Ally Financial Inc. (ALLY:US), the home and auto lender majority owned by U.S. taxpayers, will cease underwriting and trading mortgage-backed securities at its broker-dealer and dismiss most of its 33 traders and analysts.
Ally Securities will continue doing business for the company’s insurance operations, according to a statement e- mailed today by Gina Proia, a spokeswoman for the Detroit-based firm. New York-based Ally Securities, led by Jeff Gravelle, will offer new jobs within the company to a “select number” of people, Proia said in a phone interview.
The firm “will be winding down that operation in an orderly manner over the coming weeks,” according to the statement. “These activities are no longer strategic for Ally.” All existing trades will be honored, the company said.
Chief Executive Officer Michael Carpenter is searching for ways to repay the U.S. after President Barack Obama vowed in 2009 to recover “every last dime” of taxpayer bailout money. Carpenter, who once predicted that a pending initial public offering could value Ally at $30 billion, later said the sale won’t happen until there’s progress on mortgages. People with knowledge of the matter have said Ally is considering placing its money-losing mortgage business into bankruptcy.
Ally is 74 percent owned by the U.S. Treasury Department after infusions of more than $17 billion from federal programs.
The broker-dealer underwrites and trades mortgage-backed securities on behalf of affiliates, according to a regulatory filing. It also brokers whole loans, Proia said. In July 2011, Ally contributed $175 million to the business, which used the funds to increase its trading positions, the filing said.
The unit held $695 million in assets at the end of last year, of which almost all, or $678 million, was so-called agency mortgage-backed securities, the filing shows. Total equity exceeded $248 million.
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