Ally Bank, the banking arm of GMAC Financial Services, is in a budding dispute with the American Bankers Association over the higher interest rates the lender is offering on its savings accounts.
GMAC chief executive Al de Molina today sent a letter to the ABA's leader calling the trade association's recent complaints about its interest rates “inappropriate.” De Molina also defended his bank's health and stressed Ally Bank's effort to be “straightforward” with customers.
De Molina's missive was prompted by a letter last week from ABA CEO Edward Yingling to Federal Deposit Insurance Corp. CEO Sheila Bair that drew attention to GMAC's above-average rates.
“ABA believes it is completely inappropriate, and indeed risky, for GMAC Bank/Ally Bank to be allowed by regulators to continue to pay rates well above the market,” Yingling wrote. “We urge you to apply the same principles that would apply to other banks in a comparable situation to GMAC/Ally.”
GMAC changed the name of its bank to Ally last month and began stressing its commitment to higher rates and fewer fees in a bid to add more deposits at an institution hard hit by the auto industry's travails and a load of bad mortgage loans. GMAC converted to a bank holding company last year to receive federal bailout funds.
In his letter, Yingling said Ally was offering six-month certificates of deposit last month at rates at 2.13 percent, more than double the national average. He called this strategy “egregious” because GMAC is a “troubled bank” in which the government has a “controlling interest.” He also noted that GMAC lost money in 2008 and the first-quarter of 2009.
In his response, de Molina said the bank is considered more than “well capitalized,” no longer makes the mortgage loans that have spurred its losses and is lending as required under the government's Troubled Asset Relief Program. In a filing Friday, GMAC said the government holds 35 percent of the voting power in the company.
“You might want to assist your members in figuring out how they are going to compete in the new market place rather than ask regulators to direct Ally Bank to pay its depositors less competitive rates,” de Molina wrote.
Detroit-based GMAC has been expanding its presence in Charlotte, where de Molina, Bank of America's former chief financial officer, lives. Its hiring of former Bank of America executives has addled his former employer, which has sent letters to former employees now at GMAC reminding them of their obligations under non-compete and other agreements.
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Don't you just love it when these snakes in-fight!
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