FORTUNE -- I'm usually skeptical about what's going on, rather than rhapsodic. So it was a departure from form when I wrote six months ago that, confounding expectations, the government was going to come out way ahead on the $17.2 billion of taxpayer money that it spent to bail out Ally Financial, formerly GMAC, General Motors' finance subsidiary.
Now, it turns out, I was excessively optimistic. Oh, well. Yes, the Treasury is virtually certain to come out ahead if you include the $3.7 billion of dividends that it has collected from Ally. But contrary to what I wrote last summer, the government is unlikely to recover its full investment in Ally common stock.
At the time, I figured that Ally's book value -- its net worth per share -- would be about $10,000 after it settled claims arising from the bankruptcy of its Residential Capital mortgage subsidiary, its one-time crown jewel that filed for bankruptcy in 2012 and emerged from it last year.
MORE: Why bitcoin could fail
I figured that the government, which has been pushing for an initial public offering of Ally shares, would sell its Ally holdings at book value, or perhaps more.
As of Sept. 30, book was about $9,870 a share, close to what I figured it would be. But I wasn't counting on a November sale by Ally of $1.3 billion of new common stock in a private placement to an undisclosed investor group at only $6,000 a share. Ally needed the sale to pass a government stress test, which allowed it to get regulatory approval to redeem the $5.9 billion of 9% preferred stock that the Treasury owned.
Ally, which declined to comment, presumably wanted to get out from under that expensive dividend obligation and to clean up its balance sheet. The Treasury, which also declined to comment, presumably wanted to be able to tell the world that it had gotten its $5.9 billion back.
However, selling those new shares at $6,000 each reduced Ally's book value by about 5%, to about $9,330 a share. (You can find the math at the end of this post.)
Then came the second thing I hadn't expected. Rather than waiting for Ally to have an initial public offering, the Treasury did a private sale, raising $3 billion by selling Ally common at $7,375 a share. That's substantially more than Ally got in November. But it's more than 20% below Ally's diminished book value -- and I had been counting on sales at Ally's undiminished book value.
I think the government, which paid book value for a good piece of its Ally common stock, decided to take some chips off the table during the current bull market, rather than waiting to take Ally public and possibly having the market turn.
I wasn't counting on such a sale.
If you include dividends, Treasury has gotten back $15.3 billion of the $17.2 billion it put into Ally. At the price Treasury got earlier this month, the 571,971 shares of Ally shares it still holds would fetch about $4.2 billion. That's way more than the $1.9 billion the Treasury is still out of pocket -- but less than the $5.6 billion the Treasury has tied up in its remaining Ally common. The Treasury would have to get about $9,800 per Ally share for the Treasury to break even. That seems unlikely to happen.
I still think that we taxpayers have done amazingly well with Ally, all things considered. The government feared -- rightly, I think -- that if Ally had to file for bankruptcy in 2008, General Motors dealers would have been unable to finance new car purchases from GM, and that GM (GM) would have fallen into a chaotic bankruptcy.
Taxpayers will still come out well, when you price in the fact that bailing out Ally helped avoid huge damage to our industrial base. However, taxpayers are unlikely to come out as well as I predicted.
Even though I hedged in my original column by saying that, "(Ally's) stock could fetch less than its asset value per share," I owe you an explanation of where I went wrong. Now, you have it. And now, I'll return to my usual skepticism.
Here are the numbers that show how Ally's $1.3 billion stock sale in November reduced the book value of Ally's common stock by more than $500 a share.
Book value as of Sept. 30, 2013: about $13.136 billion
Shares outstanding: 1,330,970
Book value per share: about $9,870
In November, Ally sold 216,667 new shares at $6,000 each, raising $1.3 billion.
This made book value about $14.436 billion and increased the number of shares to 1,547,637. Divide the book value by the number of shares, and you get a book value of about $9,330.
Sources: Fortune calculations, from Ally public filings.
The government's bailout of Citigroup has finally ended. It was profitable, but it took a while.
FORTUNE -- Congratulations, taxpayers. Your Citigroup bailout is finally over.
