TABLE OF CONTENTS ii
iii TABLE OF CONTENTS

TABLE OF CONTENTS

MESSAGE FROM THE ASSISTANT SECRETARY FOR FINANCIAL STABILITY................................. v

EXECUTIVE SUMMARY........................................................................................................................................ vii

Part 1: Management’s Discussion and Analysis

Background, Mission, and OFS Organization Structure........................................................................... 3

Overview of TARP for Fiscal Year 2011 ......................................................................................................... 5

Key Trends/Factors Affecting TARP Future Activities and Ultimate Cost.....................................13

Systems, Controls, and Legal Compliance....................................................................................................19

Limitations of the Financial Statements.......................................................................................................22

Operational Goals ..................................................................................................................................................23

Operational Goal One: Ensure the Overall Stability and Liquidity of the Financial System ..23

Capital Purchase Program(CPP)..............................................................................................................23

Targeted Investment Program(TIP)......................................................................................................24

Asset Guarantee Program(AGP)..............................................................................................................25

Community Development Capital Initiative (CDCI)........................................................................25

Public-Private Investment Program (PPIP)........................................................................................25

Term Asset-Backed Securities Loan Facility(TALF)........................................................................26

Small Business Administration 7(a) Securities Purchase Program(SBA)..............................27

Automotive Industry Financing Program(AIFP)..............................................................................27

American Internationl Group, Inc. (AIG) Investment Program ..................................................30

Operational Goal Two: Prevent Avoidable Foreclosures and Preserve Homeownership......32

Operational Goal Three: Protect Taxpayers’ Interests..........................................................................35

Operational Goal Four: Promote Transparency.......................................................................................37

Part 2: Financial Section

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (CF0)....................................................................41

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT......................................................42

Appendix I: Management’s Report on Internal Control Over Financial Reporting ............49

Appendix II: OFS Response to Auditor’s Report...............................................................................50

FINANCIAL STATEMENTS ................................................................................................................................. 52

NOTES TO THE FINANCIAL STATEMENTS................................................................................................. 57

Part 3: Appendices

APPENDIX A: TARP GLOSSARY........................................................................................................................94

APPENDIX B: ABBREVIATIONS and ACRONYMS .....................................................................................96

WEBSITES......................................................................................................................................... Inside Back Cover
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

TABLE OF CONTENTS iv

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AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MESSAGE FROM THE ASSISTANT SECRETARY v

MESSAGE FROM THE ASSISTANT SECRETARY FOR FINANCIAL 

STABILITY

November 10, 2011

I am pleased to present the Office of Financial Stability’s (OFS) Agency 

Financial Report for fiscal year 2011. This report describes our 

financial and performance results for the third year of the Troubled 

Asset Relief Program (TARP). The report contains the financial 

statements for TARP and the Government Accountability Office (GAO)

audit opinion on those financial statements, a separate opinion on 

OFS’ internal controls over financial reporting, and results of GAO’s 

tests of OFS’ compliance with selected laws and regulations.

The Emergency Economic Stabilization Act of 2008 (EESA) established 

the Office of Financial Stability (OFS) within the Office of Domestic 

Finance of the Department of the Treasury to implement TARP. OFS

carries out the objectives of the TARP: ensuring the overall stability 

and liquidity of the financial system; preventing avoidable foreclosures 

and helping preserve homeownership. 

The TARP was a significant commitment of taxpayer money and Americans did not like the fact that 

public funds had to be committed for this purpose. However, by any reasonable objective standard, 

TARP worked. It helped stop the widespread financial panic we faced in the fall of 2008 and helped 

prevent what could have been a devastating collapse of our financial system. Moreover, it did so at 

a cost that is far less than what most people expected at the time the law was passed. 

Several important achievements from inception through TARP’s third year:

• OFS has collected over three-fourths of the total funds disbursed, through repayments, sales, 

dividends, interest, and other income of $316 billion, contrasted with the $413 billion 

disbursed.

• OFS’ banking investments have resulted in a positive return for taxpayers, while also 

helping to keep institutions better capitalized to ensure the overall stability of our financial 

system. OFS has already collected a total of $258 billion through repayments, dividends, 

interest and other income relative to $245 billion invested in banking institutions.

• OFS commenced its exit from General Motors Company through a highly successful Initial 

Public Offering (IPO) for General Motors and exited its investment in Chrysler Group, as 

Chrysler Group was able to repay its loans six years before the 2017 scheduled maturity. 

• OFS, working with other federal government entities, closed a major restructuring plan for 

American International Group, Inc. (AIG), marking a significant milestone in the company’s 

turnaround and putting Treasury OFS in a better position to recover its investment in the 

company. 

• While the housing market remains fragile, OFS initiatives to assist struggling homeowners 

have helped hundreds of thousands of families keep their homes and set new standard

practices for mortgage service providers that have indirectly helped millions more.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

vi MESSAGE FROM THE ASSISTANT SECRETARY 

OFS’ authority to make new commitments expired on October 3, 2010. Going forward, our focus is to 

manage the remaining investments prudently while working to recover as much of the taxpayers’ 

funds as possible. We will also continue our efforts to help distressed homeowners. And we will take 

these steps while maintaining comprehensive financial and performance accountability and 

transparency standards. 

 

The financial and performance data included in this report are reliable and complete. For the third 

consecutive year, the OFS has earned “clean” opinions on its financial statements and its internal 

control over financial reporting from the Government Accountability Office.

Sincerely,

Timothy G. Massad

Assistant Secretary

Office of Financial Stability
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

EXECUTIVE SUMMARY vii 

EXECUTIVE SUMMARY

 

Treasury’s Office of Financial Stability (OFS) 

presents to the reader the Fiscal Year 2011 Agency 

Financial Report for the Troubled Asset Relief 

Program (TARP), established by the Department of 

the Treasury pursuant to the Emergency Economic 

Stabilization Act of 2008 (EESA). Three years 

after the establishment of the TARP, substantial 

progress continues to be made in stabilizing the 

financial system and OFS is unwinding the 

extraordinary assistance that was provided during 

the crisis. 

Three years ago, the U.S. financial system was at 

risk of collapse and many major financial 

institutions were at risk of failure. Markets had 

ceased to function. Without immediate and forceful 

government action, our country faced the 

possibility of a second Great Depression, which 

would have had profound consequences for all 

Americans. 

In this environment of fear and panic, TARP was 

created as a central part of a series of emergency 

measures. The goal of TARP, along with other 

federal government actions, was to stop the panic 

and restore stability to the U.S. financial system. 

TARP’s initiatives were done faster, and at a much 

lower cost, than many anticipated.

As of October 3, 2010, OFS’ authority to make new 

commitments under TARP expired. TARP, in 

conjunction with other federal government actions, 

helped to unfreeze the markets for credit and 

capital, bringing down the cost of borrowing for 

businesses, individuals, and state and local 

governments, restoring confidence in the financial 

system and restarting economic growth. 

 

During fiscal year 2011, OFS focused principally on 

(i) exiting remaining investments in a timely and 

orderly manner consistent with the duty to 

promote financial stability and protect taxpayers’ 

interests that maximizes the return for taxpayers, 

and (ii) continuing to help homeowners avoid 

preventable foreclosures.

In fiscal year 2011, OFS’ progress included the 

following: 

• The series of programs that OFS launched 

to help stabilize the nation’s banking 

institutions are now producing a profit to 

taxpayers. A total of $245 billion was 

invested in banking institutions pursuant 

to several TARP initiatives. Since its 

inception and through September 30, 2011, 

OFS has collected approximately $258 

billion through repayments, sales, 

dividends, interest, and other income --

approximately $13 billion more than 

disbursements -- under these initiatives 

including collections for the Asset 

Guarantee Program for which nothing was 

disbursed by OFS. 

• OFS reduced its stake in General Motors 

Company by 50 percent through General 

Motors’ highly successful Initial Public 

Offering with OFS receiving $13.5 billion 

from the sale of a portion of its General 

Motors common stock holdings. OFS has 

exited its investment in Chrysler Group, as 

Chrysler Group repaid its loans six years 

earlier than the loan’s maturity date. To 

date, OFS has collected more than $40 

billion (including repayments, sales, 

dividends, interest and other income) of 

the $80 billion invested in companies 

related to the auto industry.

• OFS, working with other federal entities, 

closed a major restructuring plan for 

American International Group, Inc. (AIG), 

marking a significant milestone in the 

company’s turnaround and putting OFS in 

a better position to recover its investment 

in AIG. In May 2011, Treasury completed 

the sale of 200 million shares (132.0 

million shares were OFS’ shares) of AIG 

common stock, reducing Treasury's 

percentage ownership of AIG’s outstanding 

shares from approximately 92 percent to 

77 percent; and leaving OFS owning 960 

million shares or approximately 50.8 

percent of AIG’s common stock equity on a 

fully diluted basis.

 

As a result of improved financial conditions of 

TARP participants, earlier than expected asset 

repayments, lower utilization of the program and 

careful stewardship, the estimated cost of TARP is 

significantly below original projections. In the 

August 2009 Midsession Review of the President’s 

2010 Budget, the lifetime cost of TARP, based on 

budget scoring conventions, was projected to be 

$341 billion (assuming the full $700 billion of 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

viii EXECUTIVE SUMMARY

TARP authority was utilized). In the 2011 

President’s Budget (released in February 2010), 

the lifetime cost of TARP had decreased to $116.8 

billion (assuming $546 billion of the $700 billion 

TARP authority was utilized). In the 2012 

President’s Budget (released in February 2011), 

the lifetime cost of TARP had decreased to $48.5 

billion (assuming $474.8 billion of the TARP 

authority was utilized). The most recent estimates 

as of September 30, 2011, reflect a lifetime cost 

included in the budget of $70.2 billion, based on 

utilizing $470 billion of the TARP authority.1

The estimated lifetime cost of TARP reflects 

several factors, including the cost of the initiatives 

to help homeowners stay in their homes, for which 

$45.6 billion has been committed, of which $2.4 

billion has been disbursed. OFS’ housing program 

disbursements were never intended to be recovered 

and OFS does not expect them to result in any 

repayments. The estimated lifetime cost also 

reflects costs related to investments in the auto 

companies and AIG. These costs fluctuate in large 

part due to market prices of common stock, and 

declines in market prices largely account for the 

increase in the estimated lifetime cost of TARP 

from the estimates in the 2012 President’s Budget. 

These costs are offset in part by income on TARP 

investments in banks and other programs. Note 

that the lifetime cost of TARP, based on budget 

scoring conventions, differs from the cost included 

in the OFS financial statements. Estimates of 

lifetime costs assume that all planned expenditures 

are made. By contrast, the TARP financial 

statement costs are based on transactions through 

September 30, 2011.

The reported cost of TARP activities from 

inception, on October 3, 2008, through September 

30, 2011, based on the OFS financial statements, 

was $28.0 billion. Unlike the federal budget cost 

estimate, this reflects only transactions through 

September 30, 2011. Thus, it does not include the 

committed but undisbursed funds for housing 

programs as well as other programs all of which 

are included in the expected lifetime cost for 

budget purposes. The $28.0 billion cost consists of 

$9.5 billion of reported TARP net cost in the OFS 

financial statements for fiscal year 2011; $23.1 

billion of reported TARP net income for fiscal year 

 

1 The Dodd-Frank Wall Street Reform and Consumer 

Protection Act (P.L. 111-203) amended EESA Section 

115 authority to cap total purchase and guarantee 

authority at a cumulative $475 billion.

2010 and the $41.6 billion of reported TARP net 

cost for the period from inception through 

September 30, 2009. The change of $9.5 billion 

since fiscal year 2010 is primarily due to declines 

in the value of OFS’s investments in GM, Ally 

Financial, and AIG, and continued funding of the 

Treasury Housing Programs Under TARP.

Since its inception, TARP has disbursed $413.4 

billion in direct loans, equity investments and for 

the Treasury Housing Programs Under TARP, 

collected $276.9 billion from repayments and sales, 

and reported $20.4 billion in dividends, interest 

and fees, $9.1 billion in warrant sales, and $9.7 

billion in net proceeds from the sale and 

repurchase of assets in excess of costs. As of 

September 30, 2011, TARP had $122.4 billion in 

gross outstanding direct loans and equity 

investments, which are valued at $80.1 billion. In 

addition, from inception through September 30, 

2011, TARP incurred costs related to Treasury 

housing programs of $2.8 billion and 

administrative costs of $0.8 billion. 

OFS continues to provide detailed information 

about TARP to ensure the highest level of 

transparency. OFS published a Two-Year 

Retrospective Report on the Troubled Asset Relief 

Program on October 5, 2010, and a corresponding 

Three-Year Anniversary Report on October 3, 2011. 

These reports include detailed information on 

TARP as well as the federal government’s 

additional emergency measures to address the 

2008 financial crisis. OFS also publishes a 

monthly report on the program, a monthly report 

on its housing initiatives and a variety of other 

reports. Please refer to these documents at: 

http://www.treasury.gov/initiatives/financialstability/briefingroom/reports/agency_reports/Pages/default.aspx. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 1 

Part 1: Management’s Discussion and Analysis
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 2
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 3 

MANAGEMENT’S DISCUSSION AND ANALYSIS

Background, Mission, and OFS Organization Structure

In order to appreciate the effects of the TARP

and the concentrated efforts of the 

Administration to combat the financial crisis, it 

is useful to examine the origin and causes of the 

crisis.

In September 2008, the nation was in the midst 

of one of the worst financial crises in our history. 

The financial institutions and markets that 

Americans rely upon to protect their savings, 

help finance their children’s education, and help 

pay their bills, and that businesses rely upon to 

make payroll, build inventories, fund new 

investment, and create new jobs, were 

threatened, unlike at any time since the Great 

Depression. Across the country, people were 

rapidly losing confidence in our financial system 

and in the federal government’s ability to 

safeguard their economic future.

The causes of the crisis will be studied for years, 

and this report is not meant to provide a 

comprehensive analysis of why the crisis 

occurred. But some reasons are clear. Over the 

two decades preceding the crisis, the financial 

system had grown rapidly in an environment of 

economic growth and stability. Risks grew in 

the system without adequate transparency. Lax 

regulations and loopholes in supervision let 

firms become highly leveraged and take on too 

much risk. Ample credit around the world 

fueled an unsustainable housing boom in the 

first half of the last decade. When the housing 

market inevitably turned down, starting in 2006, 

the pace of mortgage defaults accelerated at an 

unprecedented rate. By mid 2007, rising 

mortgage defaults were undermining the 

performance of many investments held by major 

financial institutions.

The crisis began in the summer of 2007 and 

gradually increased in intensity and momentum 

over the course of the following year. A series of 

major financial institutions, including 

Countrywide Financial, Bear Stearns, and 

IndyMac, were purchased under duress or failed; 

and Fannie Mae and Freddie Mac, the largest 

purchasers and guarantors of home loans in the 

mortgage market, came under severe stress.

By September 2008, for the first time in 80 

years, the U.S. financial system was at risk of 

collapse. Using authority granted in July 2008, 

the Federal Housing Finance Agency placed 

Fannie Mae and Freddie Mac into 

conservatorship on September 7, 2008. A 

growing sense of panic was producing the classic 

signs of a generalized run on the banks. People’s 

trust and confidence in the stability of major 

institutions, and the capacity of the federal 

government to contain the damage, were 

vanishing.

The U.S. system of regulation and supervision 

had failed to constrain the excessive use of 

leverage and the level of risk in the financial 

system and the United States entered this crisis 

without adequate tools to manage it. The 

Executive Branch did not have existing options 

for managing failures of systemically important 

non-bank financial institutions.

The Department of the Treasury, the Federal 

Reserve Board, the Federal Deposit Insurance 

Corporation (FDIC), and other federal 

government bodies undertook an array of 

emergency actions to prevent a collapse and the 

dangers posed to consumers, businesses, and the 

broader economy. However, the severe 

conditions our nation faced required additional 

resources and authorities. Therefore, the Bush 

Administration proposed the Emergency 

Economic Stabilization Act (EESA) to create the 

TARP in late September, and with the support of 

Democrats and Republicans in Congress, it was 

enacted into law on October 3, 2008.

EESA established the Office of Financial 

Stability (OFS) within the Office of Domestic 

Finance of the Department of the Treasury

(Treasury) to implement the TARP. The mission 

of OFS is to carry out the authorities given to 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

4 MANAGEMENT‘S DISCUSSION AND ANALYSIS

the Secretary of the Treasury to implement the 

TARP. Section 101 of EESA authorized the 

Secretary of the Treasury to establish the TARP 

to “purchase, and to make and fund 

commitments to purchase, troubled assets from 

any financial institution, on terms and 

conditions as are determined by the Secretary”. 

EESA defines the terms “troubled assets” and 

“financial institution” and provides other 

requirements that must be met for any such 

purchase. Section 102 of EESA also provides 

authority for a guarantee program for troubled 

assets. Section 109 of EESA provides authority 

to maximize assistance for homeowners. The 

enactment of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (the DoddFrank Act) in July 2010 reduced total TARP 

purchase authority from $700 billion to a 

cumulative $475 billion.

Final purchase authority to make new 

commitments under TARP expired on October 3, 

2010. This means no new commitments can be 

made. There is, however, still significant work 

to be done to implement commitments made 

prior to the October 3 deadline but not yet fully 

funded. For those assets already purchased, 

OFS will continue to wind down TARP and 

manage the remaining TARP investments in 

order to recover as much of taxpayers’ funds as 

possible.

OFS is headed by the Assistant Secretary for 

Financial Stability, appointed by the President 

with the advice and consent of the Senate. 

Reporting to the Assistant Secretary for 

Financial Stability are six major organizations: 

the Chief Investment Officer, the Chief 

Financial Officer, the Chief of Operations, the 

Chief of Homeownership Preservation, the Chief 

of OFS Internal Review and the Chief Reporting 

Officer. A Chief Counsel’s Office reports to the 

Assistant Secretary and to the Office of the 

General Counsel in the Department of Treasury. 

The OFS organization chart 

follows:

The Office of the Chief Investment Officer (CIO) 

is responsible for program development and the 

execution and management of all investments 

made by either purchasing or insuring “troubled 

assets” pursuant to EESA, other than TARP 

housing programs. 

The Office of the Chief Financial Officer (CFO) 

has lead responsibility within OFS for budget 

formulation and execution, cash management, 

accounting, financial systems, financial 

reporting, program and internal metrics 

analytics, modeling cash flows, and internal 

controls. 

The Office of the Chief of Operations is 

responsible for developing the operating 

infrastructure and managing internal operations 

in OFS. 

The Office of the Chief of Homeownership 

Preservation is responsible for identifying 

opportunities to help homeowners and 

overseeing homeownership programs while also 

protecting taxpayers. 

The Office of Internal Review (OIR) is 

responsible for identifying the most significant 

risks that the TARP faces, both internally and 

externally. In addition, OIR is responsible for 

verifying that internal controls are present and 

functioning correctly and for monitoring TARP 

recipient and external entity compliance with 

various statutory and regulatory requirements. 

The Office of the Chief Reporting Officer is 

responsible for periodic reports to the Congress 

as required by EESA.

Assistant Secretary for Financial Stability

Chief 

Investment 

Officer

Chief of OFS 

Internal Review

Chief Reporting 

Officer

Chief of Home 

Ownership 

Preservation 

Chief of 

Operations

Chief Financial 

Officer

Chief 

Counsel
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 5 

The Office of the Chief Counsel reports 

functionally to the Office of General Counsel at 

the Department of the Treasury and provides 

legal advice to the Assistant Secretary. The 

Office is involved in the structuring of OFS 

programs and activities to ensure compliance 

with EESA and with other laws and regulations. 

The Office of the Chief Counsel is also 

responsible for coordinating OFS’ work with the 

external oversight entities including the 

Government Accountability Office (GAO), the 

Special Inspector General for TARP (SIGTARP), 

the Financial Stability Oversight Board and the 

Congressional Oversight Panel (COP) through 

the end of its existence on April 3, 2011. 

OFS is not envisioned as a permanent 

organization, so to the maximum extent possible 

when economically efficient and appropriate, 

OFS utilizes private sector expertise in support 

of the execution of TARP programs. Fannie Mae 

and Freddie Mac accounted for more than half of 

the fiscal year 2011 administrative cost ($173

million of $315 million) to assist in the 

administration and compliance oversight, 

respectively, of the Making Home Affordable 

Program. Additionally, asset managers were 

hired to serve as financial agents in assisting 

with managing the assets associated with 

several TARP programs. Private sector firms 

were also engaged to assist with the significant 

volume of work associated with the TARP in the 

areas of custodial services, accounting and 

internal controls, modeling, administrative 

support, facilities, legal advisory, financial 

advisory, and information technology.

 

 

Overview of TARP for Fiscal Year 2011

OFS Operational Goals 

EESA provided the Secretary of the Treasury 

with the authorities and facilities to help restore 

liquidity and stability to the U.S. financial 

system. EESA also provided specific authority 

to take certain actions to prevent avoidable 

foreclosures.

In light of this statutory direction, OFS

established the following operational goals for 

the TARP and developed a number of programs 

to help stabilize the U.S. financial system and 

the housing market:

1. Ensure the overall stability and liquidity 

of the financial system.

a. Make capital available to viable 

institutions.

b. Provide targeted assistance as 

needed.

c. Increase liquidity and volume in 

securitization markets.

2. Prevent avoidable foreclosures and help 

preserve homeownership.

3. Protect taxpayer interests.

4. Promote transparency.

Details on programs developed in support of 

these Operational Goals can be found later in 

this Management’s Discussion and Analysis 

under Operational Goals. 

 

 

Fiscal Year 2011 Financial Summary and 

Cumulative Net Income 

EESA provided authority for the TARP to 

purchase or guarantee up to $700 billion in 

troubled assets.2 EESA spending authority 

would have terminated December 30, 2009; 

however, as authorized under Section 120(b) of 

EESA, the Secretary of the Treasury certified 

the extension of TARP authority until October 3, 

2010, with the submission of a written 

certification to Congress.

The Dodd-Frank Act3

 

2 The Helping Families Save Their Homes Act of 2009, 

Pub. L. No. 111-22, Div. A, amended the act and 

reduced the maximum allowable amount of 

outstanding troubled assets under the act by almost 

$1.3 billion, from $700 billion to $698.7 billion.

 amended EESA by 

capping total purchase and guarantee authority 

at a cumulative $475 billion and limiting any 

new obligations only to programs or initiatives 

that were initiated prior to June 25, 2010. OFS

reduced the TARP program allocations to 

conform to these limitations.

3 Pub. L. 111-203.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

6 MANAGEMENT‘S DISCUSSION AND ANALYSIS

 

Based on operations for the year ended 

September 30, 2011, OFS reports the following 

key results:

• Since its inception, TARP has disbursed 

$413.4 billion in direct loans, equity 

investments and for the Treasury 

Housing Programs Under TARP.

• In fiscal year 2011, OFS disbursed $23.8 

billion for loans and equity investments 

as well as $1.9 billion in payments for 

Treasury Housing Programs Under 

TARP, and reported net cost of 

operations of $9.5 billion.

• During fiscal year 2011, OFS received 

$72.8 billion from repayments of loans 

and repurchases and sales of 

investments.

• As of September 30, 2011, OFS reported 

$80.8 billion for the value of loans, 

equity investments, and the asset 

guarantee program. 

Results of TARP Operations (Fiscal Year 

2011 and Fiscal Year 2010) 

OFS’ fiscal year 2011 net cost of operations of 

$9.5 billion includes the reported net cost related 

to loans, equity investments, and other credit 

programs. For the fiscal year ended September 

30, 2011, OFS reported net subsidy income for 

five programs – the Capital Purchase Program 

(CPP), the Targeted Investment Program (TIP), 

the Community Development Capital Initiative 

(CDCI), the Term Asset-Backed Securities Loan 

Facility (TALF), and the Public-Private 

Investment Program (PPIP). These programs 

collectively reported net subsidy income of $4.1 

billion. Also, for the fiscal year ended 

September 30, 2011, OFS experienced net 

subsidy cost for four programs – the Asset 

Guarantee Program (AGP), the American 

International Group, Inc. Investment Program, 

the Automotive Industry Financing Program 

(AIFP), and the Federal Housing Agency 

Refinance Program totaling $11.3 billion. Fiscal 

year 2011 expenses for the Treasury Housing 

Programs Under TARP of $1.9 billion and 

administrative expenses of $0.3 billion bring the 

total reported fiscal year net cost of operations to 

$9.5 billion, as shown in Table 1. For the fiscal 

year ended September 30, 2010, the net income 

from operations was $23.1 billion as reflected in 

Table 1. These net income and net cost amounts 

reported in the financial statements reflect only 

transactions through September 30, 2011 and 

September 30, 2010, respectively, and therefore 

are different than lifetime cost estimates made 

for budgetary purposes. 

Table 1: Net Income (Cost) of TARP Operations 

(Dollars in billions)1

 

TARP Program 

For the Year 

Ended 

September 30, 

2011 

For the Year 

Ended 

September 30, 

2010 

From TARP’s 

Inception 

through 

September 30, 

2011

Bank Support Programs 

2 

Capital Purchase Program $ 1.8 $ ( 3.9) $ 13.0

Targeted Investment Program 0.2 1.9 4.0 

Asset Guarantee Program --- 1.5 3.7

Community Development Capital Initiative3 0.1 (0.3) ( 0.2)

Credit Market Programs 

Public-Private Investment Program 1.8 0.7 2.5

Term Asset-Backed Securities Loan Facility3 0.1 --- 0.4

SBA 7(a) Securities Purchase Program --- 3 --- ---

Other Programs 

Automotive Industry Financing Program (9.7) 16.6 (23.6)
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 7 

Table 1: Net Income (Cost) of TARP Operations 

(Dollars in billions)1

 

TARP Program 

For the Year 

Ended 

September 30, 

2011 

For the Year 

Ended 

September 30, 

2010 

From TARP’s 

Inception 

through 

September 30, 

2011

American International Group Investment 

Program

2 

(1.6) 7.7 (24.3)

FHA-Refinance Program --- N/A ---

Total Net Subsidy Income (Cost) (7.3) 24.2 (24.5) 

Additional TARP (Costs) 

Treasury Housing Programs Under TARP 

(excluding FHA-Refinance Program)

(1.9) (0.8) (2.7)

Administrative Costs (0.3) (0.3) (0.8)

Total Net Income (Cost) of TARP Operations $ (9.5) $ 23.1 $ (28.0) 

1 Information presented in Table 1 is presented in billions of dollars to ensure consistency with other tables in 

this Management’s Discussion and Analysis; similar information is presented in the financial statements in 

millions of dollars.

2

through September 30, 2009.

The Inception through September 30, 2011 column includes dollar amounts related to the $41.6 billion net cost 

of operations for the period from inception

3 The Term Asset-Backed Securities Loan Facility, the Community Development Capital Initiative, and the SBA 

7(a) Securities Purchase Program are reported for financial statement purposes under the Consumer and 

Business Lending Initiative.

