Just makes sick to my stomach

"It is clear to me this (bankruptcy filing) is part of a housecleaning exercise," University of Michigan bankruptcy law professor John Pottow said. "They want to take Ally public soon, and they think (ResCap would) weigh down on it."

Ally's ResCap, along with other mortgage lenders, was aggressive in the subprime market, making risky loans without serious reviews of borrowers' credit histories. Like others, it took huge losses when the housing bubble burst.

Adding to Ally's ongoing burden, some buyers of ResCap's mortgage-backed securities have sued, demanding that Ally buy back the bad securities. Pottow said a ResCap bankruptcy may not shelter Ally from such suits. Some bankruptcy judges won't let corporate parents escape such challenges when a subsidiary files for bankruptcy.