to the U.S. Treasury (and be used to pay down the national debt, as specified in the TARP statute).
Beginning in November 2013, the government's stake in Ally Financial began dropping due to share dilution and the sale of the government's stock through both private placements and open market sales. The final sale of the government's Ally stock was completed in December 2014. With the completion of the sale, the government received a total of $14.7 billion in repayment for its assistance, leading the Treasury to recognize a loss of $2.5 billion. However, the government also received $4.9 billion in dividends and other income due to the TARP assistance to GMAC/Ally Financial.
In addition to TARP assistance, during the financial crisis in 2008, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion that was permitted by the Federal Reserve (Fed) due to prevailing emergency conditions in the financial markets. This change increased access to government assistance, including Fed lending facilities and Federal Deposit Insurance Corporation (FDIC) guarantees, and also increased regulatory oversight of the company.