Over time the cost of the TARP programs will 

change. As described later in the MD&A, and in 

the OFS audited financial statements, these 

estimates are based in part on currently 

projected economic factors. These economic 

factors will likely change, either increasing or 

decreasing the lifetime cost of the TARP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TARP Program Summary 

Table 2 provides a financial summary for TARP 

programs since TARP inception on October 3, 

2008, through September 30, 2011. For each 

program, the table provides utilized TARP

authority (which includes purchases made, legal 

commitments to make future purchases, and 

offsets for guarantees made), the amount 

actually disbursed, repayments to OFS from 

program participants or from sales of the 

investments, write-offs and losses, net 

outstanding balance as of September 30, 2011, 

and cash inflows on the investments in the form 

of dividends, interest or other fees. As of fiscal 

year end 2011, $57 billion of the $470 billion in 

purchase and guarantee authority remained 

unused.4

 

4 OFS tracks costs in accordance with Federal budget 

procedures. First, OFS enters into legally binding 

“obligations” to invest or spend the funds for TARP 

programs. Then, funds are disbursed over time 

pursuant to the obligations. In any given case, it is 

possible that the full amount obligated will not be 

disbursed.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

8 MANAGEMENT‘S DISCUSSION AND ANALYSIS

Table 2: TARP Summary

From TARP Inception through September 30, 2011 

1 

(Dollars in billions) 

Purchase 

Price or 

Guarantee 

Amounts 

Total $ 

Disbursed 

Investment 

Repayments Write-offs 

and Losses

Outstanding 

Balance 2 

Received 

from 

Investments 3 

Bank Support Programs 

Capital Purchase 

Program $ 204.9 4 $ 204.9 $ (185.0) $ (2.6) 5 $ 17.3 $ 25.7

Targeted Investment 

Program 40.0 40.0 (40.0) - - 4.4

Asset Guarantee Program 5.0 - - - - 3.0

Community Development 

Capital Initiative 0.6 6 0.6 - - 0.6 - 

Credit Market Programs 

Public Private Investment 

Program 21.9 17.6 (1.7) - 15.9 0.7

Term Asset-Backed 

Securities Loan Facility6 4.3 0.1 - - 0.1 -

SBA 7(a) Securities 

Purchase Program 0.3 6 0.3 (0.2) - 0.1 - 

Other Programs 

Automotive Industry 

Financing Program 79.7 79.7 (35.0) (7.4) 37.3 5.0

American International 

Group Investment 

Program 67.8 67.8 (15.0) (1.9) 51.1 0.4

Sub-total for Investment 

Programs 424.5 411.0 (276.9) (11.9) 122.4 39.2

Treasury Housing 

Programs Under TARP 45.6 2.4 7 N/A N/A N/A N/A

Total for TARP Program $ 470.1 $ 413.4 $ (276.9) $ (11.9) $ 122.4 $ 39.2 

1 This table shows the TARP activity for the period from inception through September 30, 2011, on a cash basis. Received 

from investments includes dividends and interest income reported in the Statement of Net Cost, and Proceeds from sale and 

repurchases of assets in excess of costs.

2 Losses represent proceeds less than cost on sales of assets which are reflected in the financial statements within “net 

proceeds from sales and repurchases of assets in excess of (less than) cost”. 3 Total disbursements less repayments, writeoffs and losses do not equal the total outstanding balance primarily because the 

disbursements for the Treasury Housing Programs Under TARP generally do not require (and OFS does not expect) 

repayments, and because of certain capitalized income relating to the AIG Investment Program.

4 OFS received $31.9 billion in proceeds from sales of Citigroup common stock, of which $25 billion is included at cost in 

investment repayments, and $6.9 billion of net proceeds in excess of cost is included in Received from Investments. 5 Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI exchanges from CPP of $363 million. 6 The Term Asset-Backed Securities Loan Facility, the Community Development Capital Initiative, and the SBA 7(a) 

Securities Purchase Program are reported for financial statement purposes under the Consumer and Business Lending 

Initiative.

7 Individual obligation amounts are $29.9 billion for the Making Home Affordable Program, $7.6 billion for the Hardest Hit 

Fund, and $8.1 billion committed for the FHA-Refinance Program.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 9 

Most of the TARP funds have been used to make 

investments in preferred stock or to make loans. 

OFS has generally received dividends on the 

preferred stock and interest payments on the 

loans from the institutions participating in 

TARP programs. These payments represent a 

return on OFS’ TARP investments. From 

inception through September 30, 2011, OFS

received a total of $20.4 billion in dividends, 

interest and fees. Table 3 shows the breakdown 

of receipts for the periods ended September 30, 

2011 and 2010 for all TARP programs combined 

as well as totals for the period from inception 

through September 30, 2011.

Table 3: TARP Receipts and Repayments 

on Investments/Loans 

(Dollars in billions)

1 

 

For the Year 

Ended September 

30, 2011 

For the Year 

Ended September 

30, 2010

From TARP’s 

inception through 

September 30, 

2011

Dividends, Interest, Fees and 

Warrant Repurchases 

2 

Dividends and Fees $ 2.8 $ 5.9 $ 18.3

Interest 0.9 1.0 2.1 

Sales/Repurchases of Warrants and 

Warrant Preferred Stock and 

Additional Notes 1.5 5.2 9.6

Proceeds from Sales of Citigroup 

Common Stock in Excess of Cost 3.9 3.0 6.9

Other Proceeds in Excess of Cost 2.3 --- 2.3

Subtotal 11.4 15.1 39.2 

 

Investment/Loan Repayments 

Sales/Repurchases/Repayments on 

Investments3 66.5 122.0 259.2

Loan Principal Repaid 6.3 9.3 17.7

Subtotal 72.8 131.3 276.9 

GRAND TOTAL $ 84.2 $ 146.4 $ 316.1 1 This table shows TARP activity on a cash basis. 

2 The total reported for the Inception through September 30, 2011 column includes the $85.5 billion in receipts 

and repayments related to the period from inception through September 30, 2009.

3 Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI exchanges from CPP of $363 million.

OFS also received warrants in connection with 

most of its investments, which provides an 

opportunity for taxpayers to realize an upside on 

investments. Since the program’s inception, 

OFS has received $9.1 billion in gross proceeds 

from the disposition of warrants associated with 

93 CPP investments and both TIP investments, 

consisting of (i) $3.7 billion from issuer 

repurchases at agreed upon values and (ii) $5.4 

billion from auctions. TARP’s Warrant 

Disposition Report is posted on the OFS website 

at the following link: 

http://www.financialstability.gov/latest/reportsa

nddocs.html. 

 

 

 

 

 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

10 MANAGEMENT‘S DISCUSSION AND ANALYSIS

 

Summary of TARP Direct Loans and Equity Investments 

Table 4 provides information on the estimated 

values of the TARP direct loan and equity 

investments by program, as of the end of fiscal 

years 2011 and 2010. (Treasury Housing 

Programs Under TARP are excluded from the 

chart because no repayments are required). The 

Outstanding Balance column represents the 

amounts disbursed by OFS relating to the loans 

and equity investments that were outstanding 

as of September 30, 2011 and 2010. The

Estimated Value of the Investment column 

represents the present value of net cash inflows 

that OFS estimates it will receive from the loans 

and equity investments. For equity securities, 

this amount represents fair value. The total 

difference of $42.3 billion (2011) and $36.8 

billion (2010) between the two columns is 

considered the “subsidy cost allowance” under 

the Federal Credit Reform Act methods OFS

follows for budget and accounting purposes

(see Note 6 in the financial statements for 

further discussion).5

Table 4: Summary of TARP Direct Loans and Equity Investments 

(Dollars in billions) 

Program 

Outstanding 

Balance as of 

September 

30, 2011 

Estimated 

Value of 

Investment 

1 

as of 

September 

30, 2011 

Outstanding 

Balance as 

of 

September 

30, 2010 

Estimated 

Value of 

Investment 

1 

as of September 

30, 2010 

Bank Support Programs 

Capital Purchase Program $ 17.3 $ 12.4 $ 49.8 $ 48.2

Community Development Capital 

Initiative 0.6 2 0.4 0.6 0.4

Credit Market Programs 

Public-Private Investment 

Program 15.9 18.4 13.7 14.4

Term Asset-Backed Securities 

Loan Facility 0.1 2 0.6 0.1 0.4

SBA 7(a) Securities Purchase 

Program 0.1 2 0.1 0.2 0.2

Other Programs 

Automotive Industry Financing 

Program 37.3 17.8 67.2 52.7

American International Group 

Investment Program 51.1 30.4 47.6 26.1 

Total $ 122.4 $ 80.1 $ 179.2 $ 142.4 

1 Before subsidy cost allowance. 

2 The Term Asset-Backed Securities Loan Facility, the Community Development Capital Initiative, and the SBA 

7(a) Securities Purchase Program are reported for financial statement purposes under the Consumer and 

Business Lending Initiative.

 

5 The subsidy cost in Table 1 and on the Statement of Net Cost, is composed of (1) the change in the subsidy 

cost allowance, net of write-offs, (2) net intragovernmental interest cost, (3) certain inflows from the direct loans 

and equity investments (e.g., dividends, interest, net proceeds from sales and repurchases of assets in excess of 

cost, and other realized fees), and (4) the change in the estimated discounted net cash flows related to the asset 

guarantee program and FHA-Refinance Program. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 11 

The ultimate cost of the TARP will not be known 

for some time. The financial performance of the 

programs will depend on many factors such as 

future economic and financial conditions, and 

the business prospects of specific institutions. 

The cost estimates are sensitive to slight 

changes in model assumptions, such as general 

economic conditions, specific stock price 

volatility of the entities in which OFS has an 

equity interest, estimates of expected defaults, 

and prepayments. If OFS receives repayments 

faster than expected and incurs lower than 

expected defaults, TARP’s ultimate cost on these 

investments may be lower than estimated. 

Wherever possible, OFS uses market prices of 

tradable securities to estimate the fair value of 

TARP investments. Use of market prices was 

possible for TARP investments that trade in 

public markets or are closely related to tradable 

securities. For those TARP investments that do 

not have direct analogs in private markets, OFS

uses internal market-based models to estimate 

the market value of these investments. All cash 

flows are adjusted for market risk. Further 

details on asset valuation can be found in Note 6 

of the Financial Statements.

 

 

Comparison of Estimated Lifetime TARP 

Costs Over Time 

Market conditions and the performance of 

specific financial institutions will be critical 

determinants of the TARP’s lifetime cost. The 

changes in the OFS estimates since TARP’s 

inception through September 30, 2011, provide a 

good illustration of this impact. Table 5 provides 

information on how OFS’ estimated lifetime cost 

of TARP has changed over time. These costs 

fluctuate in large part due to changes in the 

market prices of common stock for AIG and GM 

and the estimated value of the Ally stock. This

table assumes that all expected investments (e.g. 

PPIP) and disbursements for Treasury Housing 

Programs Under TARP are completed, and 

adhere to government budgeting guidance. This 

table will not tie to the financial statements 

since it includes investments and other 

disbursements expected to be made in the 

future. Table 5 is consistent with the estimated 

lifetime cost disclosures on the TARP web site 

at: www.financialstability.gov. The cost 

amounts in Table 5 are based on assumptions 

regarding future events, which are inherently 

uncertain. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

12 MANAGEMENT‘S DISCUSSION AND ANALYSIS

Table 5: Estimated Lifetime TARP Costs (Income)

(Dollars in billions)

1 

Program 

Estimated 

Lifetime Cost 

(Income) on 

March 31, 2010 

Estimated 

Lifetime Cost 

(Income) on 

September 

30, 2010 

Estimated 

Lifetime Cost 

(Income) on 

March 31, 

2011

Estimated 

Lifetime Cost 

(Income) on 

September 30, 

2011

Bank Support Programs

Capital Purchase Program $ ( 9.8) $ (11.2) $ (13.6) $ (13.0)

Targeted Investment Program ( 3.8) ( 3.8) ( 4.0) ( 4.0)

Asset Guarantee Program ( 3.1) 2 ( 3.7) ( 3.8) ( 3.7)

Community Development 

Capital Initiative

 0.4

3

 0.3 0.2 0.2

Credit Market Programs

Public Private Investment 

Program

 0.5 ( 0.7) 0.4 ( 2.4)

Term Asset-Backed Securities 

Loan Facility

( 0.4)

3

( 0.4) ( 0.3) ( 0.4)

SBA 7(a) Securities Purchase 

Program3

 0.0 0.0 0.0 ( 0.0)

Other Consumer Business 

Lending Initiative

 3.0 N/A N/A N/A

Other Programs

Automotive Industry Financing 

Program

24.6 14.7 13.9 23.6

American International Group 

Investment Program

45.2 36.9 10.9 24.3

Subtotal 56.6 32.1 3.7 24.5

Treasury Housing Programs 

Under TARP

48.8 445.6 45.6 45.6

Total $ 105.4 $ 77.7 $ 49.3 $ 70.2 1 Estimated program costs (+) or savings (in parentheses) over the life of the program, including interest on reestimates and excluding administrative costs.

2 Prior to the termination of the guarantee agreement, Treasury guaranteed up to $5 billion of potential losses 

on a $301 billion portfolio of loans.

3 The Term Asset-Backed Securities Loan Facility, the Community Development Capital Initiative and the SBA 

7(a) Securities Purchase Program are reported for financial statement purposes under the Consumer and 

Business Lending Initiative.

4 For fiscal year 2011, includes FHA-Refinance Program which is accounted for under credit reform.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 13 

Key Trends/Factors Affecting TARP Future Activities and 

Ultimate Cost

This section provides additional TARP analytic 

information and enhanced sensitivity analysis 

focusing on the remaining TARP 

dollars/continued taxpayer exposure and what is 

likely to affect the expected future return. Four

TARP programs --CPP, PPIP, AIFP, and the 

AIG Investment Program -- have $10 billion or 

more still outstanding and remain at risk of 

taxpayer loss. In addition, Treasury’s Housing 

Programs Under TARP have about $43 billion 

committed but not yet disbursed. Going 

forward, the recoveries or costs from CPP, PPIP, 

AIFP, and AIG Investment Program and the 

expenditures for Treasury Housing Programs 

Under TARP will most significantly affect the 

lifetime cost of the TARP. 

 

CPP and Banking Industry Information 

OFS had CPP investments remaining in 401 

financial institutions with a gross outstanding 

balance of $17.3 billion as of September 30, 

2011. As noted earlier in this report, the largest 

financial institutions in the CPP have repaid 

their investments to OFS. 

Table 6 below shows the outstanding investment 

face amount for the 10 largest remaining CPP 

investments held as of September 30, 2011.

Table 6: 10 Largest Remaining CPP 

Investments 

(Dollars in billions)

Institution 

Outstanding 

Investment 

Regions Financial Corporation $ 3.500 

Zions Bancorporation 1.400 

Synovus Financial Corp. 0.968 

Popular, Inc. 0.935 

First Bancorp. 0.424 

M&T Bank Corporation 0.382 

Sterling Financial Corporation 0.303

Citizens Republic Bancorp, Inc. 0.300 

First Banks, Inc. 0.295 

New York Private Bank &

Trust Corporation 0.267 

Total $ 8.774 

OFS’ actual recoveries on the outstanding CPP 

investments will depend on a number of factors, 

including the asset quality, loss reserve ratios 

and capital positions of financial institutions 

participating in CPP. 

 

Throughout the life of the program, 181 CPP 

recipients have not declared and paid one or 

more dividends to OFS. Of these recipients, 74

have missed at least six payments, which gives 

OFS the right to place members on the 

institutions’ boards of directors. During fiscal 

year 2011, OFS exercised its rights to elect 10 

members in total to boards of directors for 6 CPP 

institutions. Board members elected by OFS

cannot be government employees and all have 

the same fiduciary duties and obligations to the 

shareholders of the financial institutions as any 

other board members. Additional information 

on the appointment of directors to CPP 

institutions is available at: 

http://www.treasury.gov/initiatives/financialstability/programs/investment-programs. 

Since the initiation of the CPP, 13 institutions in 

which OFS had invested $2.9 billion have 

entered bankruptcy or been placed in 

receivership by their regulators. This includes 

eight CPP recipients ($190.3 million in funding) 

during fiscal year 2011; and five CPP recipients 

($2.7 billion in funding) during fiscal year 2010. 

During fiscal year 2010 OFS wrote-off $2.3 

billion relating to CIT Group and another small 

institution, and made no CPP investment writeoffs in fiscal year 2011. As OFS does not 

anticipate any recovery from the other 11 

investments outstanding relating to institutions 

that entered bankruptcy or receivership, the 

value of these investments is reflected at zero as 

of September 30, 2011.

 

Public-Private Investment Program 

As of September 30, 2011, OFS had gross 

outstanding equity investments in and loans to 

Public Private Investment Funds (PPIFs) 

amounting to $5.5 billion and $10.4 billion, 

respectively, for a total of $15.9 billion. In 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

14 MANAGEMENT‘S DISCUSSION AND ANALYSIS

addition, as of September 30, 2011, OFS had 

legal commitments to disburse up to $4.3 billion 

in additional funds to the PPIFs. The estimated 

value of OFS’s investments and loans in the 

PPIFs as of September 30, 2011, was 

approximately $18.4 billion. PPIFs have the 

ability to invest in eligible assets over a threeyear investment period. They then have up to 

five additional years, which may be extended for 

up to two more years, to manage these 

investments and return the profits to OFS and 

the other PPIF investors. In addition, OFS also 

received warrants from the PPIFs, which gives 

OFS the right to receive a percentage of the 

profits that would otherwise be distributed to 

the private partners that are in excess of their 

contributed capital. The PPIFs are now more 

than halfway through their three-year 

investment periods, which end in the fourth 

quarter of fiscal year 2012. 

 

 

Automotive Industry Financing Program 

As of September 30, 2011, OFS held $37.3 billion 

in AIFP investments, with an estimated value of 

$17.8 billion. As of September 30, 2011, OFS 

has received more than $40 billion from 

repayments, sales, dividends, interest, and other 

income. The competitiveness of U.S. 

manufacturers, both domestically and 

internationally will affect the value of OFS’ 

investment. In addition, the macroeconomic 

conditions (unemployment, Gross Domestic 

Product growth, etc.) will affect the overall 

trends in auto sales and thus OFS’ recoveries. 

The outlook for the American auto industry has 

improved significantly, thanks in part to the 

emergency assistance provided by the federal 

government. Detroit’s Big Three have all 

reported profits and gains in market share for 

the first time since 1995. 

General Motors Company (New GM), reported

second quarter net income of $2.5 billion, its 

sixth consecutive profitable quarter. Since 

emerging from bankruptcy, the company has 

added shifts at six of its plants to address 

growing demand. New Chrysler has also 

significantly rebounded after its bankruptcy 

filing. The company has lowered its structural 

costs, become more efficient, adopted new 

technologies, rejuvenated its product line, and 

rebuilt its brand value.

 

 

AIG Investment Program 

Following the government’s emergency 

assistance to AIG, the company is now

experiencing a turnaround. AIG has completed a 

successful restructuring, stabilized its 

operations, and as a result, OFS is in a 

considerably stronger position to exit OFS’ 

investment in AIG than was thought possible 

during the height of the 2008 financial crisis. 

As of September 30, 2011, OFS held $51.1 billion 

in the AIG Investment Program, with an 

estimated value of $30.4 billion. As of 

September 30, 2011, OFS had received $15.4 

billion from repayments and sales, dividends 

and other income. OFS’ investment in AIG was 

originally made in the form of preferred stock, 

all of which was converted to common stock or 

preferred interests in AIG Special Purpose 

Vehicles in the restructuring that took place in 

January 2011.

 

Treasury Housing Programs Under TARP 

OFS has committed $45.6 billion to fund 

Treasury Housing Programs Under TARP. 

From inception through September 30, 2011, 

$2.4 billion has been disbursed under these 

programs. Based only on the permanent 

modifications in place as of September 30, 2011, 

OFS estimates that $7.6 billion in incentive fees 

will ultimately be disbursed in association with 

all Making Home Affordable (MHA) 

modifications made as of September 30, 2011, if 

all active modifications were to remain current 

and receive incentives for 5 years. The program 

is continuing to enter into new modifications. 

Separately, $7.6 billion has been allocated for 

the Hardest Hit Fund and $8.1 billion for the 

FHA Refinance Program.

Sensitivity Analysis 

The ultimate value of TARP investments will 

only be known in time. Realized values will vary 

from current estimates in part because economic 

and financial conditions will change. Many 

TARP investments do not have readily 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 15 

observable values and their values can only be 

estimated by OFS. 

Sensitivity analysis is one way to get some feel 

for the degree of uncertainty around the OFS

estimates. In the analysis reported here, OFS

focuses on the largest components of the TARP, 

the assets held under CPP, PPIP, AIFP and the 

AIG Investment Program.

CPP Analysis 

 

For CPP, the most important inputs to the 

valuation are the market prices of publiclytraded preferred stock used to calibrate the 

model-derived pricing of the preferred stock held 

in the TARP. The valuation procedure entails 

observing the market price of publicly-traded 

preferred stock and calibrating the model (in 

particular the risk premium) to match those 

prices. The calibrated model is then used to price 

the non-publicly traded preferred stock held by 

the TARP. The benchmark preferred stock

consists of a portfolio of claims issued by some of 

the same institutions with TARP preferred stock

investments. It is generally the larger 

institutions that have issued preferred stock. 

The TARP preferred stock for smaller 

institutions may not be exactly comparable, but 

the bulk of TARP investments, as measured on a 

dollar basis, are in the larger institutions. This 

calibration influences the asset-to-liability ratio 

of the banks and consequently the default and 

prepayment estimates predicted by the model.6 

As a sensitivity analysis, OFS increased and 

decreased the value of the benchmark preferred 

stock in the CPP by 10 percent. Table 7 shows 

the impact on the value of OFS’ outstanding 

investment in CPP as a result of a 10 percent 

increase and a 10 percent decrease in the value 

of the calibration securities. 

 

6 See discussion of valuation methodology in Note 6 of 

the Financial Statements.

Table 7: Impact on CPP Valuation 

(Dollars in Billions) 

 

September 30, 2011 

Reported Value for 

CPP 

Effect of 10% 

Increase 

Effect of 10% 

Decrease 

CPP $12.44 $12.99 $11.19

% change from current N/A 4.4% (10.1)%
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

16 MANAGEMENT‘S DISCUSSION AND ANALYSIS

To put this sensitivity analysis in perspective, it 

is useful to consider the range over which actual 

securities have moved over the past year. 

Figure A shows the monthly average price of the 

benchmark preferred as a percentage of par. 

(The CPP value as of September 30, 2011, 

represents approximately 74.6 percent of par, 

excluding the warrants held by OFS). The 

dashed lines indicate the upper and lower bound 

price used for the sensitivity analysis. 

 

PPIP Analysis 

To estimate the value of OFS’ outstanding 

investments under the PPIP, OFS first 

estimates the cash flows of the portfolio held by 

the various funds. OFS uses a stochastic process 

to generate 300 potential cash flow outcomes, 

based on the characteristics of the loans 

underlying the securities and their behavior 

under simulated macro economic variables, such 

as unemployment, mortgage interest rates, 

short-term rates and home price appreciation. 

The cash flows are then applied to the waterfall 

established for the funds to estimate the cash 

flows to OFS. The aggregate of these cash flows 

(each scenario is equally weighted) is discounted 

to estimate the value of the program. Table 8 

shows the change in the value of the OFS’ 

outstanding PPIP investment using the scenario 

which produces the minimum amount of cash 

flows to OFS and the maximum amount of cash 

flows to OFS. 

Table 8: Impact on PPIP Valuation 

(Dollars in Billions) 

 

September 30, 2011 

Reported Value for 

PPIP 

Maximum Cash 

Flows 

Minimum Cash 

Flows 

PPIP $ 18.38 $19.59 $18.28

% change from current N/A 4.6% (2.4)%

 

 

 

 

 

 

 

 

 

0%

20%

40%

60%

80%

100%

Price as a Percent of Par

Figure A: Price Chart of Benchmark 

Preferred Stock

Market Value Increase 10% Decrease 10%
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 17 

AIFP Analysis 

The most important inputs to the valuation of 

OFS’ outstanding investments under the AIFP 

are the market price of New GM common stock 

and the change in the estimated value of Ally 

Financial common stock, which is driven by 

certain pricing metrics of comparable public 

financial institutions. Table 9 shows the change 

in estimated value of OFS outstanding AIFP 

investments based on a 10 percent increase and 

10 percent decrease in the trading price of the 

New GM common stock and separately a 10 

percent increase and 10 percent decrease in the 

estimated value of the Ally Financial common 

stock. Figure B shows that the New GM 

securities have recently been trading within the 

range used in the analysis as well as outside of 

this range, illustrating the uncertainty around 

the cost estimates.

Table 9: Impact on AIFP Valuation 

(Dollars in Billions) 

 

September 30, 2011 

Reported Value for 

AIFP 

Effect of 10% 

Increase 

Effect of 10% 

Decrease 

Impact of GM on AIFP $17.84 $18.85 $16.83 

% change from current N/A 5.7% (5.7)%

Impact of Ally (formerly GMAC) 

on AIFP $17.84 $18.61 $17.06 

% change from current N/A 4.3% (4.3)%

Figure B shows the daily closing price of the 

New GM common stock since the initial public 

offering in November 2010. The closing price for 

September 30, 2011 was $20.18. The dashed 

lines represent the high and low price used in 

the sensitivity analysis.

 

0

5

10

15

20

25

30

35

40

45

$ Price

Figure B: Daily Price of GM Common Stock

Daily Closing Price Increase 10% Decrease 10%
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

18 MANAGEMENT‘S DISCUSSION AND ANALYSIS

AIG Investment Program Analysis 

The most important input to the valuation of 

OFS’ outstanding investments under the AIG 

Investment Program is the market price of AIG 

common stock. As a sensitivity analysis, OFS

increased and decreased the value of the AIG 

common stock by 10 percent. Table 10 shows 

the impact on the value of OFS’ outstanding 

investment in AIG as a result of a 10 percent 

increase and a 10 percent decrease in the value 

of the AIG common stock.

Table 10: Impact on AIG Investment Program Valuation 

(Dollars in Billions) 

 

September 30, 2011 

Reported Value for AIG 

Investment 

Effect of 10% 

Increase 

Effect of 10% 

Decrease 

AIG Investment Program $30.37 $32.48 $28.26

% change from current N/A 6.9% (6.9)%

Figure C shows the daily closing price of the AIG 

common stock (closing price on September 30, 

2011, was $21.95 per share) with the dashed 

lines representing the prices used in the 

sensitivity analysis. Figure C shows that the 

securities have been trading within the range 

used in the analysis as well as outside of this 

range. This helps to illustrate the uncertainty 

around the cost estimates.

 

0

10

20

30

40

50

60

$ Price

Figure C: Daily Price of AIG Common Stock

Daily Closing Price Increase 10% Decrease 10%
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 19 

MANAGEMENT ASSURANCE STATEMENT

The Office of Financial Stability’s (OFS) management is responsible for establishing and maintaining 

effective internal control and financial management systems that meet the objectives of the Federal 

Managers’ Financial Integrity Act (FMFIA), 31 U.S.C. 3512(c),(d). OFS has evaluated its management 

controls, internal controls over financial reporting, and compliance with the federal financial systems 

standards. As part of the evaluation process, we considered the results of extensive documentation, 

assessment and testing of controls across OFS, as well as the results of independent audits. We conducted 

our reviews of internal controls in accordance with FMFIA and OMB Circular A-123.

