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Nice While It Lasted

Ally Bank says its mission is “to find the pain points of traditional banking and improve them.” But, pretty soon, Ally might be the one hurting.

The bank has run an aggressive ad campaign attacking its competition. Its television spots feature a banker who takes advantage of cute kids with misleading promises. In one, the banker gives a little boy a shiny toy truck, only to take it away a few minutes later, revealing the fine print on the bottom of the toy which states that it is available only as a limited time offer. The banker hands the boy a cardboard cutout of a truck instead

Ally promises no misleading offers, no fine print and no hidden fees. Other banks don’t like this. Neither do their investors.

One of the biggest investors in those other banks is Uncle Sam, who happens to also own a big chunk of Ally’s parent company, GMAC Financial Services. After two bailouts, the federal government owns about 35 percent of GMAC.

Last month, GMAC’s chief executive officer, Alvaro de Molina, who oversaw the creation of Ally, decided that he was ready to “move on to [his] next chapter,” according to a company press release. This is like when a disgraced politician decides to “spend more time with his family” or when the family pet goes to live on a big, beautiful farm far away. De Molina’s abrupt decision to move on reportedly came after he was informed of the board’s decision to replace him and was asked to leave during a midday meeting with GMAC’s chairman.

De Molina’s days were probably numbered back in May when Washington insisted on putting five new faces, including two government representatives, on GMAC's seven-member board.

Andrew Williams, a Treasury spokesman, said the U.S. played no role in ousting de Molina. However, from the feds’ point of view, Molina’s successor, Mike Carpenter, former CEO of Citigroup's Global Corporate & Investment Bank, is a big improvement over his predecessor.

For starters, Carpenter wants less money. The transition came just as de Molina was preparing to beg Washington for another hefty bailout. GMAC has postponed the proposed money injection until the new CEO has a chance to assess the company’s needs. Carpenter says he doesn’t see “any need for the maximum amount of capital that Treasury was anticipating putting in.”

Carpenter also says he will restore the company’s focus on auto financing. “The first priority is we have to make GMAC the premier auto-finance company” he said in an interview. This meshes nicely with government policy. GMAC’s former parent, General Motors Co., now controlled by the U.S. government, still depends heavily on GMAC to finance its dealers and their customers.

Focusing more on auto financing also means focusing less on banking, where GMAC competes with other companies, including Citigroup, in which the government has a large stake. Citigroup is 34 percent government owned.

That means Ally is probably about to get a lot less competitive and start to be more of an ally to the government and less of an ally to consumers.

Too bad about those fair deals and attractive interest rates. It was fun while it lasted. If you want to like your bank these days, you'd better buy one.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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