There’s been a quiet uproar from the American Bankers Association (ABA) recently about Ally Bank. Every heard of it? Not really? Well, does GMAC Bank ring a bell? Yes, that bank. The one that used to be an arm of General Motors. But now, since General Motors spun off GMAC and started receiving government bailout money, the bank renamed itself Ally Bank. (Of course, I’m skipping over more of the minute details regarding its’ conversion to a bank holding company, for simplicity’s sake)
Anyway, with the name change, they’re hoping to win back some business. So they’re offering a high rate of interest on their accounts that’s above industry averages. So what’s the big deal? Well the ABA doesn’t like the fact that Ally benefited from government bailout money and is becoming a perceived risk on our the Federal Deposit Insurance fund (FDIC). Something about a possible unfair advantage.
So like that kid on the playground that cried because you won’t share your toys with him, the ABA sent a letter to the FDIC on May 25 (PDF File), asking for it’s help to stop Ally from offering a higher-than-average rate of interest. Recently, Ally obliged and lowered its interest rate offerings. At the same time, it took at jab at the ABA in a written response (PDF File):
“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.”
So really, is this a situation of the ABA looking out for the interest and safety of the banking industry? Or is this move by the ABA more about protecting some of its largest members from competing with smaller, more nimble Internet banks (particularly ones that are not ABA members, like Ally)? Judge for yourself, but I think we’re getting a worse deal now because of the ABA’s actions.
-Bobby