As a result of our reviews, management concludes that the management control objectives described below, 

taken as a whole, were achieved as of September 30, 2011. Specifically, this assurance is provided relative 

to Sections 2 (internal controls) and 4 (systems controls) of FMFIA. OFS further assures that the financial 

management systems relied upon by OFS are in substantial compliance with the requirements imposed by 

the Federal Financial Management Improvement Act (FFMIA). 

OFS’ internal controls are designed to meet the management objectives established by Treasury and listed 

below:

a. Programs achieve their intended results;

b. Resources are used consistent with the overall mission;

c. Program and resources are free from waste, fraud, and mismanagement;

d. Laws and regulations are followed;

e. Controls are sufficient to minimize any improper or erroneous payments;

f. Performance information is reliable;

g. Systems security is in substantial compliance with all relevant requirements;

h. Continuity of operations planning in critical areas is sufficient to reduce risk to 

reasonable levels; and 

i. Financial management systems are in compliance with federal financial systems 

standards, i.e., FMFIA Section 4/FFMIA.

In addition, OFS management conducted its assessment of the effectiveness of internal control over 

financial reporting, which includes safeguarding of assets and compliance with applicable laws and 

regulations, in accordance with OMB Circular A-123, Management’s Responsibility for Internal Control, 

Appendix A, Internal Control over Financial Reporting. Based on the results of this evaluation, OFS 

provides unqualified assurance that internal control over financial reporting is appropriately designed and 

operating effectively as of September 30, 2011, with no related material weaknesses noted.

Sincerely,

 

 Timothy G. Massad

 Assistant Secretary for Financial Stability

Systems, Controls, and Legal Compliance
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

20 MANAGEMENT‘S DISCUSSION AND ANALYSIS

Internal Control Program 

OFS management remains committed to 

maintaining effective internal controls in 

safeguarding taxpayer dollars while providing 

financial stability through the TARP. OFS

continues to have a high performing internal 

control program in compliance with the Federal 

Managers’ Financial Integrity Act (FMFIA). 

OFS’ Internal Control Program Office (ICPO) 

works closely with program managers and 

support personnel to maintain robust internal 

controls across business functions. ICPO also 

coordinates with OFS’ Office of Financial Agents 

(OFA) to ensure that third party service 

providers whose work has a potential financial 

reporting impact on OFS have well designed and 

effective internal control environments 

supporting TARP. During fiscal year 2011, OFS

made significant progress in continuing to 

mature its internal control environment as 

demonstrated below: 

• Business processes supporting existing 

programs, including internal control 

activities, matured through the use of 

increasingly well-defined roles and 

responsibilities and policies and 

procedures. OFS management regularly 

monitors activities to confirm that 

control procedures are performed 

consistently and as designed. 

• OFS made significant progress in 

addressing findings and areas for 

improvement in the internal control 

environment identified through OFS' self 

assessment processes (e.g., OMB 

Circular A-123 internal controls over 

financial reporting assessment, annual 

assurance statement process) and 

through work performed by the oversight 

bodies (i.e., GAO, SIGTARP, and COP). 

• OFS made investments in information 

technology (IT) in fiscal year 2011 to 

drive efficiencies through the increased 

automation of the operational and 

accounting environment. 

OFS has a Senior Assessment Team (SAT) to 

guide the office’s efforts to meet the statutory 

and regulatory requirements surrounding a 

sound system of internal control. The SAT is 

chaired by the Deputy Chief Financial Officer 

and includes representatives from all OFS

functional areas. Furthermore, OFS has an 

internal control framework in place that is based 

on the principles of the Committee of Sponsoring 

Organizations of the Treadway Commission 

(COSO). The SAT leverages this framework in 

communicating control objectives across the 

organization and to its third party service 

providers. 

 

ICPO operates under the direction of the CFO 

and is guided by the SAT. ICPO monitors the 

implementation of the internal control 

framework and is responsible for assessing the 

achievement of management control objectives 

by: 

• Integrating management controls into 

OFS business processes through: 

o Maintaining internal control 

documentation, 

o Reviewing internal control 

responsibilities with business 

owners before major program 

execution events, and

o Real-time monitoring of control 

effectiveness during and after 

significant program execution 

events;

• Conducting “lessons learned” sessions to 

identify and remediate areas requiring 

improvement; 

• Performing periodic sample-based 

testing of key controls across mature 

business processes; and, 

• Monitoring feedback from oversight 

bodies.

In addition, the internal control environment 

supporting TARP undergoes continuous 

improvement to remain effective and is subject 

to significant third party oversight by the GAO 

and the SIGTARP. 

The Assistant Secretary for Financial Stability 

reports annually to the Under Secretary for 

Domestic Finance on the adequacy of the various 

internal controls throughout the OFS, to include 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 21 

financial management systems compliance. This 

assurance statement covers OFS’ compliance 

with the FMFIA, the Federal Financial 

Management Improvement Act (FFMIA), and 

OMB Circular A-123 Management’s 

Responsibility for Internal Control. In order to 

support the Assistant Secretary’s letter of 

assurance, the respective OFS functional areas 

prepare individual statements of assurance. 

These individual statements of assurance 

provide evidence supporting the achievement of 

OFS’ internal control objectives and disclose any 

noted internal control weaknesses. 

 

Information Technology Systems 

In fiscal year 2011, OFS continued to utilize and 

improve the Core Investment Transaction Flow 

(CITF), TARP’s system of record and accounting 

translation engine. OFS added standardized 

management reports to CITF to improve its 

usefulness to management decision-making and 

added functionality to capture 

intradepartmental activity to facilitate year-end 

financial reporting activity. 

Other systems are supported by financial 

agents, which provide services to OFS. The 

Financial Agency Agreements maintained by the 

Treasury Office of the Fiscal Assistant Secretary 

in support of OFS require financial agents to 

design and implement suitably robust security 

plans and internal control programs, to be 

reviewed and approved by OFS at least 

annually. 

 

In addition, OFS utilizes financial systems 

maintained by Treasury Departmental Offices 

and various Treasury bureaus. These systems 

are in compliance with federal financial systems 

standards and undergo regular independent 

audits. 

 

Compliance with the Improper Payments 

Elimination and Recovery Act (IPERA) 

 

The elimination of improper payments is a major 

focus of OFS senior management. Managers are 

held accountable for developing and 

strengthening financial management controls to 

detect and prevent improper payments, and 

thereby better safeguard taxpayer dollars. 

OFS carried out its fiscal year 2011 IPERA 

review per Treasury-wide guidance and did not 

assess any programs or activities as susceptible 

to significant erroneous payments. OFS did not 

identify any payments to incorrect payees or 

ineligible recipients. However, management did 

identify a small number of Making Home 

Affordable (MHA) investor cost share payments 

that were made in error due to unclear 

guidelines related to escrow payments and data 

integrity issues from servicers related to income. 

The overall impact of these improper payments 

was immaterial, and OFS management is 

actively implementing corrective actions at the 

servicer level to remedy this issue. 

In coordination with OFS, Freddie Mac, one of 

Treasury’s financial agents, first performed a 

comprehensive analysis of potential Monthly 

Investor Cost Share incentive overpayments and 

underpayments in August and September 2010. 

Subsequent to that analysis, Freddie Mac 

provided servicers with additional guidance for 

correctly calculating borrower income and 

capturing the correct escrow data. As a result, 

the error rates have dropped significantly in 

fiscal year 2011. OFS and Freddie Mac expect 

this error rate to continue to decrease as 

servicers address additional issues. OFS will 

continue to monitor this issue closely.

 

Areas for Improvement 

Over the next year, OFS management will focus 

on maturing its internal control environment in 

several key areas as follows:

• As programs continue to mature and 

continue winding down, there is a 

continued need for OFS to maintain 

policies and procedures, which includes 

updating or retiring documents as 

appropriate. 

• OFS relies on financial agents to provide 

many of the business processes and 

controls supporting its programs. The 

Treasury Housing programs, in 

particular, have grown in scale and 

complexity over the last year. OFS

continues to assess the adequacy of 

internal controls provided by third 

parties as they mature their program 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

22 MANAGEMENT‘S DISCUSSION AND ANALYSIS

capabilities. However, OFS will need to 

heighten its oversight practices to 

monitor controls as these programs 

further mature. 

 

• The large number and complexity of 

TARP programs and related transactions 

pose challenges in the maintenance of 

the supporting internal control 

documentation and policies and 

procedures. OFS needs to enhance its 

ability to monitor and ensure consistency 

across critical documents detailing the 

controls in place to mitigate the risks 

identified. 

• Over the past year, OFS developed 

information technology capabilities to 

increase efficiency and automate manual 

processes. Continuing this automation 

will enhance OFS’ ability to reduce risks 

associated with human error. In 

addition, OFS management will continue 

to strengthen IT-related controls 

towards a more mature IT environment 

supporting core business processes. 

Limitations of the Financial Statements

The principal financial statements have been 

prepared to report the financial position and 

results of operations of the OFS’ TARP program, 

consistent with the requirements of 31 U.S.C. 

3515(b). While the statements have been 

prepared from the books and records of the 

Office of Financial Stability and the Department 

of the Treasury in accordance with section 116 of 

EESA and Generally Accepted Accounting 

Principles (GAAP) for Federal entities and the 

formats prescribed by the OMB, the statements 

are in addition to the financial reports used to 

monitor and control budgetary resources which 

are prepared from the same books and records. 

The statements should be read with the 

realization that they are for a component of the

U.S. Government, a sovereign entity.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 23 

Operational Goals

Operational Goal One: Ensure the 

Overall Stability and Liquidity of 

the Financial System

The following discussion of OFS goals and the 

TARP programs focuses largely on the 

significant events that occurred during fiscal 

year 2011. A more comprehensive discussion of 

each program, including its development and 

prior years’ performance can be found in the 

TARP Two-Year Retrospective and The TARP 

Three Year Anniversary Report, which are 

available at: 

http://www.treasury.gov/initiatives/financialstability/briefingroom/reports/agency_reports/Pages/default.aspx.

 

The first and most significant goal of TARP is to 

restore stability to the financial system. Despite 

recent volatility in the stock market and shocks 

in the global economy, the U.S. financial system 

today is more stable than it was during the 

midst of the 2008 crisis. 

Financial markets and the economy continue to 

recover. Credit remains available for consumers 

and businesses. Financial institutions hold 

more capital relative to risk than they did before 

the crisis hit. Most of the government’s 

emergency responses to the crisis are being 

wound down and 76 percent of TARP 

investments have been recovered through 

repayments, sales, dividends, interest and other 

income. 

Bank Support Programs (CPP, TIP, AGP, 

CDCI) 

Capital Purchase Program 

OFS launched the Capital Purchase Program 

(CPP), the largest and most significant program 

under EESA, on October 14, 2008. Through the 

CPP, OFS provided capital infusions directly to 

banks and thrifts deemed viable by their 

regulators to bolster the capital position of 

institutions of all sizes and, in doing so, to build 

confidence in these institutions and the financial 

system as a whole. With the additional capital, 

CPP participants were better equipped to 

undertake new lending and continue to provide 

other services to consumers and businesses, 

even while absorbing write-downs and chargeoffs on loans that were not performing. 

CPP investments were made available to 

qualifying financial institutions (QFIs) of all 

sizes and types across the country, including 

banks, savings and loan associations, bank 

holding companies and savings and loan holding 

companies. QFIs interested in participating in 

the program had to submit an application to 

their primary federal banking regulator. 

In the period following announcement of the 

CPP, OFS provided $205 billion in capital to 707 

institutions in 48 states, including more than 

450 small and community banks and 22 certified 

community development financial institutions 

(CDFIs) (see Table 11 below). The largest 

investment was $25 billion and the smallest was 

$301,000. As Table 11 illustrates, smaller 

financial institutions make up the vast majority 

of participants in the CPP. Of the 707 

applications approved and funded by OFS

through the CPP by the time it closed to new 

institutions on December 31, 2009, 473 or 67 

percent were institutions with less than $1 

billion in assets. 

Table 11:CPP Initial Investment Profile 

(Dollars in billions)

CPP Participants TARP Investment

Asset Range Number Percent Amount Percent

<$1 billion 473 66.9% 3.8 1.8%

$1 billion - $10 billion 177 25.0% 10.0 4.9%

>$10 billion 57 8.1% 191.1 93.3%

Total 707 100% 204.9 100%
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

24 MANAGEMENT‘S DISCUSSION AND ANALYSIS

OFS received preferred stock or debt securities 

in exchange for these investments. Most 

financial institutions participating in the CPP 

pay OFS a dividend rate of five percent per year, 

which will increase to nine percent a year after 

the first five years. From inception of the 

program through September 30, 2011, OFS has 

received approximately $185 billion in CPP 

repayments, along with approximately $11.2

billion in CPP dividends and interest and $6.9

billion in net proceeds received from the sale of 

Citigroup common stock in excess of cost.

As part of a June 2009 Exchange Agreement 

between OFS and Citigroup, OFS exchanged the 

$25 billion in preferred stock it received in 

connection with Citigroup’s participation in CPP 

for approximately 7.7 billion shares of common 

stock at a price of $3.25 per share. In December 

2010, OFS completed the sale of all remaining 

2.4 million shares of common stock in Citigroup. 

Proceeds were $10.5 billion, at a price per share 

of $4.35. OFS had previously sold 5.3 billion 

shares at an average price of $4.04 under four 

trading plans during the period April to 

December, 2010. The average selling price for 

all 7.7 billion shares was $4.14 per share 

compared to a cost of $3.25 per share. In 

January 2011, OFS completed a public auction 

of warrants to purchase Citigroup common 

stock. Proceeds from the warrants associated 

with the CPP, at an exercise price of $17.85, 

totaled $54.6 million.7 

OFS also received warrants to purchase common 

shares or other securities from the financial 

institutions at the time of the CPP investment. 

The purpose of the additional securities is to 

provide opportunities for taxpayers to reap 

additional returns on the investments made by 

OFS as CPP participants recover. From 

inception of the program through September 30, 

2011, OFS has received nearly $7.6 billion in 

 

7

 As of September 30, 2011, OFS had exited from all 

TARP investments (including CPP, TIP and AGP) in 

Citigroup with proceeds greater than cost in the amount 

of $12.3 billion on the $45 billion invested in the 

institution. In addition to CPP proceeds reported above, 

proceeds from the warrants associated with TIP and 

AGP, with an exercise price of $10.61, totaled $257.6 

million.

proceeds from the sale/repurchase of CPP

warrants. 

The CPP has already generated a positive return 

to taxpayers; however, the ultimate return will 

depend on several factors, including market 

conditions and performance of individual 

companies. 

For additional information, please see the CPP 

Quarterly Report and the Annual Use of Capital 

Survey which can be found at:

http://www.treasury.gov/initiatives/financialstability/results/cpp/Pages/default.aspx. 

Refinancing Through the Small Business 

Lending Fund 

 

As of September 30, 2011, 137 CPP institutions 

have refinanced their CPP investments using 

the SBLF totaling more than $2 billion. The 

refinancing of CPP institutions into the SBLF 

decreased projected costs to OFS by fully 

repaying the total OFS investment in 137 

institutions. These refinancing transactions 

moved the risk associated with these 

institutions’ repayments from OFS to SBLF. 

Enacted into law as part of the Small Business 

Jobs Act of 2010, the SBLF was established as a 

$30 billion fund administered by Treasury that 

encourages lending to small businesses by 

providing capital to qualified community banks 

with assets of less than $10 billion. SBLF is not 

a TARP program and does not use TARP funds. 

Targeted Investment Program 

OFS established the Targeted Investment 

Program (TIP) in December 2008. Through TIP, 

OFS sought to prevent a loss of confidence in 

critical financial institutions, which could result 

in significant financial market disruptions, 

threaten the financial strength of similarly 

situated financial institutions, impair broader 

financial markets, and undermine the overall 

economy. TIP was considered “exceptional 

assistance” for purposes of executive 

compensation requirements. 

 

OFS invested $20 billion in preferred stock in 

each of two institutions --Bank of America 

(BofA) and Citigroup -- under TIP, in addition to 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 25

those funds that these financial institutions 

received under the CPP. In December 2009, 

both participating institutions repaid their TIP 

investments in full, with dividends. Total 

dividends received from Targeted Investment 

Program investments were about $3 billion 

during the life of the program. OFS also 

received warrants from each bank which 

provided the taxpayer with additional gain on 

the investments when OFS sold the BofA 

warrant in fiscal year 2010 for $1.2 billion and

the Citigroup warrant in fiscal year 2011 for

$190.4 million. TIP is closed and resulted in a 

positive return for taxpayers.

Asset Guarantee Program 

Under the AGP, OFS acted to support the value 

of certain assets held by qualifying financial 

institutions, by agreeing to absorb a portion of 

the losses on those assets. The program was 

conducted jointly by Treasury, the Federal 

Reserve Bank of New York and the FDIC. Like

TIP, it was designed for financial institutions 

whose failure could harm the financial system 

and reduce the potential for “spillover” to the 

broader financial system and economy. The 

AGP was used to assist BofA and Citigroup in 

conjunction with the TIP investments in those 

institutions. The arrangement with BofA was 

terminated before it was formally finalized, with 

BofA paying OFS a termination fee. Under the 

terms of the guarantee agreement with 

Citigroup, OFS, the FDIC, and the FRBNY 

received a premium for the guarantee of $7 

billion in Citigroup preferred stock and 

warrants. Additional information on the two 

institutions under AGP can be found in the OFS’ 

FY 2010 Agency Financial Report available at:

http://www.treasury.gov/initiatives/financialstability/briefingroom/reports/agency_reports/Documents/2010%2

0OFS%20AFR%20Nov%2015.pdf. 

In connection with the termination of the 

Citigroup asset agreement in December 2009, 

Citigroup cancelled $1.8 billion in preferred 

stock previously issued to OFS. The FDIC and 

OFS agreed that, subject to certain conditions, 

the FDIC would transfer to OFS $800 million of 

their Citigroup trust preferred stock holding 

plus dividends thereon contingent on Citigroup 

repaying its previously-issued FDIC debt under 

the FDIC’s Temporary Liquidity Guarantee 

Program which expires on December 31, 2012. 

OFS sold the trust preferred securities in 

October 2010 and the AGP warrants in January 

2011, leaving only the $800 million of trust 

preferred stock receivable from the FDIC valued 

at $739 million at September 30, 2011.

The AGP is now closed and resulted in a positive 

return for taxpayers. No OFS payments were 

made under the program. 

 

Community Development Capital Initiative 

The CDFIs focus on providing financial services 

to communities underserved by traditional 

banks and financial services, such as low- and 

moderate- income, minority, and other 

underserved communities. OFS launched the 

Community Development Capital Initiative to 

help viable certified CDFIs and the communities 

they serve cope with effects of the financial 

crisis. Under this program, CDFI banks and 

thrifts received investments of capital with an 

initial dividend or interest rate of 2 percent, 

compared to the 5 percent rate generally offered 

under CPP. CDFI banks and thrifts applied to 

receive capital up to 5 percent of risk-weighted 

assets. To encourage repayment while 

recognizing the unique circumstances facing 

CDFIs, the dividend rate will increase to 9 

percent after eight years, compared to five years 

under CPP. 

OFS completed funding under this program in 

September 2010. The total investment amount 

for the CDCI program under TARP is $570 

million for 84 institutions, which remained 

outstanding as of September 30, 2011. Of this 

amount, $363.3 million from 28 banks was 

exchanged from investments under the CPP into 

the CDCI. 

Credit Market Programs (PPIP, TALF, SBA 

7(a)) 

Public-Private Investment Program 

During the financial crisis, many institutions 

and investors were under extreme pressure to 

reduce indebtedness. This de-leveraging process 

pushed down the market prices for many 

financial assets, including troubled legacy 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

26 MANAGEMENT‘S DISCUSSION AND ANALYSIS

securities (i.e., non-agency residential mortgagebacked securities (RMBS) and commercial 

mortgage-backed securities (CMBS)) below their 

fundamental value. Institutions and investors 

were trapped with these hard-to-value assets, 

marked at distressed prices on their balance 

sheets, which constrained liquidity and the 

availability of credit in these markets. 

The PPIP was designed to purchase troubled 

legacy securities (i.e., non-agency RMBS and 

CMBS) by providing financing on attractive 

terms as well as a matching equity investment 

made by OFS. By drawing new private capital 

into the market for legacy RMBS and CMBS, 

PPIP was designed to help restart the market 

for these securities, thereby facilitating the 

removal of these assets from financial 

institutions’ balance sheets and allowing for 

more credit to become available for consumers 

and small businesses.

 

OFS matches equity dollar-for-dollar and lends 

up to the amount of equity raised by the PPIFs 

established by private sector fund managers for 

the purpose of purchasing eligible RMBS and 

CMBS from eligible financial institutions under 

EESA. During fiscal year 2011, OFS disbursed 

$1.1 billion as equity investment and $2.3 billion 

as loans to PPIFs. As of September 30, 2011, 

OFS had equity investments in PPIFs 

outstanding of $5.5 billion and loans outstanding 

of $10.4 billion for a total of $15.9 billion. As of 

September 30, 2011, the estimated value of 

these investments and loans was approximately 

$18.4 billion. 

PPIFs have the ability to invest in eligible assets 

over a three-year investment period. They then 

have up to five additional years, which may be 

extended for up to two more years, to manage 

these investments and return the proceeds to 

OFS and the other PPIF investors. PPIP fund 

managers retain control of asset selection, 

purchasing, trading, and disposition of 

investments. The profits generated by a PPIF, 

net of expenses, will be distributed to the 

investors, including OFS, in proportion to their 

equity capital investments. OFS also receives 

warrants from the PPIFs, which gives OFS the 

right to receive a percentage of the profits that 

would otherwise be distributed to the private 

partners that are in excess of their contributed 

capital. The program structure allows for risk to 

be spread between the private investors and 

OFS and provides taxpayers with the 

opportunity for positive returns.

For more information on these holdings and the 

performance of the PPIFs, readers can refer to 

the most recent PPIP Quarterly Report available 

at:

http://www.treasury.gov/initiatives/financialstability/programs/Credit%20Market%20Progra

ms/ppip/Documents/PPIP%20Report%2009-

2011.pdf

Term Asset-Backed Securities Loan Facility 

TALF was a joint Federal Reserve-OFS program 

that was designed to restart the asset-backed 

securities (ABS) market that provide credit to 

consumers and small businesses, which had 

ground to a virtual standstill during the early 

months of the financial crisis. 

Pursuant to its Federal Reserve Act Section 

13(3) authority, the Federal Reserve Board 

authorized the Federal Reserve Bank of New 

York (FRBNY) to extend up to $200 billion in 

non-recourse loans to borrowers to enable the 

purchase of newly issued asset-backed 

(including newly issued CMBS and legacy 

CMBS) AAA-rated securities including those 

backed by consumer loans, student loans, small 

business loans, and commercial real estate 

loans. In return, the borrowers pledged the 

eligible collateral with a risk premium 

(“haircut”) as security for the loans. Should a 

borrower default upon its TALF loan or 

voluntarily surrender the collateral, it would be 

seized and sold to TALF LLC, a special purpose 

vehicle created by FRBNY to purchase and hold 

seized or surrendered collateral. Through 

September 30, 2011, TALF LLC has not 

purchased any collateral from the FRBNY.

OFS originally committed to provide $20 billion 

in the form of a subordinated loan commitment 

to TALF LLC. This commitment was later 

reduced to $4.3 billion after the program closed 

to new lending in June 2010, which represented 

10 percent of the outstanding TALF loans at the 

time. TALF LLC is able to use the funds to 

purchase the underlying collateral associated 

with the FRBNY TALF loans in the event a 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 27

borrower surrendered the collateral or defaulted 

upon its loan. 

From inception through September 30, 2011, 

OFS has loaned $100 million of the $4.3 billion 

commitment. The maturity date on the OFS

loan to the TALF LLC is March 2019 with loans

made by the FRBNY through TALF maturing at 

the latest by March 2015. As of September 30, 

2011, the TALF program has experienced no 

losses and all outstanding TALF loans are well 

collateralized. OFS and FRBNY continue to see 

it as highly likely that the accumulated excess 

interest spread will cover any loan losses that 

may occur without recourse to the dedicated 

TARP funds. Therefore, OFS does not expect 

any cost to the taxpayers from this program.

Small Business Administration 7(a) 

Securities Purchase Program 

Small businesses play an important role in 

generating new jobs and growth in our economy. 

The SBA’s 7(a) Loan Guarantee Program assists 

start-up and existing small businesses that face 

difficulty in obtaining loans through traditional 

lending channels. 

To help ensure that credit flows to 

entrepreneurs and small business owners, OFS

developed the SBA 7(a) Securities Purchase 

Program to purchase SBA-guaranteed securities 

from pool assemblers. Purchasing securities 

from participating “pool assemblers” enabled 

them to purchase additional small business 

loans from loan originators. Since OFS began 

purchasing SBA 7(a) securities, the SBA 7(a) 

market has stabilized, as exhibited by new pool 

issuance volumes returning to pre-crisis levels.

Under this program, OFS invested in total in 31 

SBA 7(a) securities with a value of 

approximately $368 million during fiscal year 

2010. Those securities were comprised of 1,001 

loans from 17 different industries, including 

retail, food services, manufacturing, scientific 

and technical services, healthcare, educational 

services, and others. OFS has now sold a total of 

16 securities for approximately $213.2 million. 

OFS continues to hold 15 SBA 7(a) securities 

with a gross outstanding balance as of 

September 30, 2011, of approximately $127.6

million. 

 

Other Programs 

Automotive Industry Financing Program 

The Automotive Industry Financing Program 

(AIFP) was begun in December 2008 to help 

prevent a significant disruption of the U.S. 

automotive industry, because the potential for 

such a disruption posed a systemic risk to 

financial market stability and would have had a 

negative effect on the economy. 

Recognizing both General Motors Corporation 

(Old GM) and Chrysler Holdings LLC (Old 

Chrysler) were on the verge of potentially 

disorderly liquidations, OFS extended temporary 

loans to GM and Chrysler in December 2008. 

After the Obama Administration took office, it 

agreed to provide additional investments 

conditioned on each company and its 

stakeholders participating in a fundamental 

restructuring. Sacrifices were made by unions, 

dealers, creditors and other stakeholders, and 

the restructurings were achieved through 

bankruptcy court proceedings in a record time. 

As a result, General Motors Company (New GM) 

and Chrysler Group LLC (New Chrysler) are 

more competitive and viable companies, 

supporting American jobs and the economy. 

Operating results have improved, the industry 

has added jobs and the TARP investments have 

begun to be repaid. 

Today, both companies have rebounded 

significantly. New GM’s second quarter 2011 

profit was its sixth consecutive profitable 

quarter. Since emerging from bankruptcy, New 

GM has added shifts at six of its plants to 

address growing demand. A similar story is 

playing out at New Chrysler as the company has 

lowered its structural costs, become more 

efficient, adopted new technologies, rejuvenated 

its product line, and rebuilt its brand value. 

Today, its market share continues to recover. 

 

In total, OFS provided approximately $80 billion 

in loans and equity investments to GM, GMAC 

(now known as Ally Financial), Chrysler, and 

Chrysler Financial. Please see Footnote 6 of 

financial statements for further information on 

the AIFP subsidy cost.

