Ally repays $2.9B of government-backed debt

• Ally was allowed to use the FDIC debt-guarantee program
• The program was aimed at freeing up lending
• Ally says the guarantee allowed it to offer financing to thousands of auto dealers

DETROIT (AP) — Ally Financial announced Wednesday that it has repaid $2.9 billion of the debt it issued under a government program that backed hundreds of billions of dollars in U.S. bank debt during the financial crisis.

Ally, the former financing arm of bailed-out General Motors, now operates as an auto lender and bank holding company. The Federal Deposit Insurance Corp. took the rare step in October 2009 of allowing the junk-rated company, then called GMAC Financial Services, to use its debt-guarantee program. The FDIC agreed to guarantee up to $7.4 billion in debt issued by GMAC in case the company defaulted on payment.

The FDIC program guaranteed hundreds of billions in debt issued by U.S. banks in the event of payment default. Put in at the height of the crisis in October 2008, the program was intended to help thaw the freeze in bank-to-bank lending. The credit markets began to revive in 2009.

Ally said Wednesday that it plans to repay in December the remaining $4.5 billion guaranteed under the program, called the Temporary Liquidity Guarantee Program.

The federal guarantee "was a key contributor in Ally being able to continue offering financing options for thousands of auto dealers across the U.S. and millions of their customers during the financial crisis," said Jeffrey Brown, the company's senior executive vice president of finance and corporate planning.

Detroit-based Ally also received a $17.2 billion government bailout during the crisis. It has so far repaid $5.8 billion.