WASHINGTON (Bloomberg) -- Ally Financial Inc., the Detroit-based finance company once owned by General Motors, fell short in the Federal Reserve's latest test of how 19 of the nation's biggest lenders would fare in a severe economic slump.
The test is a setback for Ally, the auto and home lender rescued by U.S. taxpayers, which had planned an initial public offering to repay its bailout.
Ally, run by CEO Michael Carpenter, said it will submit a revised plan.
Once known as GMAC when it was part of GM, Ally remains one of the biggest auto lenders and has profited from a recovery in car sales.
The U.S. government gained a 74 percent stake in the company in return for rescuing Ally in 2008.
The Fed is testing to see how the capital of U.S. banks might hold up through a deep recession and a second housing crisis.
The scrutiny focused on variables such as trading and counterparty losses and write-offs on credit cards and first-lien mortgages. Most of the 19 banks that were studied passed the test.
Ally said in a statement that the Fed's analysis overstated some risks and didn't account for some of the auto and home lender's financial and management resources.
Ally has benefited from $17.2 billion of federal aid, which it needed after losses swelled on subprime home mortgages made by its Residential Capital mortgage subsidiary.
A statement e-mailed by Gina Proia, a spokeswoman for Ally, said the Fed's analysis "dramatically overstates potential contingent mortgage risk, especially with respect to newer vintages of loans."
The tests also didn't give enough credit for "management's track record" and commitment to addressing the mortgage risks, and doesn't "adequately contemplate contingent capital that already exists," according to the statement.
The U.S. Treasury holds $5.9 billion of Ally's preferred shares that must be converted into common equity no later than Dec. 30, 2016, according to the lender's annual securities filing.
Ally has considered putting the ResCap unit into bankruptcy, people familiar with the matter have said.
"They've done a lot less capital-raising than others," said Kirk Ludtke, an analyst at Stamford, Connecticut-based CRT Capital Group LLC. Ally's capital plan may include additional contributions to ResCap, he said.