 

 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

28 MANAGEMENT‘S DISCUSSION AND ANALYSIS

General Motors 

OFS provided $50 billion under TARP to Old 

GM, beginning with a $13.4 billion loan in 

December 2008 to Old GM to fund working 

capital. Under the loan agreement, Old GM was 

required to submit a viable restructuring plan. 

The first plan Old GM submitted failed to 

establish a credible path to viability, and the 

deadline was extended to June 2009 for Old GM 

to develop an amended plan. OFS loaned an 

additional $6 billion to fund Old GM as it 

worked to submit a viable restructuring plan. 

To achieve an orderly restructuring, Old GM 

filed for bankruptcy on June 1, 2009. OFS

provided $30.1 billion under a debtor-inpossession financing agreement to assist Old 

GM during the restructuring. A newly formed 

entity, New GM purchased most of the assets of

Old GM under a sale pursuant to Section 363 of 

the bankruptcy code (363 Sale). When the sale 

to New GM was completed on July 10, 2009, 

OFS converted most of its loans to 60.8 percent 

of the common equity in the New GM and $2.1 

billion in preferred stock. At that time, OFS

held $6.7 billion in outstanding loans which 

were repaid in full during fiscal year 2010. 

Approximately $986 million remained with Old 

GM (now known as Motors Liquidation 

Company) for wind-down costs associated with 

its liquidation. 

Following the July 2009 restructuring and also 

as of September 30, 2010, New GM had the 

following ownership: OFS (60.8 percent), GM

Voluntary Employee Benefit Association (VEBA) 

(17.5 percent), the Canadian Government (11.7 

percent), and Old GM’s unsecured bondholders 

(10 percent). As part of the restructuring, New 

GM issued warrants to acquire additional shares 

of common stock to VEBA and Old GM (for 

distribution to the creditors of Old GM following 

confirmation of a plan of liquidation by the 

bankruptcy court). 

Several milestones were reached regarding OFS’ 

investment in New GM during fiscal year 2011.

• In October 2010, OFS accepted an offer 

from New GM to repurchase $2.1 billion 

of the TARP preferred stock, conditioned 

on the closing of the proposed initial 

public offering of New GM’s common 

stock. Under the agreement, New GM

would purchase the preferred stock at a 

price per share of $25.50, which was

equal to 102 percent of the liquidation 

preference. In December 2010, as 

announced in October 2010, New GM

completed the repurchase of all New GM

preferred stock held by OFS for total 

proceeds of $2.14 billion.

• In November 2010, New GM completed 

its initial public offering (IPO) with net 

proceeds to OFS of $13.5 billion. The 

price per share was $32.7525, which 

represents the public sale price of $33 

less underwriting discounts and fees, 

with the sale resulting in net proceeds 

less than cost of $4.4 billion. The IPO 

reduced OFS’ ownership of New GM’s 

outstanding common stock by nearly half 

from 60.8 percent to 32 percent. 

• In March 2011, the Plan of Liquidation 

for Old GM became effective and OFS’ 

$986 million loan to Old GM was 

converted to an administrative claim. 

OFS retained the right to recover 

additional proceeds; however, any 

additional recovery is dependent on 

actual liquidation proceeds and pending 

litigation. During fiscal year 2011, OFS

received payments totaling $111 million 

from Motors Liquidation Company. 

Chrysler 

In January 2009, OFS loaned $4 billion to Old 

Chrysler. Under the loan agreement, Old 

Chrysler was required to implement a viable 

restructuring plan. In March 2009, the 

Administration determined that the business 

plan submitted by Old Chrysler failed to 

demonstrate viability and concluded that Old 

Chrysler was not viable as a stand-alone 

company. In fiscal year 2010, Old Chrysler 

repaid $1.9 billion while $500 million was 

assumed by New Chrysler (see below). OFS

wrote off the remaining $1.6 billion of this loan.

The Administration subsequently laid out a 

framework for Old Chrysler to achieve viability 

by partnering with the international car 

company Fiat. As part of the planned 

restructuring, in April 2009, Old Chrysler filed 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 29

for bankruptcy protection. In May 2009, OFS

provided $1.9 billion to Old Chrysler under a 

debtor-in-possession (DIP) financing agreement 

for assistance during its bankruptcy proceeding. 

The DIP loan was extinguished by the 

bankruptcy court in April 2010, including 

collateral security attached to the loan, and 

transferred to a liquidation trust. OFS retained 

the right to recover the proceeds from the 

liquidation of the specified collateral and 

received $40.2 million from the liquidation trust

in fiscal year 2010 and $7.8 million in fiscal year 

2011. 

In June 2009, a newly formed entity, Chrysler 

Group LLC, (New Chrysler) purchased most of 

the assets of Old Chrysler under a 363 sale. 

OFS provided a $6.6 billion loan commitment to 

New Chrysler (as of September 30, 2010, $2.1 

billion remained undrawn), and received a 9.9 

percent equity ownership in New Chrysler. The 

agreement included the ability of Fiat to meet 

specific performance related milestones which 

would increase the ownership percentage of Fiat 

and lower the ownership percentage of OFS. In 

January, April and May 2011, Fiat met those 

performance milestones, lowering the OFS

ownership percentage to 6.6 percent (6.0 percent 

on a fully diluted basis).

• In May 2011, New Chrysler repaid $5.1 

billion in TARP loans and terminated its 

ability to draw a remaining $2.1 billion 

TARP loan commitment. Of the 

repayment, $500 million was to partially 

repay the January 2009 loan of $4 

billion. New Chrysler’s repayment came 

six years before the scheduled maturity 

of those loans in 2017. 

• In July 2011, OFS received $560 million 

in proceeds from the sale of its 

remaining stake in New Chrysler to 

Fiat. With the closing of this 

transaction, OFS has fully exited its 

investment in New Chrysler. Fiat paid 

$500 million to OFS for its 98,461 shares 

or 6 percent fully diluted equity interest 

in New Chrysler. Fiat also paid $60 

million to OFS for its rights under an 

agreement with the UAW retirement 

trust pertaining to the trust's shares in 

New Chrysler.

From inception through September 30, 2011, 

OFS has received more than $11.1 billion of the 

$12.4 billion disbursed to Chrysler related 

entities (primarily Old Chrysler and New 

Chrysler) through principal repayments, sale of 

stock, interest, and other collections. While OFS 

still holds an interest in a liquidation trust, no 

significant future recoveries are expected. 

Accordingly, OFS is unlikely to fully recover the 

difference of $1.3 billion. 

 

 

Ally Financial (formerly GMAC) 

In December 2008, OFS made an initial 

investment of $5 billion in GMAC. OFS also lent 

$884 million of TARP funds to Old GM (one of 

GMAC’s owners) for the purchase of additional 

ownership interests in a rights offering by 

GMAC. In May 2009, federal banking 

regulators required GMAC to raise additional 

capital by November 2009 in connection with the 

Supervisory Capital Assistance Program 

(SCAP)/stress test. Also in May 2009, OFS

exercised its option to exchange the loan with 

Old GM for 35.4 percent of common membership 

interests in GMAC. OFS also purchased $7.5 

billion of convertible preferred shares from 

GMAC in May 2009, which enabled GMAC to 

partially meet the Supervisory Capital 

Assessment Program (SCAP) requirements. In 

December 2009, OFS made additional 

investments of $3.8 billion in GMAC to enable 

GMAC to satisfy the SCAP requirements and 

exchanged certain preferred shares for common 

stock. OFS provided the $3.8 billion in new 

capital in the form of $2.54 billion of Trust 

Preferred Securities (TruPS), which are senior to 

all other capital securities of the company, and 

$1.25 billion of Mandatory Convertible Preferred 

Stock. 

In May 2010, GMAC changed its corporate name 

to Ally Financial, Inc. In December 2010, OFS

converted additional preferred stock in Ally 

Financial with a liquidation preference of $5.5 

billion into common stock – a move designed to 

accelerate OFS’ ability to exit its investment in 

the company. The conversion increased OFS’ 

common equity stake in Ally Financial from 56 

percent to 74 percent of total common shares 

outstanding. In connection with this conversion, 

OFS converted its preferred stock at 1.0 times 

the book value of tangible common equity 

balance as of September 30, 2010, subject to 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

30 MANAGEMENT‘S DISCUSSION AND ANALYSIS

certain adjustments. Ally Financial also agreed 

to assist OFS in the sale or sales of its holdings 

of TruPS on terms acceptable to OFS and Ally 

Financial as soon as practical subject to certain 

conditions.

 

In March 2011, OFS priced a secondary offering 

at par for all of its Ally Financial trust preferred 

securities. Aggregate proceeds from the offering 

(together with a distribution fee) totaled 

approximately $2.7 billion. With the proceeds 

from this sale, OFS has received approximately 

$5.1 billion from Ally Financial from inception of 

the program through September 30, 2011, 

including $2.4 billion in dividends and interest. 

As of September 30, 2011, OFS holds $5.9 billion 

of convertible preferred stock and 74 percent of 

the outstanding shares of common stock in Ally 

Financial as discussed in footnote 6 to the OFS 

Financial Statements. 

American International Group, Inc. (AIG) 

Investment Program 

In September 2008, AIG was the largest 

provider of conventional insurance in the world, 

with approximately 75 million individual and 

corporate customers in over 130 countries. 

AIG’s assets exceeded $1 trillion and insured 

180,000 businesses and other entities employing 

over 100 million people in the U.S. It was a 

large issuer of commercial paper and the second 

largest holder of U.S. municipal bonds. 

Then, the financial crisis hit in October of 2008. 

AIG’s parent holding company engaged in 

financial activities that were well beyond the 

business of life insurance and property and 

casualty insurance. Its financial products unit 

was a significant participant in some of the

newest, riskiest, and most complex transactions 

of the U.S. financial system. In the chaotic 

environment of September 2008, the Federal 

Reserve and Treasury concluded that AIG’s 

failure could be catastrophic. Among other 

things, if AIG had failed, the crisis would have 

almost certainly spread to the entire insurance 

industry, and its failure could have directly 

affected the savings of millions of Americans. 

Therefore, the federal government took action to 

protect the U.S. financial system. 

During September, October, and November 

2008, the Federal Reserve and OFS took a series 

of steps to prevent AIG’s disorderly failure and 

mitigate systemic risks. The initial assistance to 

AIG was provided by the FRBNY before the 

passage of EESA and the creation of TARP. 

After EESA was enacted, the OFS and the 

Federal Reserve continued to work together to 

address the challenges posed by AIG.

In November 2008, OFS invested $40 billion in 

senior preferred stock of AIG and it also received 

warrants to purchase common shares in the 

firm. The funds were used immediately to 

reduce the loans provided to AIG by the FRBNY. 

The preferred stock was subsequently exchanged 

in April 2009, for face value plus accrued 

dividends, into $41.6 billion of a different series 

of preferred stock. Complete details on the AIG 

investment are available in at the TARP Three 

Year Anniversary Report and the TARP TwoYear Retrospective Report which are both 

available at: 

http://www.treasury.gov/initiatives/financialstability/briefingroom/reports/agency_reports/Pages/default.aspx. 

AIG is now experiencing a turnaround. The 

company has completed a successful 

restructuring. Having stabilized its operations, 

AIG is now in a stronger position to repay the 

OFS’ investments. As a result, during fiscal 

year 2011, substantial progress has been made 

in reducing OFS’ exposure to AIG.

• In January 2011, Treasury, FRBNY, the 

trustees of the AIG Credit Facility Trust 

(the Trust)8

 

8 The independent trust established to manage the 

Department of Treasury’s beneficial interest in Series 

C preferred AIG shares.

and AIG completed the

Restructuring previously announced on 

September 30, 2010. This series of 

integrated transactions and certain 

corporate actions was designed to 

accelerate the repayment of U.S. 

taxpayer funds and to promote AIG’s 

transition from a majority government 

owned and supported entity to a 

financially sound and independent 

entity. As part of the AIG restructuring 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 31

on January 14, 2011, AIG drew $20.3 

billion from the capital facility made 

available by OFS, for a total of $27.8 

billion drawn. In the Restructuring, AIG 

repaid FRBNY a total of $47 billion. 

AIG no longer has any outstanding 

obligations to the FBRNY (although the 

FRBNY has loans to two special purpose 

vehicles which acquired assets from 

AIG). Following the Restructuring, OFS’ 

total investment in AIG was $68 billion, 

and as of January 31, 2011, Treasury’s 

investment consisted of approximately 

1.655 billion shares of AIG common 

stock (1.092 billion shares owned by OFS

and 562.9 million shares owned by the 

Department, which were received on the 

termination of the Trust), representing 

ownership of 92 percent of the company 

(77 percent held by OFS and 15 percent 

held by the Treasury outside of OFS) as 

well as $20.3 billion of Treasury OFS’

preferred equity interests in two AIG 

owned Special Purpose Vehicles (SPVs). 

The SPVs are wholly owned by AIG and 

consolidated on the AIG financial 

statements. The OFS owned 100 percent

of the preferred share interest in the two 

SPVs. Generally, the SPVs pay the 

Preferred Interest holder (i.e., OFS) a 

return of 5 percent per annum. 

• Assets of the SPV’s included AIG equity 

interests in AIA, MetLife, AIG Star Life 

Insurance, AIG Edison Life Insurance, 

Nan Shan Life Insurance, ILFC (Aircraft 

Leasing entity) and Maiden Lane II and 

III. AIG is to repay the SPV preferred 

interest owned by OFS from 

monetization of the non-cash assets of 

the SPVs. 

• In February 2011, AIG sold its 

subsidiaries, AIG Star Life Insurance 

Co., Ltd. and AIG Edison Life Insurance 

Company and repaid $2.1 billion to OFS, 

which reduced the total outstanding 

amount of Treasury- OFS’ preferred 

equity interest in the SPVs from $20.3 

billion to $18.2 billion. 

• In March 2011, AIG repaid OFS $6.9 

billion, which further reduced the total 

outstanding amount of OFS’ preferred 

equity interests in the SPVs from $18.2 

billion to $11.3 billion. 

• In May 2011, Treasury completed the 

sale of 200 million shares of AIG 

common stock at $29.00 per share for 

$5.8 billion, with $3.8 billion in proceeds 

to OFS, resulting in proceeds less than 

cost of about $1.9 billion.9

• In August 2011, AIG repaid OFS $2.2 

billion, including $0.2 billion in preferred 

interest returns recognized as dividends, 

which further reduced OFS’ preferred 

equity interest in the SPVs from $11.3 

billion to $9.3 billion. This repayment 

was funded through proceeds from the 

sale of AIG’s Nan Shan Life Insurance 

subsidiary. 

 

As of September 30, 2011, OFS’ remaining gross 

outstanding TARP AIG related investments 

amounted to $51.1 billion, which consists of 960 

million shares of AIG common stock10

 

9 The sale consisted of 131,981,246 TARP shares and 

68,018,754 non-TARP shares based upon the 

Treasury’s pro-rata holding of those shares. The nonTARP shares are those received from the trust 

established by the FRBNY for the benefit of the U.S. 

government. Proceeds for non-TARP common stock 

totaled $1.97 billion and are not reported in OFS 

receipts. 

(with a 

cost basis of $43.53 per share and a market 

value of $21.1 billion or $21.95 per share), and 

approximately $9.3 billion of preferred equity 

interests. As of September 30, 2011, the 

aggregate value of the holdings of the SPV 

greatly exceeds OFS’ preferred interests. 

Therefore, OFS does not currently anticipate 

incurring any loss from its SPV preferred 

interests. Additional discussion of the AIG 

investment including subsidy cost can be found 

in footnote 6 of the OFS Financial Statements.

10 OFS’ 960 million shares of AIG common stock 

represent 50.8 percent of AIG’s total shares outstanding 

as of September 30, 2011. Treasury, outside of TARP, 

owns an additional 495 million shares of AIG common 

stock which represent an additional 26.1 percent of 

AIG’s total shares on a fully diluted basis.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

32 MANAGEMENT‘S DISCUSSION AND ANALYSIS

Operational Goal Two: Prevent 

Avoidable Foreclosures and 

Preserve Homeownership

OFS established several programs under TARP 

to combat the historic housing crisis and 

important new reforms are being introduced in 

part because of TARP’s housing programs. 

While the housing market remains depressed, 

TARP’s initiatives to assist struggling 

homeowners have helped provide more 

affordable permanent monthly mortgage 

payments to over 850,000 homeowners and 

provided an additional 18,000 homeowners (95 

percent of these homeowners helped through 

non-GSE programs) with alternative solutions to 

foreclosure. In addition, TARP’s housing 

programs have set new standard practices for 

mortgage providers that have indirectly helped 

millions more. 

Examples include:

• Establishing a single point of contact for 

homeowners seeking assistance. This 

critical reform is helping to prevent 

homeowners from receiving conflicting 

information about their options, while 

providing them access to a single, 

knowledgeable case manager who can 

guide them through the modification 

process.

• Limiting the practice of “dual tracking” – 

where service providers begin the 

foreclosure process while simultaneously 

evaluating homeowners for a 

modification.

• Requiring servicers to provide qualified 

unemployed homeowners with a 

forbearance period during which their 

monthly payments are temporarily 

reduced while they look for a new job.

• Assessing servicers to ensure that they 

are complying with OFS’ housing 

program guidelines and are meeting 

their obligations to homeowners fairly. 

By introducing these and other new concepts, 

OFS’ housing programs are serving as a national 

laboratory for helping the private and non-profit 

sectors address a foreclosure challenge on this 

scale. 

Using authority granted under EESA, OFS

established housing programs under TARP that 

fall into three initiatives: the MHA program, 

(which includes the HAMP), the Hardest Hit 

Fund (HHF) and OFS’ support for the FHA 

Refinance Program. Together these programs 

make up a comprehensive housing program, 

whose goal is to lower mortgage payments for atrisk borrowers, support loan modifications 

aimed at providing sustainable, affordable 

mortgage payments for borrowers, prevent 

avoidable foreclosures and provide incentives to 

investor/owners of loans, loan servicers, and 

homeowners to participate in the program. To 

protect taxpayers, the MHA and HHF housing 

initiatives generally have pay-for-success 

incentives: funds are spent only when 

transactions are completed and thereafter only 

as long as those contracts remain in place. 

Therefore, funds will be disbursed over many 

years. 

Rather than try and stop every foreclosure, OFS’ 

housing programs have focused on assisting 

families with home loans that would be 

sustainable over the long term if modified. For 

borrowers whose mortgages could not be saved, 

OFS’s programs have helped them to make a 

more graceful and orderly transition to a more 

sustainable living situation. 

The total cost of the TARP housing programs, 

excluding administrative costs, cannot exceed—

and may be less than—$45.6 billion, which is the 

amount committed to that purpose. 

Home Affordable Modification Program (HAMP) 

 

HAMP is a first lien mortgage modification 

program that provides incentives to mortgage 

servicers, investors, and homeowners to reduce 

eligible homeowners’ monthly payments to 

affordable levels based on the homeowner’s 

current income. Under this program, OFS pays 

the incentives for the modification of loans not 

held by government sponsored enterprises

(GSEs) while the GSEs bear the cost of 

modifications of loans held by the GSEs. HAMP 

is the largest program within MHA and includes 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 33

several additional components to complement 

first lien modifications. 

HAMP provides eligible homeowners the 

opportunity to reduce their monthly first lien 

mortgage payments to 31 percent of their gross 

(pre-tax) income.

To qualify for HAMP, a borrower must:

• Own a one- to four-unit home that is a 

primary residence;

• Have received a mortgage on or before 

January 1, 2009;

• Have a mortgage payment (including 

principal, interest, taxes, insurance, and 

homeowners association dues) that is 

more than 31 percent of the homeowner’s 

gross monthly income; and

• Owe not more than $729,750 on a first 

mortgage for a one–unit property (there 

are higher limits for two– to four– unit 

properties).

Before a mortgage can be permanently modified, 

the homeowner must make the new, reduced 

monthly mortgage payment on time and in full 

during a trial period of three or four months. 

Homeowners can earn up to $1,000 per year for 

five years to reduce the amount of principal they 

owe up to $5,000 by making timely payments on 

permanently modified loans. 

Additional Components of Making Home 

Affordable 

• The FHA-HAMP Program provides the 

same incentives as HAMP for Federal 

Housing Administration (FHA) 

guaranteed loans.

• The Second Lien Modification Program 

(2MP) provides incentives for second-lien 

holders to modify or extinguish a secondlien mortgage when a modification has 

been initiated on the first lien mortgage 

for the same property under HAMP. 

• The Treasury/FHA Second Lien Program 

(2LP) provides incentives to servicers for 

extinguishment of second liens for 

borrowers who refinance their first lien 

mortgages under the FHA-Refinance 

Program.

• The Rural Development (RD)-HAMP 

Program provides incentives for modified 

United States Department of Agriculture 

(USDA) guaranteed mortgages.

 

Housing Finance Agency Innovation Fund for 

the Hardest Hit Housing Markets (HFA Hardest 

Hit Fund, or HHF) 

 

In February 2010, the Obama Administration 

announced the HFA Innovation Fund for the 

Hardest Hit Housing Markets (HFA Hardest Hit 

Fund, or HHF), which allow state HFAs in the 

nation’s hardest hit housing markets and high 

unemployment markets to design innovative, 

locally targeted foreclosure prevention 

programs. State HFAs design the state 

programs, tailoring the housing assistance to 

their local needs. Further information on the 

funded programs is available at: 

http://www.FinancialStability.gov/roadtostabilit

y/hardesthitfund.html. 

Support for the FHA-Refinance Program 

In March 2010, the Administration announced 

enhancements to an existing FHA program that 

will permit lenders to provide additional 

refinancing options to homeowners who owe 

more than their homes are worth because of 

large declines in home prices in their local 

markets. This program, known as the FHARefinance program, will provide more 

opportunities for qualifying mortgage loans to be 

restructured and refinanced into FHA-insured 

loans. 

Among other requirements: 

• The homeowner must be current on the 

existing first lien mortgage;

• The homeowner must occupy the home 

as a primary residence and have a 

qualifying credit score;

• The mortgage investor must reduce the 

amount owed on the original loan by at 

least ten percent; 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

34 MANAGEMENT‘S DISCUSSION AND ANALYSIS

• The new FHA loan must have a balance 

less than the current value of the home; 

and

• Total mortgage debt for the borrower 

after the refinancing, including both the 

first lien mortgage and any other junior 

liens, cannot be greater than 115 percent 

of the current value of the home – giving 

homeowners a path to regain equity in 

their homes and an affordable monthly 

payment. 

TARP funds have been made available up to 

approximately $8 billion in the aggregate to 

provide additional coverage to lenders for a 

share of potential losses on these loans and to 

provide incentives to support the write-downs of 

second liens and encourage participation by 

servicers.

OFS has entered into a letter of credit (L/C) to 

fund the FHA- Refinance Program. Pursuant to 

this L/C, a reserve account has been pre-funded 

with $50 million in funds for OFS’ share of any 

future loss claim payments. OFS will be 

reimbursed for all unused amounts from this 

account. As of September 30, 2011, no 

disbursements for loss claim payments under 

the FHA- Refinance Program have been made. 

MHA Results 

The incentives offered under MHA are helping 

homeowners and assisting in stabilizing the 

housing market. Through September 30, 2011, 

112 active servicers have signed up for MHA. 

Between loans covered by these servicers and 

loans owned or guaranteed by the GSEs, more 

than 85 percent of first-lien residential mortgage 

loans in the country are now held by servicers 

participating in the program. Through 

September 30, 2011, OFS has made 

commitments to fund up to $29.9 billion in MHA 

payments.

After 31 months, more than 1.7 million

homeowners participating in the OFS and GSE 

HAMP programs have entered into trial 

modifications that reduced their mortgage 

payments to more affordable levels. Of these 

homeowners, the OFS HAMP program has 

helped almost 800,000 participants. Over

850,000 homeowners participating in the HAMP 

programs have had their mortgage terms 

modified permanently, with over 400,000 of 

those participants from the OFS HAMP 

program. Homeowners participating in both the 

GSE and OFS HAMP programs collectively have 

experienced a 37 percent median reduction in

their mortgage payments—more than $525 per 

month. MHA has also spurred the mortgage 

industry to adopt similar programs that have 

helped millions more at no cost to the taxpayer. 

OFS now publishes quarterly assessments of 

servicer performance, which contain data on 

compliance with program guidelines as well as 

program results metrics. Going forward, OFS

hopes these assessments will set the standard 

for transparency about mortgage servicer efforts 

to assist homeowners and encourage servicers to 

correct identified instances of noncompliance. 

For the second quarter of calendar year 2011, 

two servicers had been determined to need 

substantial improvement. These servicers were 

also in need of substantial improvement in the 

first quarter, and their servicer incentives have 

been withheld since June 1, 2011. 

MHA performance highlights for fiscal year 2011 

can be found at:

http://www.treasury.gov/initiatives/financialstability/results/MHAReports/Pages/default.aspx. 

Hardest Hit Fund Results 

The Hardest Hit Fund provides funding to 18 

states and the District of Columbia (DC) to 

provide assistance to struggling homeowners 

through locally-tailored programs administered 

by each respective HFA. $7.6 billion has been 

allocated of the $45.6 billion committed for the 

housing programs. From inception of the 

program through September 30, 2011, a total of 

$655 million has been drawn down from OFS by

the 18 states and DC. Each state has its own 

timeline for implementation of their programs 

and draws down funds as they are needed.

Housing Scorecard 

The U.S. Department of Housing and Urban 

Development (HUD) and OFS also release a 

Monthly Housing Scorecard on the nation’s 

housing market. Each month the scorecard 

presents key housing market indicators and 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 35

highlights the impact of the Administration’s 

housing recovery efforts, including assistance to 

homeowners through the FHA and the HAMP. 

The Housing Scorecard is available at: 

www.hud.gov/scorecard.

Operational Goal Three: Protect 

Taxpayers’ Interests

OFS manages TARP investments to minimize 

costs to taxpayers and receives income on its 

holdings of preferred equity and other TARP 

investments in the form of interest, dividends 

and fees. OFS also takes steps to ensure that 

TARP recipients comply with any TARP-related 

statutory or contractual obligations such as 

executive compensation requirements and 

restrictions on dividend payments.

Consistent with the statutory requirements, 

OFS’ four overarching portfolio management 

guiding principles are as follows:

• Protect taxpayer investments and 

maximize overall investment returns 

within competing constraints,

• Promote stability for and prevent 

disruption of financial markets and the 

economy,

• Bolster market confidence to increase 

private capital investment, and

• Dispose of investments as soon as 

practicable, in a timely and orderly 

manner that minimizes financial market 

and economic impact.

OFS’ asset management approach protects 

taxpayer investments and promotes stability 

through evaluating systemic and individual risk 

from standardized reporting, proactive 

monitoring and ensuring adherence to EESA 

and compliance with contractual agreements. 

By avoiding involvement in day to day company 

management decisions and exercising its rights 

as a common shareholder only on core 

governance issues, OFS seeks to bolster market 

confidence to increase private capital 

investment. 

