Ally Financial Inc., the auto lender formerly known as GMAC Inc., will sell shares to the public sooner than government officials expected, U.S. Treasury Secretary Timothy Geithner said.

“We’re working very hard with the management and board of GMAC to achieve that outcome,” Geithner said today, referring to an initial public offering, in testimony to the Congressional Oversight Panel for the Troubled Asset Relief Program in Washington. “I don’t know how quickly but it’s going to be much sooner than we thought six months ago.”

An IPO would allow the government to begin withdrawing its support of Ally as officials look to exit bailouts undertaken during the financial crisis, Bloomberg reported. General Motors Co. said today it paid $2.1 billion to repurchase preferred shares owned by taxpayers.

“We are going to move as quickly as we can to replace the government’s investments with private capital, take those firms public, figure out a way to exit as quickly as we can,” Geithner said today.

Ally, the primary lender to dealers at GM as well as Chrysler Group LLC, has benefited from three bailouts totaling $17.2 billion. Michael Carpenter, chief executive officer of Detroit-based Ally, has said an IPO could happen as early as next year.

Ally’s Profits

Ally has posted three straight quarters of profit including a $269 million gain for the third quarter as consumers and dealers borrowed more for car and truck purchases. The company has also shown an ability to sell debt with declining interest rates this year, improving its access to funding sources, said Kirk Ludtke, a senior vice president at the Stamford, Connecticut-based brokerage firm CRT Capital Group LLC.

“Ally has performed well and the capital markets have mended themselves probably faster than the Treasury expected,” Ludtke said today in an interview. “They’ve demonstrated that they can access the capital markets in size and at attractive borrowing rates.”

Ally sold $2 billion of notes at 8.3 percent in February, Bloomberg data show. It then sold blocks of debt at rates of 8 percent and 7.5 percent before completing a $1 billion sale at 6.25 percent last month. During the same period, yields on high- yield bonds dropped 1.21 percentage points, according Bank of America Merrill Lynch’s High Yield Master II index.

Ally was the in-house finance arm of GM before the automaker sold a 51 percent stake to an investor group led by Cerberus Capital Management LP in 2006 for $7.4 billion.