Mitt Romney’s opposition to a bailout for the auto industry is a regular subject of Democratic attacks, but also a mark of his conservative consistency: The market, he’s said, would have done a better job of sorting out Detroit’s woes than the government did.
But the line between the auto bailout, which he opposed, and the giant financial bailout known as TARP, which he’s supported, isn’t as clear as often advertised. In fact, TARP included a rescue of the car industry’s finance arm, the white collar counterpart to the blue collar industry itself.
The beneficiary of the auto industry’s financial rescue was the General Motors Acceptance Corporation (GMAC), which was renamed Ally Financial in May 2009. The company had been the lending arm of General Motors, but by the time of the bailout it had a new majority owner: the private equity firm Cerberus Capital Management, which had, incidentally, donated nearly $80,000 to Romney’s 2008 Presidential campaign.
FEC records show that Steve Feinberg, founder and CEO of Cerberus, and 12 other executives donated the maximum amount of $2,300 each to Romney’s 2008 campaign for the White House. Cerberus Chairman and former Vice President Dan Quayle has publicly endorsed and campaigned for Romney in 2012.
Cerberus was also heavily invested in Chrysler, whose bailout Romney opposed. It made deep concessions in that rescue, however, and lost its stake in the company.
Ally Financial, meanwhile, isn’t typically grouped with the auto bailouts. But the American taxpayer shoveled $17 billion worth of TARP money into the company, money used largely used to finance loans to GM and Chrysler dealers.
In December of 2008 the Treasury Department invested $5 billion in GMAC from the Trouble Asset Relief Program (TARP) saying it was critical for General Motors’ survival. GMAC was also approved to become a bank holding company, which it gave it access to the necessary $5 billion to starve off bankruptcy. As a part of the deal Cerberus cut it’s stake in GMAC from 51% to 33% — and dodged the catastrophic losses that would have come with GMAC’s collapse.
Treasury officials called said at the time the action was “part of a broader program to assist the domestic automotive industry in becoming financially viable.”
In May of 2009 GMAC officially renamed itself Ally Bank and then received another $7.5 billion dollars in additional TARP money to able the company to continue to make loans for GM and Chrysler vehicles.
In December of 2009, at a time when many other lenders rescued by the Treasury Department had already begun repaying their debts, Ally received an additional $3.8 billion from the Treasury because the company was unable to raise adequate capital of it’s own. The auto customer and dealer lending giant now had received $17 billion in taxpayer money and became 56% owned by the Federal government. Cerberus’ stake was also reduced to 15%.
By May of 2011 the Treasury Department had increased its ownership stake of Ally Financial
Romney supported TARP broadly, but hasn’t commented on the specific rescue of Ally, and his campaign didn’t respond to an inquiry on the subject.