OFS seeks to exit investments as soon as 

practicable to remove OFS as a shareholder, 

eliminate or reduce OFS exposure, return TARP 

funds to reduce the federal debt, and encourage 

private capital formation to replace federal 

government investment. The desire to achieve 

such objectives must be balanced against a 

variety of other objectives, including maximizing 

taxpayer returns, avoiding further financial 

market and/or economic disruption, and the 

potentially negative impact to the issuer’s health 

and/or capital raising plans from OFS’ 

disposition. An issuer typically needs the 

approval of its primary federal regulator in order 

to repay OFS and therefore regulatory approvals 

also affect how quickly an institution can repay. 

In managing the TARP investments, OFS takes 

a disciplined portfolio approach with a review 

down to the individual investment level. OFS

aims to monitor risk and performance at both

the overall portfolio level and the individual 

investment level. Given the nature and size of 

the portfolio, risk and performance are linked to 

the overall U.S. financial system and the 

economy. In conducting the portfolio 

management activities, OFS employs a mix of 

dedicated professionals and external asset 

managers. These external asset managers 

provide market specific information such as 

market prices and valuations as well as detailed 

credit analysis using public information on a 

periodic basis.

 

Risk Assessment 

OFS has developed procedures to identify and 

mitigate investment risk. These procedures are 

designed to identify TARP recipients that are in 

a significantly challenged financial condition to 

ensure heightened monitoring and additional 

diligence and to determine appropriate 

responses by OFS to preserve the taxpayers’ 

investment and minimize loss as well as to 

maintain financial stability. Specifically, OFS’ 

external asset managers review publicly 

available information to identify recipients for 

which pre-tax, pre-provision earnings and 

capital may be insufficient to offset future losses 

and maintain required capital. For certain 

institutions, OFS and its external asset 

managers engage in heightened monitoring and 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

36 MANAGEMENT‘S DISCUSSION AND ANALYSIS

due diligence that reflects the severity and 

timing of the challenges. 

Although OFS relied on the recommendations of 

federal banking regulators in connection with 

reviewing and approving applications for 

assistance, OFS generally does not have access 

to non-public information collected by federal 

banking regulators on the financial condition of 

TARP recipients. To the contrary, there is a 

separation between the responsibilities of OFS

as an investor and the duties of the federal 

government as regulator. 

The data gathered through this process is used

by OFS in consultation with its external managers and legal advisors to determine a proper 

course of action. This may include making 

recommendations to management or working 

with management and other security holders to 

improve the financial condition of the company, 

including through recapitalizations or other 

restructurings. These actions are similar to 

those taken by large private investors in dealing 

with troubled investments. OFS does not seek to 

influence the management of TARP recipients 

for non-financial purposes.

 

Compliance 

OFS also takes steps to ensure that TARP 

recipients comply with their TARP-related 

statutory and contractual obligations. Statutory 

obligations include executive compensation 

restrictions. Contractual obligations vary by 

investment type. For most of OFS’ preferred 

stock investments, TARP recipients must comply 

with restrictions on payment of dividends and on 

repurchases of junior securities, so that funds 

are not distributed to junior security holders 

prior to repayment of the federal government. 

Recipients of exceptional assistance (currently 

AIG, GM, and Ally) must comply with additional 

restrictions on executive compensation, lobbying, 

corporate expenses and internal controls and 

must provide quarterly compliance reports. 

All servicers voluntarily participating in MHA 

have contractually agreed to follow the MHA 

program guidelines, which require the servicer 

to offer a MHA modification to all eligible 

borrowers and to have systems that can process 

all MHA-eligible loans. Servicers are subject to 

periodic, on-site compliance reviews performed 

by OFS’ compliance agent, Making Home 

Affordable-Compliance (MHA-C), a separate, 

independent division of Freddie Mac, to ensure 

that servicers satisfy their obligations under 

MHA requirements in order to provide a wellcontrolled program that assists as many eligible 

homeowners as possible to retain their homes 

while taking reasonable steps to prevent waste, 

fraud and abuse. OFS works closely with MHAC to design and refine the compliance program 

and conducts quality assessments of the 

activities performed by MHA-C. In fiscal year 

2011, OFS began publishing quarterly 

assessments of the ten largest servicers.

Warrant Sales Results 

OFS adheres to a consistent process for 

evaluating bids from institutions to repurchase 

their warrants. Upon receiving a bid for a 

warrant repurchase, OFS utilizes (i) market 

quotes, (ii) independent, third party valuations, 

and (iii) model valuations to assess the bid. OFS

began selling warrants back to banks that had 

repaid the TARP investment in May 2009.

Since the program’s inception, OFS has received 

more than $9.1 billion in gross proceeds from the 

disposition of warrants associated with 93 CPP 

investments and both TIP investments, 

consisting of (i) $3.7 billion from issuer 

repurchases at agreed upon fair market values 

and (ii) $5.4 billion from auctions. For the 93

fully repaid CPP investments representing 

$180.1 billion in capital, OFS has received an

absolute return (i.e., not annualized) of 4.8

percent from dividends and an added 4.2

percentage return from the sale of the warrants 

for a total absolute return of 9.0 percent. For 

the $40 billion TIP investments in Bank of 

America and Citigroup, OFS received an 

absolute return of 6.4 percent from dividends 

and an added 3.8 percent return from the sale of 

the warrants for a total absolute return of 10.2 

percent.11

 

11 Since some of the OFS’ warrant repurchases were 

made in OFS’ first year, OFS has consistently reported 

absolute returns for all warrant sales, rather than 

annualizing for some sales and not others. 

 These returns are not predictive of 

the eventual returns on the entire CPP 

portfolios. For the complete Warrant 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 37

Disposition Report, please visit: 

http://www.treasury.gov/initiatives/financialstability/briefingroom/reports/other/Pages/default.aspx

Operational Goal Four: Promote 

Transparency

To protect taxpayers and help ensure that every 

dollar is directed toward promoting financial 

stability, OFS established comprehensive 

accountability and transparency measures. OFS

publishes hundreds of reports and other 

information about TARP so that the public 

knows how the money was spent, who received it 

and on what terms. This includes all contracts 

governing any investment or expenditure of 

TARP funds and countless reports over nearly 

three years of the TARP’s existence. All of these 

reports and information are posted on the OFS

website, www.FinancialStability.gov, including: 

• Lists of all the institutions participating 

in TARP programs, and all of the 

investments OFS has made; 

• All investment contracts defining the 

terms of those investments within five to 

ten business days of a transaction’s 

closing; 

• All contracts with OFS service providers 

involved with TARP programs; 

• A Daily TARP Update Report; 

• A TARP Tracker;

• A report of each transaction within two 

business days of completing the 

transaction;

• Monthly reports of dividend and interest 

received; 

• Monthly reports to Congress, which 

present updates on OFS investments 

and programs in a clear, concise manner; 

• Monthly reports detailing the progress of 

modifications under the Making Home 

Affordable program; 

• A monthly lending survey, and an 

annual use of capital survey, which 

contains detailed information on the 

lending and other activities of banks 

that have received TARP funds; and

• Quarterly assessments of the ten largest 

mortgage servicers.

OFS has worked to maximize the transparency 

of the housing program to borrowers and ensure 

that servicers are held accountable. For 

example, every borrower is entitled to a clear 

explanation if he or she is determined to be 

ineligible for a HAMP modification. OFS has 

established denial codes that require servicers to 

report the reason for modification denials in 

writing to OFS. Servicers are required to use 

those denial codes as a uniform basis for sending 

letters to borrowers who are evaluated for 

HAMP but denied a modification. In those 

letters, borrowers will be provided with a phone 

number to contact their servicers as well as the 

phone number of the Homeowners HOPETM

Hotline, a counseling service provided by the 

Homeownership Preservation Foundation which 

has counselors who are trained to work with 

borrowers to help them understand reasons they 

may have been denied modifications and explain 

other modification or foreclosure prevention 

options that may be available to them. 

OFS increased transparency and public access to 

the NPV model -- a key component of the 

eligibility test for HAMP – in releasing the NPV 

white paper, which explains the methodology 

used in the NPV model. To ensure accuracy and 

reliability, Freddie Mac, acting as OFS’ 

compliance agent, conducts periodic audits of 

servicers’ implementation of the model and 

requires servicers to use models which meet 

OFS’ NPV specifications or to revert back to 

OFS’ NPV application. As required by the DoddFrank Act, OFS established a web portal that 

borrowers can access to run a NPV analysis on 

their own mortgages, and that borrowers who 

are turned down for a HAMP modification can 

use.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

38 MANAGEMENT‘S DISCUSSION AND ANALYSIS

In a continued commitment to enhanced 

reporting and transparency, in January 2011, 

the Obama Administration released the MHA 

Data File which includes characteristics of 

program participants to date, including financial 

information, mortgage loan information before 

and after entering HAMP, performance in a 

HAMP modification, and race/ethnicity data. 

The MHA Data File offers mortgage loan-level 

data and is intended to allow for better 

understanding of the impact of the program. 

OFS applied the recommendations of an 

independent non-profit, non-partisan policy 

institute in preparing the MHA Data File to 

ensure the privacy of participating homeowners. 

The release of the data file fulfills a requirement 

within the Dodd-Frank Act to make available 

loan-level data about the program. OFS will 

update the file monthly and will expand 

reporting to include newer initiatives that are 

part of Making Home Affordable. Researchers 

interested in using the MHA Data File can 

access the file and user guide at:

http://www.Treasury.gov/initiatives/financialsta

bility/results/Pages/mha_publicfile.aspx. 

A. Audited Financial Statements 

OFS prepares separate financial statements for 

TARP on an annual basis. This is the third OFS

Agency Financial Report (AFR), and includes the 

audited financial statements for the fiscal years 

ended September 30, 2011 and September 30, 

2010. Additional reports for prior periods are 

available at: www.FinancialStability.gov. 

In its first two years of operation, TARP’s 

financial statements received unqualified 

(“clean”) audit opinions from its auditors, the 

GAO. OFS also received a Certificate of 

Excellence in Accountability Reporting (CEAR) 

from the Association of Government Accountants 

for both fiscal year 2010 and the period ending 

September 30, 2009.

B. TARP Retrospective Reports 

In October 2011, OFS published the TARP 

Three-Year Anniversary Report. This serves as 

an update to OFS’ comprehensive TARP TwoYear Retrospective report issued in October 

2010. These reports include information on 

TARP programs and the effects of TARP and 

additional emergency measures taken by the 

federal government to stabilize the financial 

system following the 2008 crisis. Readers are 

invited to refer to these documents at: 

http://www.treasury.gov/initiatives/financialstability/briefingroom/reports/agency_reports/Pages/default.aspx.

C. Oversight by Four Separate Agencies 

Congress also established four avenues of 

oversight for TARP:

• The Financial Stability Oversight Board, 

established by EESA Section104;

• Specific responsibilities for the GAO as 

set out in EESA Section 116;

• The Special Inspector General for TARP, 

established by EESA Section 121; and

• The Congressional Oversight Panel 

(COP), established by EESA Section125. 

COP concluded its operations in 

accordance with EESA on April 3, 2011.

OFS has productive working relationships with 

all of these bodies, and cooperates with each 

oversight agency’s effort to produce periodic 

audits and reports that focus on the many 

aspects of TARP. Individually and collectively, 

the oversight bodies’ audits and reports have 

made and continue to make important 

contributions to the development, strengthening, 

and transparency of TARP programs.

D. Congressional Hearings and Testimony 

OFS officials have testified in numerous 

Congressional hearings since TARP was created. 

Copies of the written testimony are available at: 

www.FinancialStability.gov/latest/pressreleases.

html. 

 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MANAGEMENT‘S DISCUSSION AND ANALYSIS 39

 Part 2: Financial Report

 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

40 MANAGEMENT‘S DISCUSSION AND ANALYSIS

 

 

 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 41

 

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (CF0)

The Office of Financial Stability’s (OFS) Agency Financial Report for fiscal year 2011 provides readers 

information on financial results relating to the Troubled Asset Relief Program (TARP) as required by the 

Emergency Economic Stabilization Act (EESA) of 2008 and other laws. It is a critical part of our efforts to 

ensure the highest level of transparency and accountability to the American people.

For fiscal year 2011, the Government Accountability Office (GAO) provided OFS unqualified – “clean” -- audit 

opinions on the fair presentation of our financial statements and the effectiveness of our internal control over 

financial reporting. In addition, the auditors determined that we had no material weaknesses. However, GAO 

continued to report one significant deficiency in internal control over our accounting and financial reporting 

processes. 

I would like to acknowledge senior management’s commitment to good governance as well as the discipline, 

transparency, and care exhibited by OFS employees in creating and executing our organization’s policies and 

procedures. We were honored to have received the Certificate of Excellence in Accountability Reporting (CEAR) 

award from the Association of Government Accountants for both fiscal year 2010 and the period ending 

September 30, 2009. 

For fiscal year 2011, net cost of operations was $9.5 billion, resulting in a cumulative net cost of operations of 

$28.0 billion since inception. The fiscal year 2011 net cost of operations primarily results from a decline in the 

value of Ally Financial, reductions in the share prices of common stock holdings in General Motors and 

American International Group, Inc. (AIG) and continued costs of the Treasury Housing Programs Under TARP. 

The cumulative net cost of operations primarily consists of net subsidy cost on direct loans and/or equity 

investments in AIG and automobile companies partially offset by net subsidy income related to TARP’s bank 

support and credit market programs. During the past year, OFS focused on further strengthening its rigorous 

internal control processes around obligations, transaction processing, disbursements, collections, and financial 

reporting. While our processes continue to mature, the audit opinions evidence successes surrounding internal 

controls over financial reporting implementation across the organization. In fiscal year 2011, OFS enhanced its 

subsidiary ledger for tracking TARP equity investments and loans and the supporting accounting data. This 

strengthened system of record provides automated controls over reporting financial information with 

appropriate system controls. 

On October 3, 2010, the government’s authority to make new financial commitments to purchase troubled 

assets expired under the EESA. While new obligations are prohibited, funding under our existing commitments 

for housing and other programs will continue to be disbursed and many assets in our investment program are 

currently outstanding. As a result, our primary focus is on managing current investment assets and 

implementing the housing programs. 

I feel fortunate to play a role in the continuing tradition of sound fiscal stewardship at OFS. This organization 

recognizes the importance of a proper control environment and will continue to uphold the highest standards of 

integrity as we carry out our fiduciary responsibilities to the American people. Moving forward, we will 

continue to strengthen our financial management capacity. In particular, we will continue to enhance our 

procedures, documentation, and controls over our systems and processes to protect taxpayer interests and 

ensure the highest levels of transparency in our activities.

Sincerely,

Lorenzo Rasetti

Chief Financial Officer
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

42 AUDITOR’S REPORT

 

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

AUDITOR’S REPORT 43
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

44 AUDITOR’S REPORT
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

AUDITOR’S REPORT 45
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

46 AUDITOR’S REPORT
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

AUDITOR’S REPORT 47
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

48 AUDITOR’S REPORT
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

AUDITOR’S REPORT 49

Appendix I: Management’s Report on Internal Control Over 

Financial Reporting
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

50 AUDITOR’S REPORT

Appendix II: OFS Response to Auditor’s Report 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

AUDITOR’S REPORT 51

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THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

52 FINANCIAL STATEMENTS

FINANCIAL STATEMENTS 

The Office of Financial Stability (OFS) prepares 

financial statements for the Troubled Asset Relief 

Program (TARP) as a critical aspect of ensuring 

the accountability and stewardship for the public 

resources entrusted to it and as required by 

Section 116 of the Emergency Economic 

Stabilization Act of 2008 (EESA). Preparation of 

these statements is also an important part of the 

OFS’ financial management goal of providing 

accurate and reliable information that may be 

used to assess performance and allocate resources. 

The OFS management is responsible for the 

accuracy and propriety of the information 

contained in the financial statements and the 

quality of internal controls. The statements are, in 

addition to other financial reports, used to 

monitor and control budgetary resources. The 

OFS prepares these financial statements from its 

books and records in conformity with the 

accounting principles generally accepted in the 

United States for federal entities and the formats 

prescribed by the Office of Management and 

Budget (OMB). 

While these financial statements reflect activity of 

the OFS in executing its programs, including 

providing resources to various entities to help 

stabilize the financial markets, they do not 

include, as more fully discussed in Note 1, the 

assets, liabilities, or results of operations of 

commercial entities in which the OFS has a 

significant equity interest. 

The Balance Sheet summarizes the OFS assets, 

liabilities and net position as of September 30, 

2011 and 2010. Intragovernmental assets and 

liabilities resulting from transactions between 

federal agencies are presented separately from 

assets and liabilities from transactions with the 

public.

The Statement of Net Cost shows the net cost of 

operations for the years ended September 30, 

2011 and 2010.

The Statement of Changes in Net Position 

presents the OFS ending net position by two 

components - Cumulative Results of Operations 

and Unexpended Appropriations as of September 

30, 2011 and 2010. It summarizes the changes in 

net position. The ending balances of both 

components of net position are also reported on 

the Balance Sheet.

The Statement of Budgetary Resources provides 

information about funding and availability of 

budgetary resources and the status of those 

resources for the years ended September 30, 2011 

and 2010. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

FINANCIAL STATEMENTS 53

Dollars in Millions 2011 2010

ASSETS

Intragovernmental Assets:

 Fund Balance with Treasury (Note 3) $ 83,342 $ 98,664

 Asset Guarantee Program (Note 6) 739 815

Total Intragovernmental Assets 84,081 99,479

Cash on Deposit for Housing Program (Note 4) 50 -

Accounts Receivable - 4

Troubled Asset Relief Program:

 Direct Loans and Equity Investments, Net (Note 6) 80,104 142,452

 Asset Guarantee Program (Note 6) - 2,240

Total Assets $ 164,235 $ 244,175

LIABILITIES

Intragovernmental Liabilities:

 Accounts Payable and Other Liabilities $ 2 $ 5

 Due to the General Fund (Note 7) 4,591 25,112

 Principal Payable to the Bureau of the Public Debt (Note 8) 129,497 140,404

Total Intragovernmental Liabilities $ 134,090 $ 165,521

Accounts Payable and Other Liabilities 93 134

Liability for Treasury Housing Programs Under TARP (Notes 5 and 6) 344 283

Total Liabilities $ 134,527 $ 165,938

Commitments and Contingencies (Note 9) - -

NET POSITION 

 Unexpended Appropriations $ 57,544 $ 79,783

 Cumulative Results of Operations (27,836) (1,546)

Total Net Position $ 29,708 $ 78,237

Total Liabilities and Net Position $ 164,235 $ 244,175

The accompanying notes are an integral part of these financial statements.

Office of Financial Stability (Troubled Asset Relief Program)

BALANCE SHEET 

As of September 30, 2011 and 2010 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

54 FINANCIAL STATEMENTS

Dollars in Millions 2011 2010

Gross Cost (Income):

 Subsidy Cost (Income) (Note 6)

 Direct Loan and Equity Investment Programs $ 7,208 $ (22,698)

 Other Credit Programs 31 (1,505)

 Total Program Subsidy Cost (Income) 7,239 (24,203)

 Interest Expense on Borrowings from the Bureau of the Public Debt (Note 10) 3,827 5,913

 Treasury Housing Programs Under TARP (Note 5) 1,943 825

 Administrative Cost 315 296

Total Gross Cost (Income) 13,324 (17,169)

Earned Revenue:

 Dividend and Interest Income - Programs (Note 6) (3,476) (7,242)

 Interest Income on Financing Account (Note 10) (781) (1,173)

 Subsidy Allowance Amortization (Note 10) 430 2,502

Total Earned Revenue (3,827) (5,913)

Total Net Cost of (Income from) Operations $ 9,497 $ (23,082)

The accompanying notes are an integral part of these financial statements.

For the Years Ended September 30, 2011 and 2010 

STATEMENT OF NET COST

Office of Financial Stability (Troubled Asset Relief Program)

STRATEGIC GOAL: TO ENSURE THE OVERALL STABILITY AND LIQUIDITY OF THE FINANCIAL SYSTEM, 

PREVENT AVOIDABLE FORECLOSURES AND PRESERVE HOMEOWNERSHIP
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

FINANCIAL STATEMENTS 55

Dollars in Millions

Unexpended 

Approprations

 Cumulative 

Results of 

Operations 

Unexpended 

Approprations

 Cumulative 

Results of 

Operations 

Beginning Balances $ 79,783 $ (1,546) $ 84,229 $ (1)

Budgetary Financing Sources

 Appropriations Received 2,278 - 5,151 -

 Appropriations Used (24,517) 24,517 (9,597) 9,597

Other Financing Sources - (41,310) - (34,224)

Total Financing Sources (22,239) (16,793) (4,446) (24,627)

Net (Cost of) Income from Operations - (9,497) - 23,082

Net Change (22,239) (26,290) (4,446) (1,545)

Ending Balances $ 57,544 $ (27,836) $ 79,783 $ (1,546)

The accompanying notes are an integral part of these financial statements.

2010

Office of Financial Stability (Troubled Asset Relief Program)

STATEMENT OF CHANGES IN NET POSITION

2011

For the Years Ended September 30, 2011 and 2010 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

56 FINANCIAL STATEMENTS

Dollars in Millions

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

BUDGETARY RESOURCES

Unobligated Balances Brought Forward $ 11,075 $ 10,548 $ 28,156 $ 8,945

Recoveries of Prior Year Unpaid Obligations 3,057 4,664 1,173 39,364

Budget Authority:

 Appropriations 2,278 - 5,151 -

 Borrowing Authority - 77,914 - 69,440

 Spending Authority from Offsetting Collections

 Earned: Collected - 107,307 - 156,112

 Change in Unfilled Orders Without Advance - (23,320) - (5,111)

Total Budget Authority 16,410 177,113 34,480 268,750

Permanently Not Available - (90,568) - (107,976)

TOTAL BUDGETARY RESOURCES (Note 11) $ 16,410 $ 86,545 $ 34,480 $ 160,774

STATUS OF BUDGETARY RESOURCES

Obligations Incurred - Direct $ 2,244 $ 65,402 $ 23,405 $ 150,226

Unobligated Balance:

 Apportioned and Available 36 511 142 7,692

 Not Available 14,130 20,632 10,933 2,856

TOTAL STATUS OF BUDGETARY RESOURCES $ 16,410 $ 86,545 $ 34,480 $ 160,774

CHANGE IN OBLIGATED BALANCES

Obligated Balance Brought Forward:

 Unpaid Obligations $ 69,128 $ 41,918 $ 56,151 $ 79,202

 Uncollected Customer Payments from Federal Sources - (23,816) - (28,927)

Obligated Balance, Net, Brought Forward 69,128 18,102 56,151 50,275

 Obligations Incurred 2,244 65,402 23,405 150,226

 Gross Outlays (24,501) (89,498) (9,255) (148,146)

 Recoveries of Prior Year Unpaid Obligations (3,057) (4,664) (1,173) (39,364)

 Change in Uncollected Customer Payments from Federal Sources - 23,320 - 5,111

Obligated Balance, Net, End of Period:

 Unpaid Obligations 43,814 13,158 69,128 41,918

 Uncollected Customer Payments from Federal Sources - (496) - (23,816)

Obligated Balance, Net, End of Period $ 43,814 $ 12,662 $ 69,128 $ 18,102

NET OUTLAYS

 Gross Outlays $ 24,501 $ 89,498 $ 9,255 $ 148,146

 Offsetting Collections - (107,307) - (156,112)

 Distributed Offsetting Receipts (61,832) (118,860)

NET OUTLAYS $ (37,331) $ (17,809) $ (109,605) $ (7,966)

The accompanying notes are an integral part of these financial statements.

2011 2010

Office of Financial Stability (Troubled Asset Relief Program)

STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2011 and 2010 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 57

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. REPORTING ENTITY

The Troubled Asset Relief Program (TARP) was 

authorized by the Emergency Economic 

Stabilization Act of 2008 (EESA or “the Act”). The 

Act gave the Secretary of the Treasury (the 

Secretary) broad and flexible authority to establish 

the TARP to purchase and insure mortgages and 

other troubled assets, which permitted the Secretary 

to inject capital into banks and other commercial 

companies by taking equity positions in those 

entities to help stabilize the financial markets.

The EESA established certain criteria under which 

the TARP would operate, including provisions that 

impact the budgeting, accounting, and reporting of 

troubled assets acquired under the Act. Section 

101(a) of the EESA provided the authority for the 

Secretary to purchase troubled assets, and Section 

101(a)(3) of the EESA established the Office of 

Financial Stability (OFS) to implement the TARP. 

Section 102 of the EESA required the Secretary to 

establish a program to guarantee troubled assets 

originated or issued prior to March 14, 2008, 

including mortgage-backed securities. Section 115 of 

the EESA limited the authority of the Secretary to 

purchase troubled assets up to $700.0 billion 

outstanding at any one time, calculated at the 

aggregate purchase prices of all troubled assets held. 

Amendments to Section 115 of EESA during the 

period ended September 30, 2009, reduced that 

authority by $1.3 billion, from $700 billion to $698.7 

billion. Section 120 of the EESA established that the 

authorities under Sections 101(a), excluding Section 

101(a)(3), and Section 102 of the EESA would 

terminate December 31, 2009, unless extended upon 

submission of a written certification to Congress by 

the Secretary of the Treasury. On December 9, 2009, 

the Secretary extended the program authorities 

through October 3, 2010. In July 2010, the DoddFrank Wall Street Reform and Consumer Protection 

Act amended Section 115 of EESA, limiting the 

TARP’s authority to a total of $475 billion cumulative 

obligations (i.e. purchases and guarantees) and 

prohibiting any new obligations for programs or 

initiatives that had not been publicly announced prior 

to June 25, 2010. Of the maximum $475 billion 

authority under EESA, as amended, OFS had utilized 

(including purchases made, legal commitments to 

make purchases and offsets for guarantees made) 

$470.1 billion as of September 30, 2011 and $474.8 

billion as of September 30, 2010.

The TARP developed the following programs: the 

Capital Purchase Program (CPP); American 

International Group, Inc. (AIG) Investment Program 

(formerly known as the Systemically Significant 

Failing Institutions Program); the Targeted 

Investment Program (TIP); the Automotive Industry 

Financing Program (AIFP); the Consumer and 

Business Lending Initiative (CBLI); the PublicPrivate Investment Program (PPIP); and the Asset 

Guarantee Program (AGP) (see Note 6 for details 

regarding all of these programs); as well as the 

Treasury Housing Programs Under the TARP (see 

Notes 5 and 6).

While these financial statements reflect the activity 

of the OFS in executing its programs, including 

providing resources to various entities to help 

stabilize the financial markets, they do not include 

the assets, liabilities, or results of operations of 

commercial entities in which the OFS has a 

significant equity interest. Through the purchase of 

troubled assets, the OFS has entered into several 

different types of direct loan, equity investment, and 

other credit programs (which consist of the AGP and 

the Federal Housing Administration (FHA) 

Refinance Program) with private entities. These 

direct loans, equity investments, and other credit 

programs were entered into with the intent of 

helping to stabilize the financial markets and 

mitigating, as best as possible, any adverse impact 

on the economy. These direct loans, equity 

investments, and other credit programs were not 

entered into to engage in the business activities of 

the respective private entities. Based on this intent, 

the OFS concluded that such direct loans, equity 

investments, and other credit programs are 

considered “bail outs”, under the provisions of 

paragraph 50 of Statement of Federal Financial 

Accounting Concepts (SFFAC) No. 2, Entity and 

Display. In addition, these entities are not included 

in the Federal budget, and therefore, do not meet 

the conclusive criteria in SFFAC No. 2. As such, the 

OFS determined that none of these entities meet the 

criteria to be classified as a federal entity. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

58 NOTES TO THE FINANCIAL STATEMENTS

Consequently, their assets, liabilities, and results of 

operations were not consolidated in these OFS 

financial statements, but the value of OFS’ 

investments in such entities was recorded in OFS’ 

financial statements. 