On Monday, the Federal Deposit Insurance Corp. said it was selling $2.4 billion in Citi bonds. The bank debt is the last remaining piece of Citi (C) that is owned by any government agency tied to the bailout of the firm in the wake of MOREStephen Gandel, senior editor - Sep 10, 2013 5:00 AM ET
Compensation consultant says Wall Street year-end bonus pay could reach $23 billion, the highest since the financial crisis.
FORTUNE -- Well, this ought to make Henry Paulson very sad.
The nation's five biggest banks are on track to pay out $127 billion in total compensation, including at least $23 billion in bonuses, this year. That's up from the $114 billion the banks shelled out to their employees in 2009. It translates to MOREStephen Gandel, senior editor - Aug 28, 2013 5:00 AM ET
Surprise surprise! The U.S. government's investment in GM's former finance arm is paying off.
It's taken almost five years, but one of the government's ugliest ducklings is finally showing signs of turning into a swan. A profitable swan, at that. I'm talking about Ally Financial, formerly GMAC, General Motors' finance subsidiary.
Ally sucked up $17.2 billion of federal bailout money, much of which ended up being used to fill the rat hole MOREAllan Sloan, senior editor-at-large - Jul 2, 2013 5:00 AM ET
FORTUNE -- Here's how I calculated the value of the Treasury's stake in Ally Financial, formerly GMAC, General Motors' finance subsidiary. And how I calculated the value of the stake held by Cerberus Capital and its present (and possibly former) investors.
In late May, shortly after a tentative settlement of the bankruptcy of Ally's Residential Capital subsidiary, Ally announced that it was taking a $1.55 billion charge for expenses connected with MOREAllan Sloan, senior editor-at-large - Jul 2, 2013 5:00 AM ET
The regulations meant to strengthen our big banks may be leaving the U.S. with more troubled small banks.
FORTUNE -- The number of banks in danger of failing is the lowest since the beginning of the financial crisis. That sounds like good news, until you consider this: There are still 11 times more problem banks in the U.S. than there were back in early 2007, before the financial crisis. And the MOREStephen Gandel, senior editor - May 31, 2013 5:00 AM ET
As the financial system melted down in the fall of 2008, the Treasury Department gave the nation's biggest banks billions in new capital. Was it all necessary? No, says the former FDIC chief in her new book.
By Sheila Bair, contributor
FORTUNE -- Few players had as close a view of the financial crisis as Sheila Bair, chairman of the Federal Deposit Insurance Corp. from June 2006 to July 2011. In MORESep 20, 2012 5:00 AM ET
Critics of our analysis say Uncle Sam should have let the free markets take care of business. They tried. And they failed.
FORTUNE -- My last column, looking at five myths and misconceptions that have emerged since the financial crisis first surfaced five years ago, clearly hit a nerve. It elicited more than 500 online comments, an unusually large response. Most commenters were critical of what I wrote, which is par MOREAllan Sloan, senior editor-at-large - Jul 5, 2012 5:00 AM ET
CEO Vikram Pandit discusses potential in emerging markets, the dark days of 2009 -- and his willingness to talk with Occupy Wall Street.
FORTUNE -- Next year, Citigroup will reach a historic milestone: its 200th birthday. That makes it one of the oldest banks in the country and, fittingly for an enterprise established two days before Congress declared war against the British in 1812, one that has survived many a crisis. In MOREOct 24, 2011 5:00 AM ET
Political gridlock and fiscal bloat aren't the United States' only problems.
Those are the issues that prompted Standard & Poor's to raise a red flag over the U.S. credit rating Monday, certainly. But there's a third factor worth considering: the risk that the U.S. economy could crash, bringing down the financial sector yet again and forcing everyone but Jamie Dimon (right) and Lloyd Blankfein to dig deep into their pockets to prop it MOREColin Barr - Apr 18, 2011 2:22 PM ET
|The Deep Web you don't know about|
|AT&T cuts prices again|
|Pizza chain Sbarro files for bankruptcy|
|"True Detective" season finale crashes HBO Go site|
|Once bankrupt, Vallejo still can't afford its pricey pensions|