Last week, the American Bankers Association sent a letter to Sheila Bair, the Chairwoman of the FDIC complaining about the high rates offered by Ally Bank (formerly GMAC).  Today, Ally Bank sent its rebuttal.

In a letter to ABA President and Chief Executive Officer Edward L. Yingling, Al de Molina, the CEO of GMAC Financial, the parent company of Ally Bank wrote:

"While I find it highly inappropriate that the American Bankers Association would attempt to restrain competition in the banking industry, I am not surprised.  The public is well aware of Ally Bank’s brand promise.  Ally Bank is committed to providing banking products and services to small businesses and individuals on a competitive and fair basis.  In being straightforward with our customers, we intend to provide clarity to the public regarding self-serving practices of some banks.  I can understand how some of your membership might be troubled by that prospect.”

He also rebuts many on Yinglings other assertions, pointing out that Ally Bank's Tier I Capital ratio is "almost triple what is deemed “well capitalized” under the
FDIC’s regulations."

As I discussed in my post last week, Ally Bank's losses are not from competitive deposit rates, but from bad lending decisions.  Molina confirms this saying:

"Like many of your members, the bank has a portfolio of ALT A mortgages which has created losses in this recession. However, the management team that is responsible for creating these problems has
left the company and the new management team has discontinued the practice of booking ALT Aloans in the bank."

He then takes a swipe at the ABA member banks, essentially telling them not to throw stones from glass houses:

"Similarly, the FDIC rules that you cite relating to brokered deposits by troubled banks are irrelevant. Ally Bank has capital well in excess of FDIC requirements and is better capitalized than many of your members."

Lastly, and perhaps most damaging to the ABA, he lets them have it on the issue of TARP and the reluctance of banks to start deploying capital.  GMAC, unlike many of the banks in the ABA has been aggressively deploying the capital provided under TARP in the form of car lending and leasing.  He says:

"Your letter complains about our support from the government. Ally is deploying TARP money as immediately and directly to support American small businesses and consumers in these difficult times, as other banks should be doing. This was the entire objective behind TARP."

This is an effective rebuttal to the charges brought by the ABA and its member banks.  It's looking increasingly clear that the ABA miscalculated the extent to which consumers are tired of watching the big banks protect their profits, bonusus and shareholders, while squeezing the general public and the savers of the world. Hopefully, Chairwoman Bair will see through their complaints and protestations and allow banks to compete for our cash.

• View the letter from de Molina
• View the ABA letter
• Visit Ally Bank