In addition, the OFS has made loans and 

investments in certain Special Purpose Vehicles 

(SPV)12

SPVs meet the conclusive or indicative criteria to be 

classified as a federal entity. As a result, the assets, 

liabilities and results of operations of the SPVs are 

. SFFAC No. 2, paragraphs 43 and 44, 

reference indicative criteria such as ownership and 

control to carry out government powers and 

missions, as criteria in the determination about 

whether an entity should be classified as a federal 

entity. The OFS has concluded that none of the 

 

12 The OFS invested in SPVs under the TALF, the Automotive 

Industry Financing Program and the Public-Private Investment 

Program. Additionally, in fiscal year 2011, part of the 

investment in AIG was exchanged for preferred interests in 

SPVs.

not included in these OFS financial statements. The 

OFS has recorded the loans and investments in 

private entities and investments in SPVs in 

accordance with Credit Reform Accounting, as 

discussed below. Additional disclosures regarding 

certain SPV investments are included in Note 6, see 

Term Asset-Backed Securities Loan Facility (TALF), 

AIG Investment Program and the PPIP.

The EESA established the OFS within the Office of 

Domestic Finance of the Department of the Treasury 

(Treasury). The OFS prepares stand-alone financial 

statements to satisfy EESA’s requirement for the 

TARP to prepare annual financial statements. 

Additionally, as an office of the Treasury, its 

financial statements are consolidated into the 

Department of the Treasury’s Agency Financial 

Report. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 59

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and

Presentation

The accompanying financial statements include the 

operations of the OFS and have been prepared from 

the accounting records of the OFS in conformity 

with accounting principles generally accepted in the 

United States for federal entities (Federal GAAP), 

and the OMB Circular A-136, Financial Reporting 

Requirements, as amended. Federal GAAP includes 

the standards issued by the Federal Accounting 

Standards Advisory Board (FASAB). The FASAB is 

recognized by the American Institute of Certified 

Public Accountants (AICPA) as the official 

accounting standards-setting body for the U.S. 

Government. As such, the FASAB is responsible for 

establishing Federal GAAP for Federal reporting 

entities.

The FASAB issued the Statement of Federal 

Financial Accounting Standards (SFFAS) No. 34, 

The Hierarchy of Generally Accepted Accounting 

Principles, Including the Application of Standards 

Issued by the Financial Accounting Standards Board 

in July 2009. SFFAS No. 34 identifies the sources of 

accounting principles and the framework for 

selecting the principles used in the preparation of 

general purpose financial reports of federal 

reporting entities that are presented in conformity 

with Federal GAAP.

In addition to the above, Section 123(a) of the EESA 

requires that the budgetary cost of purchases of 

troubled assets and guarantees of troubled assets, 

and any cash flows associated with authorized 

activities, be determined in accordance with the 

Federal Credit Reform Act of 1990 (FCRA). Section 

123(b) (1) of the EESA requires that the budgetary 

costs of troubled assets and guarantees of troubled 

assets be calculated by adjusting the discount rate 

for market risks. As a result of this requirement, 

the OFS considered market risk in its calculation 

and determination of the estimated net present 

value of its direct loans, equity investments and 

other credit programs for budgetary purposes. 

Similarly, market risk is considered in the 

valuations for financial reporting purposes (see Note 

6 for further discussion).

Consistent with its accounting policy for equity 

investments in private entities, the OFS accounts 

for its equity investments at fair value, defined as 

the estimated amount of proceeds the OFS would 

receive if the equity investments were sold to a 

market participant in an orderly transaction. The 

OFS uses the present value accounting concepts 

embedded in SFFAS No. 2, Accounting for Direct 

Loans and Loan Guarantees, as amended (SFFAS 

No. 2), to derive fair value measurements. The OFS 

concluded that the equity investments were similar 

to direct loans in that there is a stated rate and a 

redemption feature which, if elected, requires 

repayment of the amount invested. Furthermore, 

consideration of market risk provides a basis to 

arrive at a fair value measurement. Therefore, the 

OFS uses SFFAS No. 2 (as more fully discussed 

below) for reporting and disclosure requirements of 

its equity investments. 

Federal loans and loan guarantees are governed by 

FCRA for budgetary accounting and the associated 

FASAB accounting standard SFFAS No. 2 for 

financial reporting. The OFS applies the provisions 

of the SFFAS No. 2 when accounting and reporting 

for direct loans, equity investments and other credit 

programs. Direct loans and equity investments 

disbursed and outstanding are recognized as assets 

at the net present value of their estimated future 

cash flows. Outstanding asset guarantees are 

recognized as liabilities or assets at the net present 

value of their estimated future cash flows. 

Liabilities under the FHA-Refinance Program are 

recognized at the net present value of their 

estimated future cash flows when the FHA 

guarantees loans. For direct loans and equity 

investments, the subsidy allowance account 

represents the difference between the face value of 

the outstanding direct loan and equity investment 

balance and the net present value of the expected 

future cash flows, and is reported as an adjustment 

to the face value of the direct loan or equity 

investment. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

60 NOTES TO THE FINANCIAL STATEMENTS

The OFS recognizes dividend income associated with 

equity investments when declared by the entity in 

which the OFS has invested and when received in 

relation to any repurchases, exchanges and 

restructurings. The OFS recognizes interest income 

when earned on performing loans; interest income is 

not accrued on non-performing loans. The OFS 

reflects changes, referred to as reestimates, in the 

value of direct loans, equity investments, and other 

credit programs in the subsidy cost on the 

Statement of Net Cost annually. The OFS has 

received common stock warrants, additional 

preferred stock (referred to as warrant preferred 

stock) or additional notes as additional consideration 

for providing direct loans and equity investments 

made and the Asset Guarantee Program. The OFS 

accounts for the warrants and warrant preferred 

stock received under Section 113 of EESA as fees 

under SFFAS No. 2, and, as such, the proceeds 

received when the warrants, warrant preferred stock 

or additional notes are sold are credited to the 

subsidy allowance rather than to income.

Use of Estimates

The OFS has made certain estimates and 

assumptions relating to the reporting of assets, 

liabilities, revenues, and cost to prepare these 

financial statements. Actual results could 

significantly differ from these estimates. Major 

financial statement lines that include estimates are 

TARP Direct Loans and Equity Investments, Net, 

the Asset Guarantee Program and the Liability for 

Treasury Housing Programs under TARP on the 

Balance Sheet, and related Subsidy Cost on the 

Statement of Net Cost (see Note 6).

The most significant differences between actual 

results and estimates may occur in the valuation of 

direct loans, equity investments, and other credit 

programs. The forecasted future cash flows used to 

determine these amounts as of fiscal year end are 

sensitive to slight changes in model assumptions, 

such as general economic conditions, specific stock 

price volatility of the entities in which the OFS has 

an equity interest, estimates of expected default, 

and prepayment rates. Forecasts of future financial

results have inherent uncertainty and the OFS’ 

TARP Direct Loans and Equity Investments, Net 

and Asset Guarantee Program line items as of fiscal 

year end are reflective of relatively illiquid assets 

whose values could be sensitive to future economic 

conditions and other assumptions. Estimates are 

also prepared for the FHA-Refinance Program to 

determine the liability for losses. Additional 

discussion related to sensitivity analysis of factors 

affecting estimates can be found in the Management 

Discussion and Analysis section of the Agency 

Financial Report.

Credit Reform Accounting

The FCRA provides for the use of program, 

financing, and general fund receipt accounts to 

separately account for activity related to direct 

loans, equity investments and other credit 

programs. These accounts are classified as either 

budgetary or non-budgetary in the Statement of 

Budgetary Resources. The budgetary accounts 

include the program and general fund receipt 

accounts, and the non-budgetary accounts consist of 

the credit reform financing accounts. 

As discussed previously, the OFS accounts for the 

cost of direct loans, equity investments and other 

credit programs in accordance with Section 123(a) of 

the EESA and the FCRA for budgetary accounting 

and SFFAS No. 2 for financial reporting. 

The authoritative guidance for financial reporting is 

primarily contained in the SFFAS No. 2, as 

amended by the SFFAS No. 18, Amendments to 

Accounting Standards for Direct Loans and Loan 

Guarantees, and the SFFAS No. 19, Technical 

Amendments to Accounting Standards for Direct 

Loans and Loan Guarantees.

In accordance with SFFAS No. 2, the OFS maintains 

program accounts which receive appropriations and 

obligate funds to cover the subsidy cost of direct 

loans, equity investments and other credit programs 

and disburses the subsidy cost to the OFS financing 

accounts. The financing accounts are non-budgetary 

accounts that are used to record all of the cash flows 

resulting from the OFS direct loans, equity 

investments and other credit programs. Cash flows 

include disbursements, repayments, repurchases, 

fees, recoveries, interest, dividends, proceeds from 

the sale of stock and warrants, borrowings from 

Treasury, negative subsidy and the subsidy cost 

received from the program accounts, as well as 

subsidy reestimates and modifications. 

The financing arrangements specifically for the 

TARP activities are provided for in the EESA as 

follows: (1) Borrowing for program funds under 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 61

Section 118 that constitute appropriations when 

obligated or spent, which are reported as 

“appropriations” in these financial statements; (2) 

borrowing by financing accounts for non-subsidy cost 

under the FCRA and Section 123; and (3) 

establishment of the Troubled Assets Insurance

Financing Fund (TAIFF) for the Asset Guarantee 

Program under Section 102(d).

The OFS uses general fund receipt accounts to 

record the receipt of amounts paid from the 

financing accounts when there is a negative subsidy 

or negative modification (a reduction in subsidy cost 

due to changes in program policy or terms that 

change estimated future cash flows) from the 

original estimate or a downward reestimate. 

Amounts in the general fund receipt accounts are 

available for appropriations only in the sense that 

all general fund receipts are available for 

appropriations. Any assets in these accounts are 

non-entity assets and are offset by 

intragovernmental liabilities. At the end of the fiscal 

year, the fund balance transferred to the U.S. 

Treasury through the general fund receipt account is 

no longer included in the OFS’ fund balance 

reporting.

 

The SFFAS No. 2 requires that the actual and 

expected costs of federal credit programs be fully 

recognized in financial reporting. The OFS 

calculated and recorded initial estimates of the 

future performance of direct loans, equity 

investments, and other credit programs. The data 

used for these estimates were reestimated at the 

fiscal year-end to reflect adjustments for market 

risk, asset performance, and other key variables and 

economic factors. The reestimate data was then 

used to estimate and report the “Subsidy Cost” in 

the Statement of Net Cost. A detailed discussion of 

the OFS subsidy calculation and reestimate 

assumptions, process and results is provided in Note 

6.

Fund Balance with Treasury

The Fund Balance with Treasury includes general, 

financing and other funds available to pay current 

liabilities and finance authorized purchases. Cash 

receipts and disbursements are processed by the 

Treasury, and the OFS’ records are reconciled with 

those of the Treasury on a regular basis.

Available unobligated balances represent amounts 

that are apportioned for obligation in the current 

fiscal year. Unavailable unobligated balances 

represent unanticipated collections in excess of the 

amounts apportioned which are unavailable. 

Obligated balances not yet disbursed include 

undelivered orders and unpaid expended authority. 

Troubled Asset Relief Program 

Direct Loans and Equity 

Investments, Net

Troubled Asset Relief Program Direct Loans and 

Equity Investments, Net represents the estimated 

net outstanding amount of the OFS direct loans and 

equity investments. The direct loan and equity 

investment balances have been determined in 

accordance with the provisions of SFFAS No. 2 (see 

Note 6). Write-offs of gross direct loan and equity 

investment balances (presented in Note 6 table) are 

recorded when a legal event occurs, such as a 

bankruptcy with no further chance of recovery or 

extinguishment of a debt instrument by agreement. 

Under SFFAS 2, write-offs do not affect the

Statement of Net Cost because the written-off asset 

is fully reserved. Therefore, the write-off removes 

the asset balance and the associated subsidy 

allowance. 

Asset Guarantee Program

During fiscal year 2010, the OFS and the Federal 

Deposit Insurance Corporation (FDIC) entered into 

a termination agreement with the Asset Guarantee 

Program’s sole participant, Citigroup. As a result, 

the Asset Guarantee Program line item (nonintragovernmental asset) at September 30, 2010, 

represented the net present value of the estimated 

cash inflows from Citigroup trust preferred 

securities and additional warrants that OFS held 

after the guarantee was terminated. These 

securities and warrants were sold by the OFS in 

fiscal year 2011. The intragovernmental Asset 

Guarantee Program line item is the estimated value 

of certain Citigroup trust preferred securities 

currently held by the FDIC for the benefit of OFS. 

Under the termination agreement, the FDIC has 

agreed to transfer these securities to the OFS, less 

any losses on FDIC’s guarantee of Citigroup debt, by 

December 31, 2012. See Note 6.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

62 NOTES TO THE FINANCIAL STATEMENTS

General Property and Equipment

Equipment with a cost of $50,000 or more per unit 

and a useful life of two years or more is capitalized 

at full cost and depreciated using the straight-line 

method over the equipment’s useful life. Other 

equipment not meeting the capitalization criteria is 

expensed when purchased. Software developed for 

internal use is capitalized and amortized over the 

estimated useful life of the software if the cost per 

project is greater than $250,000. However, OFS 

may expense such software if management 

concludes that total period costs would not be 

materially distorted and the cost of capitalization is 

not economically prudent. Based upon these 

criteria, the OFS reports no capitalized property, 

equipment or software on its Balance Sheet as of 

September 30, 2011 and 2010.

Accounts Payable and Other 

Liabilities

Accounts Payable and Other Liabilities are amounts 

due to intragovernmental or public entities that will 

generally be liquidated during the next operating 

cycle (within one year from the balance sheet date).

Principal Payable to the Bureau of 

the Public Debt

Principal Payable to the Bureau of the Public Debt 

(BPD) represents the net amount due for equity

investments, direct loans and other credit programs 

funded by borrowings from the BPD as of the end of 

the fiscal year. Additionally, OFS borrows from the 

BPD for payment of intragovernmental interest and 

payment of negative subsidy cost to the general 

fund, as necessary. See Note 8.

Due to the General Fund

Due to the General Fund represents the amount of 

accrued downward reestimates and, for fiscal year 

2010, one downward modification not yet funded, 

related to direct loans, equity investments and other 

credit programs as of September 30, 2011 and 2010. 

See Notes 6 and 7.

Liabilities for the Treasury Housing 

Programs Under TARP

There are three initiatives in the Treasury Housing 

Programs: the Making Home Affordable Program, 

the Housing Finance Agency Hardest-Hit Fund and 

the FHA-Refinance Program. The OFS has 

determined that credit reform accounting is not 

applicable to the Treasury Housing Programs Under 

TARP except for the FHA-Refinance Program. 

Therefore, liabilities for the Making Home 

Affordable Program and Housing Finance Agency 

Hardest-Hit Fund payments to servicers and 

investors, including principal balance reduction 

payments for the accounts of borrowers are 

accounted for in accordance with SFFAS No. 5, 

Accounting for Liabilities of the Federal 

Government. In accordance with this standard, a

liability is recognized for any unpaid amounts due as 

of the reporting date. The liability estimate is based 

on information about loan modifications reported by 

participating servicers for the Making Home 

Affordable Program and participating states for the 

Housing Finance Agency Hardest Hit Fund. See 

Note 5.

At the end of fiscal year 2010, the OFS entered into 

a loss-sharing agreement with the FHA to support a 

program in which FHA would guarantee refinancing 

for borrowers whose homes are worth less than the 

remaining amounts owed under their mortgage 

loans. The liability for OFS’ share of losses was

determined under credit reform accounting and is 

included in the Liability for Treasury Housing 

Programs under TARP on the Balance Sheet. See 

Notes 4, 5 and 6 for additional disclosures regarding 

the FHA-Refinance Program.

 

Unexpended Appropriations

Unexpended Appropriations represents the OFS 

undelivered orders and unobligated balances in 

budgetary appropriated funds as of September 30, 

2011 and 2010.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 63

Cumulative Results of Operations

Cumulative Results of Operations, presented on the 

Balance Sheet and on the Statement of Changes in 

Net Position, represents the net results of the OFS 

operations not funded by appropriations or some 

other source, such as borrowing authority, from 

inception through fiscal year end. At September 30, 

2011 and 2010, OFS had $27.9 billion and $1.5 

billion, respectively, of unfunded upward 

reestimates that resulted in OFS reporting negative 

Cumulative Results of Operations. The fiscal year 

2010 upward reestimates were funded in fiscal year 

2011. The fiscal year 2011 unfunded reestimates 

will be funded in fiscal year 2012. Cumulative 

Results of Operations in 2011 also included $50 

million reported as Cash on Deposit for Housing 

Program on the Balance Sheet, see Note 4. 

Other Financing Sources

The Other Financing Sources line in the Statement 

of Changes in Net Position for each year consists 

primarily of downward reestimates. Each program’s 

reestimates, upward and downward, are recorded 

separately, not netted together.

Leave

A liability for OFS employees’ annual leave is 

accrued as it is earned and reduced as leave is 

taken. Each year the balance of accrued annual 

leave is adjusted to reflect current pay rates as well 

as forfeited “use or lose” leave. Amounts are 

unfunded to the extent current or prior year 

appropriations are not available to fund annual 

leave earned but not taken. Sick leave and other 

types of non-vested leave are expensed as taken.

Employee Health and Life Insurance 

and Workers’ Compensation Benefits

The OFS employees may choose to participate in the 

contributory Federal Employees Health Benefit and 

the Federal Employees Group Life Insurance 

Programs. The OFS matches a portion of the 

employee contributions to each program. Matching 

contributions are recognized as current operating 

expenses.

The Federal Employees’ Compensation Act (FECA) 

provides income and medical cost protection to 

covered Federal civilian employees injured on the 

job, and employees who have incurred a workrelated injury or occupational disease. Future 

workers’ compensation estimates are generated from 

an application of actuarial procedures developed to 

estimate the liability for FECA benefits. The 

actuarial liability estimates for FECA benefits 

include the expected liability for death, disability, 

medical, and miscellaneous costs for approved 

compensation cases. 

Employee Pension Benefits

The OFS employees participate in either the Civil 

Service Retirement System (CSRS) or the Federal 

Employees’ Retirement System (FERS) and Social 

Security. These systems provide benefits upon 

retirement and in the event of death, disability or 

other termination of employment and may also 

provide pre-retirement benefits. They may also 

include benefits to survivors and their dependents, 

and may contain early retirement or other special 

features. The OFS contributions to retirement plans 

and Social Security, as well as imputed costs for 

pension and other retirement benefit costs 

administered by the Office of Personnel 

Management, are recognized on the Statement of 

Net Cost as Administrative Costs. Federal employee 

benefits also include the Thrift Savings Plan (TSP). 

For FERS employees, a TSP account is 

automatically established and the OFS matches 

employee contributions to the plan, subject to 

limitations. The matching contributions are 

recognized as Administrative Costs on the 

Statement of Net Cost. 

Related Parties

The nature of related parties and descriptions of 

related party transactions are discussed within 

Notes 1 and 6.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

64 NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. FUND BALANCES WITH TREASURY

Fund Balances with Treasury, by fund type and 

status, are presented in the following table.

(Dollars in Millions) 2011 2010

Fund Balances:

 General Funds $ 43,542 $ 45,438

 Program Funds 14,438 34,766

 Financing Funds 25,362 18,460

Total Fund Balances $ 83,342 $ 98,664

Status of Fund Balances:

 Unobligated Balances

 Available 547 7,834

 Unavailable 34,762 13,790

 Obligated Balances Not Yet Disbursed 48,033 77,040

Total Status of Fund Balances $ 83,342 $ 98,664

As of September 30,

Collections relating to the AGP are deposited in the 

Troubled Assets Insurance Financing Fund (which is 

within OFS Financing Funds balance) as required 

by the EESA Section 102(d). The TAIFF balance 

was reduced for AGP-related downward reestimates 

and repayments of AGP-related debt due to the 

Bureau of the Public Debt (see Note 6). 

NOTE 4. CASH ON DEPOSIT FOR HOUSING PROGRAM

As of September 30, 2011, the OFS had $50 million 

on deposit with a commercial bank to facilitate its 

payments of claims under the FHA-Refinance 

Program as OFS’ agent. Under terms of its 

agreement, the OFS is required to maintain a 

minimum amount of funds on deposit, depending 

upon the size of the program and potential claims. 

Unused funds will be returned to the OFS upon the 

termination of the program and agreement. 

NOTE 5. THE TREASURY HOUSING PROGRAMS UNDER TARP

Fiscal year 2011 saw a continued advancement of 

programs designed to provide stability for both the 

housing market and homeowners. These programs 

assist homeowners who are experiencing financial 

hardships to remain in their homes until their 

financial position improves or they relocate to a 

more sustainable living situation. These programs 

fall into three initiatives: 

1) Making Home Affordable Program (MHA); 

2) Housing Finance Agency (HFA) Hardest-Hit 

Fund; and 

3) FHA-Refinance Program. 

MHA includes HAMP, FHA-HAMP, Second Lien 

Program (2MP), Treasury/FHA Second Lien 

Program (FHA 2LP), and the Rural Development

Program (RD-HAMP). The HAMP includes first lien 

modifications, the HPDP, the Principal Reduction 

Alternative Waterfall Program (PRA), the 

Unemployment Program (UP), and the Home 

Affordable Foreclosure Alternatives Program 

(HAFA). The HAMP first lien modification program 

provides for one-time, monthly and annual 

incentives to servicers, borrowers, and investors who 

participate in the program, whereby the investor 

and OFS share the costs of modifying qualified first 

liens. The HPDP provides incentives to investors to 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 65

partially offset losses from home price declines. In 

fiscal year 2010, additional programs were 

introduced under HAMP to complement the first 

lien modification program and HPDP. The PRA 

offers mortgage relief to eligible homeowners whose 

homes are worth significantly less than the 

remaining amounts outstanding under their first 

lien mortgage. The UP offers assistance to 

unemployed homeowners through temporary 

forbearance of a portion of their mortgage 

payments. The UP will not have a financial impact 

on the OFS because no incentives are paid by OFS. 

Finally, the HAFA is designed to assist eligible 

borrowers unable to retain their homes through a 

HAMP modification by simplifying and streamlining 

the short sale and deed in lieu of foreclosure 

processes and providing incentives to borrowers, 

servicers and investors to pursue short sales and 

deeds in lieu. 

Fiscal year 2010 also saw the introduction of 

additional programs under MHA. These programs 

include the FHA-HAMP which provides the same 

incentives as HAMP for FHA guaranteed loans. The 

2MP provides additional incentives to servicers to 

extinguish second liens on first lien loans modified 

under HAMP. The FHA 2LP provides for incentives 

to servicers for extinguishment of second liens for 

borrowers who refinance their first lien mortgages 

under the FHA-Refinance Program. The RD-HAMP 

provides HAMP incentives for mortgages 

guaranteed by the U. S. Department of Agriculture. 

All MHA disbursements are made to servicers either 

for themselves or for the benefit of borrowers and 

investors. Furthermore, all payments are 

contingent on borrowers remaining current on their 

mortgage payments. Servicers have until December 

31, 2012, to enter into mortgage modifications with 

borrowers.

Included in administrative costs are fees paid to 

Fannie Mae and Freddie Mac. Fannie Mae provides 

direct programmatic support as a third party agent 

on behalf of the OFS. Freddie Mac provides 

compliance oversight of servicers as a third party 

agent on behalf of the OFS, and the servicers work 

directly with the borrowers to modify and service the 

borrowers’ loans.

The Housing Finance Agency (HFA) Hardest-Hit 

Fund was implemented in fiscal year 2010, and 

provides targeted aid to families in the states hit 

hardest by the housing market downturn and 

unemployment. States that meet the criteria for 

this program consist of Alabama, Arizona, 

California, Florida, Georgia, Illinois, Indiana, 

Kentucky, Michigan, Mississippi, Nevada, New 

Jersey, North Carolina, Ohio, Oregon, Rhode Island, 

South Carolina, Tennessee, and Washington D.C. 

Approved states develop and roll out their own 

programs with timing and types of programs offered 

targeted to address the specific needs and economic 

conditions of their state. States have until 

December 31, 2017 to enter into agreements with 

borrowers.

The FHA-Refinance Program is a joint initiative 

with the Department of Housing and Urban 

Development (HUD) which is intended to encourage 

refinancing of existing underwater (i.e. the borrower 

owes more than the home is worth) mortgage loans 

not currently insured by FHA into FHA-insured 

mortgages. HUD will pay a portion of the amount 

refinanced to the investor and OFS will pay 

incentives to encourage the extinguishment of 

second liens associated with the refinanced 

mortgages. OFS established a letter of credit that 

obligated the OFS portion of any claims associated 

with the FHA-guaranteed mortgages. The OMB 

determined that for budgetary purposes, the FHARefinance Program cost is calculated under the 

FCRA, and accordingly OFS determined that it was 

appropriate to follow SFFAS No. 2 for financial 

reporting. Therefore, the liability is calculated at 

the net present value of estimated future cash flows. 

Homeowners can refinance into FHA-guaranteed 

mortgages through December 31, 2012, and OFS 

will honor its share of claims against the letter of 

credit through 2020. As of September 30, 2011, 334

loans had been refinanced and no claim payments 

have been made under this program. As of 

September 30, 2010, no loans had been refinanced 

under this program as the joint initiative was 

entered into late in the fiscal year. However, in 

fiscal year 2011, OFS paid $2.0 million to maintain 

the letter of credit; in fiscal year 2010, OFS paid 

$3.0 million to establish the letter of credit. OFS 

was required to deposit $50.0 million with a 

commercial bank as its agent to administer payment 

of claims under the program. See Notes 4 and 6.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

66 NOTES TO THE FINANCIAL STATEMENTS

The table below recaps housing program 

commitments as of September 30, 2011, and 

payments and accruals as of September 30, 2011 

and 2010. As noted above, the UP is structured so 

that there is no financial impact on the OFS. 

Treasury Housing Programs Under TARP 

Commitments as of Fiscal Year Payments through September 30, Accruals as of September 30,

September 30, 2011 2011 2010 2011 2010

MHA $ 29,884

 HAMP (1st Lien) - $ 1,035 $ 473 $ 236 $ 175

 HPDP - 126 9 95 108

 PRA** - - - - -

 UP* N/A N/A N/A N/A N/A

 HAFA - 67 2 7 -

 FHA HAMP - 4 - 1 -

 2MP - 50 - 4 -

 2LP** - - - - -

 RD - HAMP** - - - - -

HFA Hardest Hit Fund 7,600 599 56 - -

FHA - Refinance*** 8,117 2 3 1 -

Totals $ 45,601 $ 1,883 $ 543 $ 344 $ 283

* No financial impact.

