Hedge-fund titan Paul Singer (above), a Republican stalwart, is making his case to Democratic Treasury Secretary Tim Geithner, in an effort to safeguard his debt investment in Ally Financial’s near-dead ResCap unit. (Reuters)
Billionaire hedge-fund mogul and Republican stalwart Paul Singer is in an odd position of late — asking the Obama administration for help to keep troubled mortgage lender ResCap out of bankruptcy.
Singer, whose Elliott Associates owns debt in the mortgage lender, a unit of Ally Financial, asked Treasury Secretary Tim Geithner in recent weeks to use the government’s 74-percent stake in Ally to press for an alternative financial cure.
An out-of-bankruptcy solution would help Elliott, to be sure, but would also assist the White House by keeping a unit of one of its high-profit bailouts from outright failure.
But Singer, so far, hasn’t gotten any satisfaction.
Geithner, insiders said, doesn’t want to use Treasury’s muscle to stop the likely Chapter 11 filing because it could be interpreted as the government overstepping its bounds.
Ironically, Geithner and Singer are of the same mind here, sources tell The Post — neither wants ResCap to file.
Ally CEO Michael Carpenter, often at odds with Uncle Sam, is moving toward Chapter 11 without Washington’s blessing, sources said.
ResCap owes a $20 million debt payment due May 14, and The Post reported this week that it plans to file for bankruptcy before then.
Carpenter believes he needs to put ResCap in bankruptcy to help shield parent Ally from future mortgage liabilities.
“Addressing the contingent mortgage risks are critical to pursuing any future strategy that would best position Ally to maximize value for its shareholders,” said an Ally spokeswoman.
Ally, formerly GMAC, is very close to reaching a deal with an investor to sell most of ResCap’s assets.
The sale to hedge fund Fortress Investment Group, would come in a fast-track bankruptcy court proceeding, sources said.
Such a sale could cost Singer’s Elliott dearly.
A bankruptcy of the mortgage-lending business would present a big black eye for the Obama administration, which has been hoping to campaign on the success of the Wall Street bailouts.
Uncle Sam has collected only $4 billion of its $16 billion investment in Ally, and holds Ally preferred shares.
Sources say ResCap creditors have met directly with Treasury officials in Washington to pitch their case.
There is some irony.
In 2009, Elliott succeeded in stopping an Obama administration plan to sell auto-parts maker Delphi to a private-equity firm, claiming it was an inside deal.
Singer is also one of the most important GOP fundraisers and is backing Mitt Romney in this year’s election.
Ally’s bankruptcy plans come as the firm yesterday reported net income more than doubled to $310 million from $146 million a year earlier.
That said, Ally going forward may be losing key financing relationships as longtime customers GM and Chrysler plan to form their own auto-financing units.
Treasury and Elliott declined comment.