**No financial activity to date.

***Payments do not include $50 million to establish reserve, shown on Balance Sheet as Cash on Deposit for Housing Program. Also see Note 6.

(Dollars in Millions)

NOTE 6. TROUBLED ASSET RELIEF PROGRAM DIRECT LOANS AND 

EQUITY INVESTMENTS, NET AND OTHER CREDIT PROGRAMS

The OFS administers a number of programs 

designed to help stabilize the financial system and 

restore the flow of credit to consumers and 

businesses. The OFS made direct loans and equity 

investments under TARP. The OFS also entered 

into other credit programs, which consist of an asset 

guarantee program and a loss-sharing program 

under the TARP. The table below recaps OFS 

programs by title and type: 

Program Program Type

Direct Loans and Equity Investments

 Capital Purchase Program Equity Investment/Subordinated Debentures

 American International Group, Inc. Investment Program Equity Investment

 Targeted Investment Program Equity Investment

 Automotive Industry Financing Program Equity Investment and Direct Loan

 Consumer and Business Lending Initiative:

 Term Asset-Backed Securities Loan Facility Subordinated Debentures 

 SBA 7(a) Security Purchase Program Direct Loan

 Community Development Capital Initiative Equity Investment/Subordinated Debentures

 Public-Private Investment Program Equity Investment and Direct Loan

Other Credit Programs

 Asset Guarantee Program Asset Guarantee

 FHA-Refinance Program Loss-sharing Program with FHA
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 67

Valuation Methodology

The OFS applies the provisions of SFFAS No. 2 to 

account for direct loans, equity investments and 

other credit programs. This standard requires 

measurement of the asset or liability at the net 

present value of the estimated future cash flows. 

The cash flow estimates for each transaction reflect 

the actual structure of the instruments. For each of 

these instruments, analytical cash flow models 

generate estimated cash flows to and from the OFS 

over the estimated term of the instrument. Further, 

each cash flow model reflects the specific terms and 

conditions of the program, technical assumptions 

regarding the underlying assets, risk of default or 

other losses, and other factors as appropriate. The 

models also incorporate an adjustment for market 

risk to reflect the additional return required by the 

market to compensate for variability around the 

expected losses reflected in the cash flows (the 

“unexpected loss”).

The adjustment for market risk requires the OFS to 

determine the return that would be required by 

market participants to enter into similar 

transactions or to purchase the assets held by OFS. 

Accordingly, the measurement of the assets 

attempts to represent the proceeds expected to be 

received if the assets were sold to a market 

participant in an orderly transaction. The 

methodology employed for determining market risk 

for equity investments generally involves a 

calibration to market prices of similar securities that 

results in measuring equity investments at fair 

value. The adjustment for market risk for loans is 

intended to capture the risk of unexpected losses, 

but not intended to represent fair value, i.e. the 

proceeds that would be expected to be received if the 

loans were sold to a market participant. The OFS 

uses market observable inputs, when available, in 

developing cash flows and incorporating the 

adjustment required for market risk. For purposes 

of this disclosure, the OFS has classified the various 

investments as follows, based on the observability of 

inputs that are significant to the measurement of 

the asset:

Quoted prices for Identical Assets: The 

measurement of assets in this classification is based 

on direct market quotes for the specific asset, e.g. 

quoted prices of common stock.

Significant Observable Inputs: The measurement of 

assets in this classification is primarily derived from 

market observable data, other than a direct market 

quote, for the asset. This data could be market 

quotes for similar assets for the same entity. 

Significant Unobservable Inputs: The measurement 

of assets in this classification is primarily derived 

from inputs which generally represent 

management’s best estimate of how a market 

participant would assess the risk inherent in the 

asset. These unobservable inputs are used because

there is little to no direct market activity.

The table below displays the assets held by the 

observability of inputs significant to the 

measurement of each value:
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

68 NOTES TO THE FINANCIAL STATEMENTS

(Dollars in Millions)

Quoted 

Prices for 

Identical 

Assets

Significant 

Observable 

Inputs

Significant 

Unobservable 

Inputs Total

Program

 Capital Purchase Program $ 202 $ - $ 12,240 $ 12,442

 American International Group Inc. Investment Program 21,076 9,294 - 30,370

 Targeted Investment Program - - - -

 Automotive Industry Financing Program 10,091 - 7,747 17,838

 Consumer and Business Lending Initiative, which includes TALF, 

 SBA 7(a) Securities and CDCI - 126 951 1,077

 Public-Private Investment Program - - 18,377 18,377

 Asset Guarantee Program - 739 - 739

Total TARP Programs $ 31,369 $ 10,159 $ 39,315 $ 80,843

(Dollars in Millions)

Quoted 

Prices for 

Identical 

Assets

Significant 

Observable 

Inputs

Significant 

Unobservable 

Inputs Total

Program

 Capital Purchase Program $ 14,899 $ - $ 33,334 $ 48,233

 American International Group Inc. Investment Program - - 26,138 26,138

 Targeted Investment Program - - 1 1

 Automotive Industry Financing Program - - 52,709 52,709

 Consumer and Business Lending Initiative, which includes TALF, 

 SBA 7(a) Securities and CDCI - - 966 966

 Public-Private Investment Program - - 14,405 14,405

 Asset Guarantee Program 2,240 815 - 3,055

Total TARP Programs $ 17,139 $ 815 $ 127,553 $ 145,507

As of September 30, 2011

As of September 30, 2010

The following provides a description of the 

methodology used to develop the cash flows and 

incorporate the market risk into the measurement of 

the OFS assets.

Financial Institution Equity Investments13 

The estimated values of preferred equity 

investments are the net present values of the 

expected dividend payments and repurchases. The 

model assumes that the key decisions affecting 

whether or not institutions pay their preferred 

dividends are made by each institution based on the 

strength of their balance sheet. The model assumes 

a probabilistic evolution of each institution’s assetto-liability ratio (the asset-to-liability ratio is based 

on the estimated fair value of the institution’s assets 

against its liabilities). Each institution’s assets are 

 

13 This consists of equity investments made under CPP, TIP and 

CDCI.

subject to uncertain returns and institutions are 

assumed to manage their asset-to-liability ratio in 

such a way that it reverts over time to a target level. 

Historical volatility is used to scale the likely 

evolution of each institution’s asset-to-liability ratio.

In the model, when equity decreases, i.e. the assetto-liability ratio falls, institutions are increasingly 

likely to default, either because they enter 

bankruptcy or are closed by regulators. The 

probability of default is estimated based on the 

performance of a large sample of US banks over the 

period 1990-2010. At the other end of the spectrum, 

institutions call their preferred shares when the 

present value of expected future dividends exceeds 

the call price; this occurs when equity is high and 

interest rates are low. Inputs to the model include 

institution specific accounting data obtained from 

regulatory filings, an institution’s stock price 

volatility, historical bank failure information, as 

well as market prices of comparable securities 

trading in the market. The market risk adjustment 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 69

is obtained through a calibration process to the 

market value of certain trading securities of 

financial institutions within the TARP programs. 

The OFS estimates the values and projects the cash 

flows of warrants using an option-pricing approach 

based on the current stock price and its volatility. 

Investments in common stock which are exchange 

traded are valued at the quoted market price as of 

year end. 

American International Group, Inc. (AIG) 

Investment Program

As of September 30, 2011, the OFS held 960 million 

shares of AIG common stock. Investments in AIG 

common stock were valued at the quoted market 

price as of September 30, 2011. The OFS also held 

interests in certain AIG SPVs. To estimate the 

value of the assets underlying the preferred 

interests in the SPVs, OFS sums the value of the 

common equity shares held by the SPVs, any cash 

held in escrow from previous asset sales, and the 

weighted average value of the remaining assets 

under different scenarios. Because the resulting 

value greatly exceeds the liquidation preference of 

the investments in the SPVs, the SPVs were valued 

at the liquidation preference.

For fiscal year 2010, the method used to measure 

AIG preferred shares was broadly analogous to the 

approach used to measure financial institution 

preferred shares. However, the size of OFS’ holding 

of preferred shares relative to AIG’s total balance 

sheet made the valuation extremely sensitive to 

assumptions about the recovery ratio for preferred 

shares should AIG default. Also, no market prices 

for comparable preferred shares existed. Therefore, 

OFS based the AIG investment valuation on the 

observed market values of publicly traded junior 

subordinated debt, adjusted for OFS’ position in the 

capital structure. Additionally, an external asset 

manager provided estimated fair value amounts, 

premised on public information, which were 

considered by the OFS in its measurements. 

Auto Industry Financing Program (AIFP) 

Investments and Loans

As of September 30, 2011, the OFS held 500 million 

shares of common stock in General Motors Company 

(New GM) that were valued by multiplying the 

publicly traded share price by the number of shares 

held. 

As of September 30, 2010, OFS held a 60.8% stake 

in the common stock of New GM. As New GM 

common stock was not publicly traded as of 

September 30, 2010, and because the unsecured 

bond holders in General Motors Corporation (Old 

GM) received 10 percent of the common equity 

ownership and warrants in New GM, the expected 

recovery rate implied by the trading prices of the 

Old GM bonds provided the implied value of the 

New GM equity. OFS used this implied equity value 

to account for its common stock ownership in New 

GM as of September 30, 2010. As of September 30, 

2010, investments in GM preferred shares were 

valued in a manner broadly analogous to the 

methodology used for financial institution equity 

investments.

As of September 30, 2010, OFS held a 9.9% stake in 

the common stock of Chrysler. As Chrysler common 

stock was not publicly traded as of September 30, 

2010, OFS created a pro forma balance sheet for 

post-bankruptcy Chrysler and used the estimated 

book value to account for its common stock 

ownership in Chrysler.

As of September 30, 2010, OFS valued direct loans 

to GM and Chrysler using an analytical model that 

estimates the net present value of the expected 

principal, interest, and other scheduled payments 

taking into account potential defaults. In the event 

of an institution’s default, these models include 

estimates of recoveries, incorporating the effects of 

any collateral provided by the contract. The 

probability of default and losses given default are 

estimated by using historical data when available, 

or publicly available proxy data, including credit 

rating agencies historical performance data. The 

models also incorporate an adjustment for market 

risk to reflect the additional return on capital that 

would be required by a market participant.

As of September 30, 2011 and 2010, for investments 

in Ally Financial’s (Ally, formerly known as GMAC, 

Inc.) common equity and mandatorily convertible 

preferred stock, which is valued on an “if-converted” 

basis, the OFS used certain valuation multiples such 

as price-to-earnings, price-to-tangible book value, 

and asset manager valuations to estimate the value 

of the shares. The multiples were based on those of 

comparable publicly-traded entities. As of 

September 30, 2010, OFS estimated the value of 

Ally’s trust preferred equity instruments based on 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

70 NOTES TO THE FINANCIAL STATEMENTS

comparable publicly traded securities adjusted for 

factors specific to Ally, such as credit rating. The 

adjustment for market risk is incorporated in the 

data points the OFS uses to determine the 

measurement for Ally as all points rely on market 

data.

Investments in Special Purpose Vehicles

In addition to the preferred interests in AIG SPVs 

discussed previously in this section, the OFS made 

certain investments in other financial instruments 

issued by SPVs. Generally, the OFS estimates the 

cash flows of these SPVs and then applies those cash 

flows to the waterfall governing the priority of 

payments out of the SPV.

For the loan associated with the Term Asset-Backed 

Securities Loan Facility (TALF), the OFS model 

derives the cash flows to the SPV, and ultimately 

the OFS, by simulating the performance of 

underlying collateral. Loss probabilities on the 

underlying collateral are calculated based on 

analysis of historical loan loss and charge-off 

experience by credit sector and subsector. Historical 

mean loss rates and volatilities are significantly 

stressed to reflect recent and projected performance. 

Simulated losses are run through cash flow models 

to project impairment to the TALF-eligible 

securities. Impaired securities are projected to be 

purchased by the SPV, which would require

additional OFS funding. Simulation outcomes 

consisting of a range of loss scenarios are 

probability-weighted to generate the expected net 

present value of future cash flows.

For the PPIP investments and loans made in the 

Public Private Investment Funds (PPIF), the OFS 

model derives estimated cash flows to the SPV by 

simulating the performance of the collateral 

supporting the residential mortgage-backed 

securities (RMBS) and commercial mortgage-backed 

securities (CMBS) held by the PPIF (i.e. 

performance of the residential and commercial 

mortgages). Inputs used to simulate the cash flows, 

which consider market risks, include unemployment 

forecasts, home price appreciation/depreciation 

forecasts, the current term structure of interest 

rates and historical pool performance as well as 

estimates of the net income and value of commercial 

real estate supporting the CMBS. 

The simulated cash flows are then run through the 

waterfall of the RMBS/CMBS to determine the 

estimated cash flows to the SPV. Once determined, 

these cash flows are run through the waterfall of the 

PPIF to determine the expected cash flows to the 

OFS through both the equity investments and loans. 

SBA 7(a) Securities

The valuation of SBA 7(a) securities is based on the 

discounted estimated cash flows of the securities. 

Asset Guarantee Program (AGP)

During fiscal year 2010, an agreement was entered 

into to terminate the guarantee of OFS to pay for 

any defaults on certain loans and securities held by 

Citibank. After the termination, the OFS still held 

some of the trust preferred securities (initially 

received as the guarantee fee) and warrants issued 

by Citigroup and the potential to receive $800 

million (liquidation preference) of additional 

Citigroup trust preferred securities from the FDIC 

(see further discussion of the Asset Guarantee 

Program later in this note). As of September 30, 

2011 and 2010, the instruments within the AGP 

were valued in a manner broadly analogous to the 

methodology used for financial institution equity 

investments.

Direct Loan and Equity Investment 

Programs

The following table recaps gross direct loan or equity 

investment, subsidy allowance, and net direct loan 

or equity investment by TARP program. Detailed 

tables providing the net composition, subsidy cost 

for new disbursements, modifications and 

reestimates, along with a reconciliation of subsidy 

cost allowances as of and for the years ended 

September 30, 2011 and 2010, are provided at the 

end of this Note for Direct Loans and Equity 

Investments, detailed by program, and for the other 

credit programs separately.

Descriptions and chronology of significant events by 

program are after the summary table.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 71

(Dollars in Millions)

Gross Direct 

Loan or 

Equity 

Invesment

Subsidy 

Allowance

Net Direct 

Loan or 

Equity 

Invesment

Program

 Capital Purchase Program $ 17,299 $ (4,857) 12,442$ 

 American International Group Inc. Investment Program 51,087 (20,717) 30,370

 Targeted Investment Program - - -

 Automotive Industry Financing Program 37,278 (19,440) 17,838

 Consumer and Business Lending Initiative, which includes TALF, 

 SBA 7(a) Securities and CDCI 798 279 1,077

 Public-Private Investment Program 15,943 2,434 18,377

Total Direct Loan and Equity Investment Programs $122,405 ($42,301) $80,104

(Dollars in Millions)

Gross Direct 

Loan or 

Equity 

Invesment

Subsidy 

Allowance

Net Direct 

Loan or 

Equity 

Invesment

Program

 Capital Purchase Program $ 49,779 $ (1,546) 48,233$ 

 American International Group Inc. Investment Program 47,543 (21,405) 26,138

 Targeted Investment Program - 1 1

 Automotive Industry Financing Program 67,238 (14,529) 52,709

 Consumer and Business Lending Initiative, which includes TALF, 

 SBA 7(a) Securities and CDCI 908 58 966

 Public-Private Investment Program 13,729 676 14,405

Total Direct Loan and Equity Investment Programs $179,197 ($36,745) $142,452

As of September 30, 2011

As of September 30, 2010

Capital Purchase Program

In October 2008, the OFS began implementation of 

the TARP with the Capital Purchase Program 

(CPP), designed to help stabilize the financial 

system by assisting in building the capital base of 

certain viable U.S. financial institutions to increase 

the capacity of those institutions to lend to 

businesses and consumers and support the economy. 

Under this program, the OFS purchased senior 

perpetual preferred stock from qualifying U.S. 

controlled banks, savings associations, and certain 

bank and savings and loan holding companies 

(Qualified Financial Institution or QFI). The senior 

preferred stock has a stated dividend rate of 5.0% 

through year five, increasing to 9.0% in subsequent 

years. The dividends are cumulative for bank 

holding companies and subsidiaries of bank holding 

companies and non-cumulative for others and 

payable when and if declared by the institution’s 

board of directors. QFIs that are Sub-chapter S 

corporations issued subordinated debentures in 

order to maintain compliance with the Internal 

Revenue Code. The maturity of the subordinated 

debentures is 30 years and interest rates are 7.7% 

for the first 5 years and 13.8% for the remaining 

years. QFIs, subject to regulator approval, may 

repay the OFS’ investment at any time. 

In addition to the senior preferred stock, the OFS 

received warrants, as required by section 113(d) of 

EESA, from public QFIs to purchase a number of 

shares of common stock. The warrants have an 

aggregate exercise price equal to 15.0% of the total 

senior preferred stock investment. Prior to 

December 31, 2009, in the event a public QFI 

completed one or more qualified equity offerings 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

72 NOTES TO THE FINANCIAL STATEMENTS

with aggregate gross proceeds of not less than 

100.0% of the senior perpetual preferred stock 

investment, the number of shares subject to the 

warrants was reduced by 50.0%. As of December 31, 

2009, a total of 38 QFIs reduced the number of 

shares available under the warrants as a result of 

this provision. The warrants have a 10 year term. 

Subsequent to December 31, 2009, the OFS may 

exercise any warrants held in whole or in part at 

any time.

The OFS received warrants from non-public QFIs for 

the purchase of additional senior preferred stock (or 

subordinated debentures if appropriate) with a 

stated dividend rate of 9.0% (13.8% interest rate for 

subordinate debentures) and a liquidation 

preference equal to 5.0% of the total senior preferred 

stock (additional subordinate debenture) 

investment. These warrants were immediately 

exercised and resulted in the OFS holding additional 

senior preferred stock (subordinated debentures) 

(collectively referred to as “warrant preferred stock”) 

of non-public QFIs. The OFS did not receive 

warrants from financial institutions considered 

Community Development Financial Institutions 

(CDFIs). A total of 7 and 35 institutions considered 

CDFIs were in the CPP portfolio as of September 30, 

2011 and 2010, respectively.

The Secretary may liquidate the warrants 

associated with repurchased senior preferred stock 

at the market price. 

A QFI, upon the repurchase of its senior preferred 

stock, also has the contractual right to repurchase 

the common stock warrants at the market price.

The task of managing the investments in CPP banks 

may require that the OFS enter into certain 

agreements to exchange and/or convert existing 

investments in order to achieve the best possible 

return for taxpayers. 

In fiscal year 2009, the OFS entered into an 

exchange agreement with Citigroup under which the 

OFS exchanged $25.0 billion of its investment in 

senior preferred stock for 7.7 billion common shares 

of Citigroup stock, at $3.25 per share. In April 2010, 

the OFS began a process of selling the Citigroup 

common stock. As of September 30, 2010, the OFS 

had sold approximately 4.0 billion shares for total 

proceeds of $16.1 billion resulting in proceeds from 

sales in excess of cost of $3.0 billion. The OFS 

continued to hold approximately 3.7 billion shares of 

Citigroup common stock with an estimated fair 

value of $14.3 billion, based on the September 30, 

2010, closing price of $3.91 per share. 

During fiscal year 2011, OFS received proceeds of 

$15.8 billion from the sale of Citigroup common 

stock, resulting in proceeds from sales in excess of 

cost of $3.9 billion. By December 2010, the OFS had 

sold all of its remaining Citigroup common stock. 

Total gross proceeds from Citigroup stock sales 

between April and December 2010, were $31.9 

billion. Also in January 2011, OFS sold its Citigroup 

warrants held under CPP, for a total of $54.6

million. 

In addition to the above transactions, the OFS has 

entered into other transactions with various 

financial institutions including, exchanging existing 

preferred shares for a like amount of non taxdeductible Trust Preferred Securities, exchanging 

preferred shares for shares of mandatorily 

convertible preferred securities and selling preferred 

shares to financial institutions that were acquiring 

the QFIs that had issued the preferred shares. 

Generally the transactions are entered into with 

financial institutions in poor financial condition with 

a high likelihood of failure. As such, in accordance 

with SFFAS No. 2, these transactions are considered 

workouts and not modifications. The changes in cost 

associated with these transactions are captured in 

the year-end reestimates. 

During fiscal year 2011, certain financial 

institutions participating in CPP became eligible to 

exchange their OFS-held stock investments to 

preferred stock in the Small Business Lending Fund 

(SBLF), a separate Department of the Treasury 

program not a part of the TARP. Because this 

refinance was not considered in the formulation 

estimate for the CPP program, a modification was 

recorded in May 2011, resulting in a subsidy cost 

reduction of $1.0 billion.

During fiscal year 2010, certain financial 

institutions participating in CPP which are in good 

standing became eligible to refinance their OFS-held 

stock investments to preferred stock under the 

Community Development Capital Initiative (CDCI) 

of the Consumer and Business Lending Initiative 

Program (CBLI). This was not considered in the 

formulation estimate for the CPP program. As a 

result, OFS recorded a modification subsidy cost 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 73

reduction of $31.9 million in the CPP program for 

this option during fiscal year 2010. 

In fiscal year 2011, OFS made no write off of CPP 

investments. In fiscal year 2010, as a result of the 

culmination of Chapter 11 bankruptcy proceedings, 

the OFS wrote off its $2.3 billion investment in CIT 

Group and will not recover any amounts associated 

with it. In addition, during fiscal year 2011, eight 

institutions, in which OFS had invested $190.3 

million, were closed by their regulators. During 

fiscal year 2010, four financial institutions, in which 

OFS had invested $396.3 million, either filed for 

bankruptcy or were closed by their regulators. The 

OFS does not anticipate recovery on these 

investments and therefore the value of these shares 

are reflected at zero as of September 30, 2011 and 

2010. The ultimate amount received, if any, from 

the investments in institutions that filed for 

bankruptcy and institutions closed by regulators will 

depend primarily on the outcome of the bankruptcy 

proceedings and of each institution’s receivership.

The following tables provide key data points related 

to the CPP for the fiscal years ending September 30, 

2011 and 2010: 

CPP Participating Institutions

2011 2010

Cumulative Number of Institutions Participating 707 707

Cumulative Institutions Paid in Full, Merged or Investments Sold (139) (80)

Institutions Transferred to CDCI (28) (28)

Institutions Refinanced to SBLF (137) -

Institutions Written Off (2) (2)

Number of Institutions with Outstanding OFS Investments 401 597

Institutions in Bankruptcy or Receivership (11) (3)

Number of CPP Institutions Valued at Year-End 390 594

Cumulative Number of Institutions that Have Missed One or More Dividend Payments 181 132

CPP Investments

(Dollars in Millions) Fiscal Year 2011 Fiscal Year 2010

Outstanding Beginning Balance, Investment in CPP Institutions, Gross $ 49,779 $ 133,901

Purchase Price, Current Year Investments - 277

Repayments and Sales of Investments (30,188) (81,467)

Writeoffs - (2,334)

Losses from Sales and Repurchases of Assets in Excess of Cost (85) (242)

Transfers to CDCI - (356)

Refinanced to SBLF (2,207) -

Outstanding Balance, Investment in CPP Institutions, Gross $ 17,299 $ 49,779

Interest and Dividend Collections $ 1,283 $ 3,131

Net Proceeds from Sales and Repurchases of Assets in Excess of Cost $ 4,540 $ 6,676

At September 30,

American International Group, Inc. (AIG)

Investment Program

The OFS provided assistance to systemically 

significant financial institutions on a case by case 

basis in order to help provide stability to institutions 

that are critical to a functioning financial system 

and are at substantial risk of failure as well as to 

help prevent broader disruption to financial 

markets. OFS invested in one institution (AIG)

under the program.

In November 2008, the OFS invested $40.0 billion in 

AIG’s cumulative Series D perpetual cumulative 

preferred stock with a dividend rate of 10.0%, 

compounded quarterly. The OFS also received a 

warrant for the purchase of approximately 53.8 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

74 NOTES TO THE FINANCIAL STATEMENTS

million shares (adjusted to 2.7 million shares after a 

20:1 reverse stock split) of AIG common stock. On 

April 17, 2009, AIG and the OFS restructured their 

November 2008 agreement. Under the 

restructuring, the OFS exchanged $40.0 billion of 

cumulative Series D preferred stock for $41.6 billion 

of non-cumulative 10.0% Series E preferred stock. 

Additionally, the OFS agreed to make available a 

$29.8 billion capital facility from which AIG could 

draw funds if needed to assist in its restructuring. 

The OFS investment related to the capital facility 

consisted of Series F non-cumulative perpetual 

preferred stock with no initial liquidation 

preference, and a warrant for the purchase of 3,000 

shares (adjusted to 150 shares after a 20:1 reverse 

stock split of AIG common stock). This liquidation 

preference increased with any draw down by AIG on 

the facility. The dividend rate applicable to these 

shares was 10.0%, payable quarterly, if declared, on 

the outstanding liquidation preference. As of 

September 30, 2010, AIG had drawn $7.5 billion 

from the facility. Under this capital facility, 

consistent with SFFAS No. 2, neither a subsidy cost 

nor an asset was recognized on the undrawn portion 

of $22.3 billion at September 30, 2010. In fiscal year 

2011, AIG drew $20.3 billion from the capital 

facility, for a total of $27.8 billion drawn. 

On September 30, 2010, the Treasury, Federal 

Reserve Bank of New York and AIG announced 

plans for a restructuring of the Federal 

Government’s investments in AIG. The 

restructuring, which occurred January 14, 2011, 

converted OFS’ $27.8 billion investment in Series F 

preferred stock into $20.3 billion of interests in AIG 

SPVs and 167.6 million shares of AIG common 

stock. The remaining $2.0 billion of undrawn Series 

F capital facility shares were exchanged for 20,000 

shares of Series G Cumulative Mandatory 

Convertible Preferred Stock equity capital facility 

under which AIG had the right to draw up to $2 

billion. OFS’ initial $40 billion investment 

previously exchanged for $41.6 billion of Series E 

preferred stock was converted into 924.6 million 

shares of AIG common stock.14

 

14 Additionally, the AIG Credit Facility Trust between the 

Federal Reserve Bank of New York and AIG was terminated and 

the Department of the Treasury separately, not the OFS, received 

562.9 million shares of AIG common stock from it as part of the 

restructuring transaction. At the completion of the restructuring 

per the agreement, the Department of the Treasury, including 

OFS, held 92.1% of AIG’s common stock on a fully diluted basis. 

See the Agency Financial Report for the Department of the 

 On May 27, 2011, 

pursuant to agreement between the OFS and AIG, 

and as a result of AIG’s primary public offering of its 

common stock, the Series G equity capital facility 

was cancelled. In May 2011, the OFS sold 132.0

million shares of its AIG common stock for $3.8 

billion. These proceeds were less than OFS’ cost by 

$1.9 billion. 

In fiscal year 2011, OFS received $11.5 billion in 

distributions from the AIG SPVs, reduced its 

outstanding balance relating to the AIG SPVs by 

$11.2 billion and received dividends of $246 million. 

OFS also capitalized dividend income of $204 

million. Additionally, OFS received fees of $165.0 

million from AIG. The OFS received no payments 

from AIG in fiscal year 2010.

At September 30, 2011, the OFS owned 960 million 

shares of AIG common stock, approximately 50.8% 

of AIG’s common stock equity on a fully diluted 

basis.15 Market value of the common stock shares 

was $21.1 billion. OFS also owned preferred units 

in an AIG SPV with an outstanding balance of $9.3 

billion. 

According to the terms of the preferred stock, if AIG 

missed four dividend payments, the OFS could 

appoint to the AIG board of directors, the greater of 

two members or 20.0% of the total number of 

directors of the Company. On April 1, 2010, the 

OFS appointed two directors to the Company’s board 

as a result of non-payments of dividends. The 

additional two directors increased the total number 

of AIG directors to twelve. The two additional OFSappointed directors remained on the board as of 

September 30, 2011.

Targeted Investment Program

The Targeted Investment Program (TIP) was 

designed to prevent a loss of confidence in financial 

institutions that could result in significant market 

disruptions, threatening the financial strength of

similarly situated financial institutions, impairing 

broader financial markets, and undermining the 

overall economy. The OFS considered institutions 

 

Treasury for its separate presentation and valuation of its shares 

of AIG common stock.

15 The Department of the Treasury, not OFS, owned 494.9 million 

shares of AIG common stock, approximately 26.1% of AIG’s 

common stock equity, fully diluted, at September 30, 2011. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 75

as candidates for the TIP on a case-by-case basis, 

based on a number of factors including the threats 

posed by destabilization of the institution, the risks 

caused by a loss of confidence in the institution, and 

the institution’s importance to the nation’s 

economy. 

Under TIP, the OFS invested $20 billion in 

Citigroup in December, 2008 and $20 billion in Bank 

of America in January, 2009. In December 2009, 

both institutions repaid the amounts invested along 

with dividends through the date of repayment. In 

fiscal year 2010, OFS received a total of $1.1 billion 

in dividends on the Bank of America and Citigroup 

investments and proceeds of $1.2 billion from the 

sale of Bank of America warrants. In fiscal year 

2011, OFS sold its warrant from Citigroup under 

TIP for $190.4 million and closed the program. 

Automotive Industry Financing Program

The Automotive Industry Financing Program (AIFP) 

was designed to help prevent a significant 

disruption of the American automotive industry, 

which could have had a negative effect on the 

economy of the United States. 

General Motors Company (New GM) and 

General Motors Corporation (Old GM)

In the period ended September 30, 2009, the OFS 

provided $49.5 billion to General Motors 

Corporation (Old GM) through various loan 

agreements including the initial loan for general and 

working capital purposes and the final loan for 

debtor in possession (DIP) financing while Old GM 

was in bankruptcy. The OFS assigned its rights in 

these various loans (with the exception of $986.0 

million which remained in Old GM for wind down 

purposes and $7.1 billion that would be assumed) 

and previously received common stock warrants to a 

newly created entity, General Motors Company 

(New GM). New GM used the assigned loans and 

warrants to credit bid for substantially all of the 

assets of Old GM in a sale pursuant to Section 363 of 

the Bankruptcy Code. During fiscal year 2009, upon 

closing of the Section 363 sale, the credit bid loans 

and warrants were extinguished and the OFS 

received $2.1 billion in 9.0% cumulative perpetual 

preferred stock and 60.8% of the common equity in 

New GM. In addition, New GM assumed $7.1 billion 

of the DIP loan, simultaneously paying $360.6 

million (return of warranty program funds), 

resulting in a net balance of $6.7 billion. The assets 

received by the OFS as a result of the assignment 

and Section 363 sale were considered recoveries of 

the original loans for subsidy cost estimation 

purposes. 

During fiscal year 2010, the OFS received the 

remaining $6.7 billion as full repayment of the DIP 

loan assumed. In addition as of September 30, 2010, 

the OFS had received $188.8 million in dividends 

and $343.1 million in interest on New GM preferred 

stock and the loan prior to repayment, respectively. 

At September 30, 2010, the OFS held 60.8% of the 

common stock of New GM and $2.1 billion in 

preferred stock.

During fiscal year 2011, pursuant to a letter 

agreement, New GM repurchased its preferred stock 

for 102% of its liquidation amount, $2.1 billion. As 

part of an initial public offering by New GM in fiscal 

year 2011, the OFS sold 412.3 million shares of its 

common stock for $13.5 billion, at a price of $32.75 

per share (net of fees). The sale resulted in net 

proceeds less than cost of $4.4 billion. At September 

30, 2011, the OFS held 500 million shares of the 

common stock of New GM, which represents 

approximately 32.0% of the common stock of New 

GM outstanding. Market value of the shares as of 

September 30, 2011 was $10.1 billion. 

On March 31, 2011, the Plan of Liquidation for Old 

GM became effective and OFS’ $986 million loan 

was converted to an administrative claim. OFS 

retains the right to recover additional proceeds but 

recoveries are dependent on actual liquidation 

proceeds and pending litigation. OFS recovered 

$110.9 million in fiscal year 2011 on the 

administrative claim. OFS does not expect to 

recover any significant additional proceeds from this 

claim.

GMAC LLC Rights Offering

In December 2008, the OFS agreed, in principal, to 

lend up to $1.0 billion to Old GM for participation in 

a rights offering by GMAC LLC (now known as Ally 

Financial, Inc.) in support of GMAC LLC’s 

reorganization as a bank holding company. The 

loan was secured by the GMAC LLC common 

interest acquired in the rights offering. The loan 

was funded for $884.0 million. In May 2009, the 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

76 NOTES TO THE FINANCIAL STATEMENTS

OFS exercised its exchange option under the loan 

and received 190,921 membership interests, 

representing approximately 35.36% of the voting 

interest at the time, in GMAC LLC in full 

satisfaction of the loan. As of September 30, 2011 

and 2010, the OFS continued to hold the ownership 

interests obtained in this transaction (see further 

discussion of OFS’ GMAC holdings under Ally 

Financial Inc. in this note.).

Chrysler Group LLC (New Chrysler) and 

Chrysler Holding LLC (Old Chrysler)

In the period ended September 30, 2009, the OFS 

invested $5.9 billion in Chrysler Holding LLC (Old 

Chrysler), consisting of $4.0 billion for general and 

working capital purposes (the general purpose loan) 

and $1.9 billion for debtor in possession (DIP) 

financing while Old Chrysler was in bankruptcy. 

Upon entering bankruptcy, a portion of Old Chrysler 

was sold to a newly created entity, Chrysler Group 

LLC (New Chrysler). Under the terms of the 

bankruptcy agreement, $500 million of the general 

purpose loan was assumed by New Chrysler. In 

fiscal year 2010, the OFS received $1.9 billion on the 

general purpose loan and wrote off the remaining 

$1.6 billion. Recovery of the $1.9 billion DIP loan 

was subject to the liquidation of collateral remaining 

with Old Chrysler. In fiscal year 2010, as part of a 

liquidation plan, OFS’ DIP loan to Old Chrysler was 

extinguished, and OFS retained a right to receive 

proceeds from a liquidation trust. OFS received $7.8 

million and $40.2 million from the liquidation trust 

during fiscal years 2011 and 2010, respectively. 

 

Under the terms of the bankruptcy agreement, the 

OFS committed to make a $7.1 billion loan to New

Chrysler, consisting of up to $6.6 billion of new 

funding and $500 million of assumed debt from the 

general purpose loan with Old Chrysler. The loan 

was secured by a first priority lien on the assets of 

New Chrysler. Funding of the loan was available in

two installments or tranches (B and C), each with 

varying availability and terms. Tranche B provided 

an additional $2.0 billion loan funded at closing. 

Tranche C included the $500 million assumed from 

the general purpose loan and provided $2.6 billion 

funded at closing. Interest on both Tranches was 

payable in kind through December 2009 and added 

to the principal balance of the respective Tranche. 

Interest was paid quarterly beginning March 31, 

2010. Additional in kind interest was accrued at 

$17.0 million a quarter and added to the Tranche C 

loan balance subject to interest at the appropriate 

rate. In fiscal year 2010, the OFS recognized $344.4 

million of paid-in-kind interest capitalized to these 

loans and received $381.8 million of interest. 

The OFS also obtained other consideration including 

a 9.9% equity interest in New Chrysler and 

additional notes with principal balances of $284 

million and $100 million. Fiat SpA (the Italian 

automaker), the Canadian government and the 

United Auto Workers (UAW) retiree healthcare 

trust were the other shareholders in New Chrysler.

In May 2011, New Chrysler repaid both Tranche B 

and C principal balances of $5.1 billion, the 

additional notes totaling $384 million and all 

interest due. New Chrysler’s ability to draw the 

remaining $2.1 billion loan commitment was 

terminated. In July 2011, Fiat SpA paid the OFS 

$560 million for its remaining equity interest in New 

Chrysler and for OFS’ rights under an agreement 

with the UAW retiree healthcare trust pertaining to

the trust’s shares in New Chrysler. 

As a result of the fiscal year 2011 transactions, OFS 

has no remaining interest in New Chrysler as of 

September 30, 2011. Total net proceeds received 

relating to these 2011 transactions were $896 

million less than OFS’ cost. OFS continues to hold a 

right to receive proceeds from a bankruptcy 

liquidation trust but no significant cash flows are 

expected.

Auto Supplier Support Program

In fiscal year 2009, the OFS provided approximately 

$413.1 million of funding to this program, which was 

not affected by the bankruptcy of Old Chrysler and 

Old GM, as both companies were allowed to continue 

paying suppliers while in bankruptcy. The $413.1 

million was repaid in fiscal year 2010, along with 

$9.0 million in interest and $101.1 million in fees 

and other income, and the program was closed. 

Ally Financial Inc. (formerly known as GMAC 

Inc.) 

The OFS invested a total of $16.3 billion in GMAC 

Inc. between December 2008 and December 2009, to 

help support its ability to originate new loans to GM 

and Chrysler dealers and consumers and to help 

address GMAC’s capital needs. In May, 2010, 

GMAC changed its corporate name to Ally Financial, 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 77

Inc (Ally). As a result of original investments, 

exchanges, conversions and warrant exercises, at 

September 30, 2010, the OFS held 450,121 shares of 

Ally common stock (representing 56.3% of the 

company’s outstanding common stock including 

ownership interests from the GMAC LLC Rights 

Offering previously discussed), 2.7 million shares of 

8% cumulative Trust Preferred Securities (TRuPS)

with a $1,000 per share liquidation preference and 

228.8 million shares of Ally’s Series F-2 Mandatorily 

Convertible Preferred Securities. The Series F-2, 

with a $50 per share liquidation preference and a 

stated dividend rate of 9%, is convertible into Ally 

common stock at Ally’s option, subject to the 

approval of the Federal Reserve and consent by the 

OFS or pursuant to an order by the Federal Reserve 

compelling such conversion. The Series F-2 security 

is also convertible at the option of the OFS upon 

certain specified corporate events. Absent an 

optional conversion, any Series F-2 remaining will 

automatically convert to common stock after 7 years 

from the issuance date. The applicable conversion 

rate is the greater of the (i) initial conversion rate 

(0.00432) or (ii) adjusted conversion rate (i.e., the 

liquidation amount per share of the Series F-2 

divided by the weighted average price at which the 

shares of common equity securities were sold or the 

price implied by the conversion of securities into 

common equity securities, subject to antidilution 

provisions).

In December 2010, 110 million shares of the Series 

F-2 preferred were converted into 531,850 shares of 

Ally common stock, resulting in the OFS holdings of 

Series F-2 preferred decreasing to 118.8 million 

shares, and OFS holdings in common stock of Ally 

increasing to 981,971 shares, representing 73.8% of 

Ally’s outstanding common stock. 

During fiscal year 2011, the agreement between Ally 

and OFS regarding its TRuPS was amended to 

facilitate OFS’ sale of its TRuPS in the open market. 

Because this amendment to agreement terms was 

not considered in the formulation subsidy cost 

estimate for the AIFP program, the OFS recorded a 

modification resulting in a subsidy cost reduction of 

$174 million.

In March 2011, the OFS sold its TRuPS for $2.7 

billion, resulting in proceeds in excess of cost of 

$127.0 million. 

On March 31, 2011, the OFS announced that it had 

agreed to be named as a selling shareholder of 

common stock in Ally’s registration statement filed 

with the Securities and Exchange Commission 

(SEC) for a proposed initial public offering. Since 

March 31, 2011, Ally has filed four amendments in 

response to SEC comments; there has been no public 

offering.

 

At September 30, 2011, the OFS held 981,971 shares 

of common stock (73.8% of Ally’s outstanding 

common stock) and 118.8 million shares of the 

Series F-2 preferred securities. The Series F-2 are 

convertible into at least 513,000 shares of common 

stock, which, if combined with the common stock 

currently owned, would represent 81% ownership of 

Ally common stock by the OFS. In fiscal year 2011, 

the OFS received $838.6 million in dividends from 

Ally. In fiscal year 2010, the OFS received $1.2 

billion in dividends.

Consumer and Business Lending 

Initiative (CBLI)

The Consumer and Business Lending Initiative was 

intended to help unlock the flow of credit to 

consumers and small businesses. Three programs 

were established to help accomplish this. The Term 

Asset-Backed Securities Loan Facility was created 

to help jump start the market for securitized 

consumer and small business loans. The SBA 7(a) 

Securities Purchase Program was created to provide 

additional liquidity to the SBA 7(a) market so that 

banks are able to make more small business loans. 

The Community Development Capital Initiative was 

created to provide additional low cost capital to 

small banks to encourage more lending to small 

businesses. Each program is discussed in more 

detail below.

Term Asset-Backed Securities Loan Facility

The Term Asset-Backed Securities Loan Facility 

(TALF) was created by the Federal Reserve Board 

(FRB) to provide low cost funding to investors in 

certain classes of Asset-Backed Securities (ABS). 

The OFS agreed to participate in the program by 

providing liquidity and credit protection to the FRB.

Under the TALF, the Federal Reserve Bank of New 

York (FRBNY), as implementer of the TALF 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

78 NOTES TO THE FINANCIAL STATEMENTS

program, originated loans on a non-recourse basis to 

purchasers of certain AAA rated ABS secured by 

consumer and commercial loans and commercial 

mortgage backed securities (CMBS). Interest rates 

charged on the TALF loans depend on the weighted 

average maturity of the pledged collateral, the 

collateral type and whether the collateral pays fixed 

or variable interest. The program ceased issuing 

new loans on June 30, 2010. As of September 30, 

2011, approximately $11.3 billion of loans due to the 

FRBNY remained outstanding compared to 

September 30, 2010, when approximately $29.7 

billion of loans due to the FRBNY remained 

outstanding.

As part of the program, the FRBNY created the 

TALF, LLC, a special purpose vehicle that agreed to 

purchase from the FRBNY any collateral it has 

seized due to borrower default. The TALF, LLC 

would fund purchases from the accumulation of 

monthly fees paid by the FRBNY as compensation 

for the agreement. Only if the TALF, LLC had 

insufficient funds to purchase the collateral did the 

OFS commit to invest up to $20.0 billion in nonrecourse subordinated notes issued by the TALF, 

LLC. In July 2010, the OFS’ commitment was 

reduced to $4.3 billion. The OFS disbursed $100.0 

million upon creation of the TALF, LLC and the 

remainder can be drawn to purchase collateral in 

the event the fees are not sufficient to cover 

purchases. The subordinated notes bear interest at 1 

Month LIBOR plus 3.0% and mature 10 years from 

the closing date, subject to extension. Any amounts 

needed in excess of the OFS commitment and the 

fees would be provided through a loan from the 

FRBNY. Upon wind-down of the TALF, LLC 

(collateral defaults, reaches final maturity or is 

sold), available cash will be disbursed first to 

FRBNY and then to the OFS principal balances, 

secondly to FRBNY and then to the OFS interest 

balances and finally any remaining cash 10% to the 

FRBNY and 90% to the OFS.

The TALF, LLC is owned, controlled and 

consolidated by the FRBNY. The credit agreement 

between the OFS and the TALF, LLC provides the 

OFS with certain rights consistent with a creditor 

but does not constitute control. As such, TALF, LLC 

is not a federal entity and the assets, liabilities, 

revenue and cost of TALF, LLC are not included in 

the OFS financial statements.

As of September 30, 2011 and 2010, no TALF loans 

were in default and consequently no collateral was 

purchased by the TALF, LLC.

SBA 7(a) Security Purchase Program

In March 2010, the OFS began the purchase of 

securities backed by Small Business Administration 

7(a) loans (7(a) Securities) as part of the Unlocking 

Credit for Small Business Initiative. Under this 

program OFS purchased 7(a) Securities 

collateralized with 7(a) loans (these loans are 

guaranteed by the full faith and credit of the United 

States Government) packaged on or after July 1, 

2008. As of September 30, 2010, OFS had entered 

into trades to purchase $356.3 million of these 

securities (excluding purchased accrued interest), of 

which $240.7 million had been disbursed. 

Investments totaled $367.1 million (excluding 

purchased accrued interest) by December 2010 when 

OFS disbursements under the program were 

completed. In May 2011, OFS began selling its 

securities to bond market investors. During fiscal 

year 2011, the OFS received $10.7 million in interest 

and $235.8 million in principal payments on the 

securities including returns from sales to other 

investors. During fiscal year 2010, the OFS received 

$1.0 million in interest and $2.5 million in principal 

payments on these securities. As of September 30, 

2011, OFS held $127.6 million of SBA 7(a) 

securities.

Community Development Capital Initiative

In February 2010, the OFS announced the 

Community Development Capital Initiative (CDCI) 

to invest lower cost capital in Community 

Development Financial Institutions (CDFIs). Under 

the terms of the program, The OFS purchased senior 

preferred stock (or subordinated debt) from eligible 

CDFIs. The senior preferred stock has an initial 

dividend rate of 2 percent. CDFIs could apply to 

receive capital up to 5 percent of risk-weighted 

assets. To encourage repayment while recognizing 

the unique circumstances facing CDFIs, the 

dividend rate will increase to 9 percent after eight 

years.

For CDFI credit unions, the OFS purchased 

subordinated debt at rates equivalent to those

offered to CDFIs and with similar terms. These 

institutions could apply for up to 3.5 percent of total 

assets - an amount approximately equivalent to the 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 79

5 percent of risk-weighted assets available to banks 

and thrifts.

CDFIs participating in the CPP, subject to certain 

criteria, were eligible to exchange, through 

September 30, 2010, their CPP preferred shares 

(subordinated debt) then held by OFS for CDCI 

preferred shares (subordinated debt). These 

exchanges were treated as disbursements from 

CDCI and repayments to CPP. As of September 30, 

2010, the OFS had invested $570.1 million ($363.3 

million as a result of exchanges from CPP) in 84 

institutions under the CDCI. No additional 

disbursements were made in fiscal year 2011. No 

repayments were received in fiscal years 2011 or 

2010. During fiscal year 2011, OFS received $10.5 

million in dividends and interest from its CDCI 

investments.

Public-Private Investment Program

The PPIP is part of the OFS’ efforts to help restart 

the financial securities market and provide liquidity 

for legacy assets. Under this program, the OFS (as 

a limited partner) made equity investments in and 

loans to nine investment vehicles (referred to as 

Public Private Investment Funds or “PPIFs”) 

established by private investment managers 

between September and December, 2009. The 

equity investment was used to match private capital 

and equaled approximately 50.0% of the total equity 

invested. Each PPIF could elect to receive a loan 

commitment from the OFS equal to either 50% or 

100% of partnership equity at differing costs; all 

chose 100%. The loans bear interest at 1 Month 

LIBOR, plus 1.0%, payable monthly. The maturity 

date of each loan is the earlier of 10 years or the 

termination of the PPIF. The loan can be prepaid 

without penalty. Each PPIF terminates in 8 years 

from its commencement. The governing documents 

of the funds allow for 2 one year extensions, subject 

to approval of the OFS. The loan agreements also 

require cash flows from purchased securities 

received by the PPIFs to be distributed in 

accordance with a priority of payments schedule 

(waterfall) designed to help protect the interests of

secured parties. Security cash flows collected are 

disbursed 1) to pay administrative expenses; 2) to 

pay margin interest on permitted hedges; 3) to pay 

current period interest to OFS; 4) to maintain a 

required interest reserve account; 5) to pay principal 

on the OFS loan when the minimum Asset Coverage 

Ratio Test is not satisfied; 6) to pay other amounts 

on interest rate hedges if not paid under step 2 ; 7) 

for additional temporary investments or to prepay 

loans (both at the discretion of the PPIF); 8) for 

distributions to equity partners up to the lesser of 12 

months’ net interest collected or 8% of the funded 

capital commitments; 9) for loan prepayments to 

OFS and 10) for distribution to equity partners. 

Each loan carries a financial covenant, the Asset 

Coverage Ratio Test. The Asset Coverage Ratio Test 

generally requires the PPIF to maintain an Asset 

Coverage Ratio equal to or greater than 150%. The 

Asset Coverage Ratio is a percentage obtained by 

dividing total assets of the PPIF by the principal 

amount of the loan and accrued and unpaid interest 

on the loan. Failure to comply with the test could 

require accelerated repayment of loan principal and 

prohibit the PPIF from borrowing additional funds 

under the loan agreement.

As a condition of its investment, the OFS also 

received a warrant from each of the PPIFs entitling 

the OFS to 2.5% of investment proceeds (excluding 

those from temporary investments) otherwise 

allocable to the non-OFS partners after the PPIFs 

return of 100% of the non-OFS partners’ capital 

contributions. Distributions relating to the 

warrants would occur generally upon the final 

distribution of each partnership.

The PPIFs are allowed to purchase commercial and 

non-agency residential mortgage-backed securities 

(CMBS and RMBS, respectively) issued prior to 

January 1, 2009, that were originally rated AAA or 

an equivalent rating by two or more nationally 

recognized statistical rating organizations without 

external credit enhancement and that are secured 

directly by the actual mortgage loans, leases or other 

assets (eligible assets) and not other securities. The 

PPIFs may invest in the aforementioned securities 

for a period of 3 years using proceeds from capital 

contribution, loans and amounts generated by 

previously purchased investments (subject to the 

requirements of the waterfall). The PPIFs are also 

permitted to invest in certain temporary securities, 

including bank deposits, U.S. Treasury securities, 

and certain money market mutual funds. At least 

90 percent of the assets underlying any eligible asset 

must be situated in the United States. As of 

September 30, 2011, the approximate split between 

RMBS and CMBS was 79% RMBS and 21% CMBS. 

As of September 30, 2010, the approximate split 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

80 NOTES TO THE FINANCIAL STATEMENTS

between RMBS and CMBS was 82% RMBS and 18% 

CMBS.

The PPIFs pay a management fee to the fund 

manager from the OFS’ share of investment 

proceeds. During the Investment Period, the 

management fee is equal to 0.2% per annum of the 

OFS’ capital commitment as of the last day of the 

applicable quarter. Thereafter, the management fee 

will be equal to 0.2% per annum of the lesser of (a) 

the OFS’ capital commitment as of the last day of 

the applicable quarter or (b) the OFS Interest Value 

as of the last day of the quarter. 

During fiscal year 2011, the OFS disbursed $1.1 

billion as equity investments and $2.3 billion as 

loans to PPIFs. During fiscal year 2010, OFS 

disbursed $4.9 billion as equity investments and 

$9.2 billion as loans to PPIFs. At September 30, 

2011, OFS had equity investments in PPIFs 

outstanding of $5.5 billion and loans outstanding of 

$10.4 billion for a total of $15.9 billion. At 

September 30, 2010, OFS had equity investments of 

$4.8 billion and loans outstanding of $8.9 billion for 

a total of $13.7 billion. In addition, as of September 

30, 2011, OFS had legal commitments to disburse up 

to $4.3 billion for additional investments and loans 

to the eight remaining PPIFs. 

During fiscal year 2011, the OFS received $122.7 

million in interest on loans and $867.7 million in 

loan principal repayments from the PPIFs. Also, 

during fiscal year 2011, OFS received $735.0 million 

in equity distributions, of which $305.7 million was 

recognized as dividend income, $90.8 million of 

proceeds in excess of cost and $338.5 million as a 

reduction of the gross investment outstanding. 

During fiscal year 2010, the OFS received $56.0 

million in interest on loans, $72.0 million in loan 

principal repayments and $151.8 million of income 

on the equity investments.

On January 4, 2010, the OFS entered into a 

Winding-up and Liquidation Agreement with one of 

the PPIFs. Prior to the signing of the agreement, 

the OFS had invested $356.3 million ($156.3 million 

equity investment and $200.0 million loan) in the 

fund. Upon final liquidation, the OFS received 

$377.4 million representing return of the original 

investment, interest on the loan and return on the 

equity investment and warrant. 

Other Credit Programs

Asset Guarantee Program

The Asset Guarantee Program provided guarantees 

for assets held by systemically significant financial 

institutions that faced a risk of losing market 

confidence due in large part to a portfolio of 

distressed or illiquid assets. 

Section 102 of the EESA required the Secretary to 

establish the AGP to guarantee troubled assets 

originated or issued prior to March 14, 2008, 

including mortgage-backed securities, and 

established the Troubled Assets Insurance 

Financing Fund (TAIFF). In accordance with

Section 102(c) and (d) of the EESA, premiums from 

financial institutions are collected and all fees are 

recorded by the OFS in the TAIFF. In addition, 

Section 102(c) (3) of the EESA requires that the 

original premiums assessed are “set” at a minimum 

level necessary to create reserves sufficient to meet 

anticipated claims. 

The OFS completed its first transaction under the 

AGP in January 2009, when it finalized the terms of 

a guarantee agreement with Citigroup. Under the 

agreement, the OFS, the Federal Deposit Insurance 

Corporation (FDIC), and the Federal Reserve Bank 

of New York (FRBNY) (collectively the USG Parties) 

provided protection against the possibility of large 

losses on an asset pool of approximately $301.0 

billion of loans and securities backed by residential 

and commercial real estate and other such assets, 

which remained on Citigroup’s balance sheet. The 

OFS’ guarantee was limited to $5.0 billion. 

As a premium for the guarantee, Citigroup issued 

$7.0 billion of cumulative perpetual preferred stock 

(subsequently converted to Trust Preferred 

Securities with similar terms) with an 8.0 % stated 

dividend rate and a warrant for the purchase of 

common stock; $4.0 billion and the warrant were 

issued to the OFS, and $3.0 billion was issued to the 

FDIC. The OFS received $14.9 million and $265.2 

million during the years ended September 30, 2011 

and 2010, respectively, in dividends on the preferred 

stock received as compensation for this 

arrangement. These dividends have been deposited 

into the TAIFF. The OFS had also invested in 

Citigroup through CPP and the TIP.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 81

In December 2009, the USG Parties and Citigroup 

agreed to terminate the guarantee agreement. 

Under the terms of the termination agreement 

Citigroup cancelled $1.8 billion of the preferred 

stock previously issued to OFS. In addition, the 

FDIC agreed to transfer to the OFS $800 million of 

their trust preferred stock holding plus dividends. 

The amount OFS will receive would be reduced by 

any losses FDIC incurs on its Citigroup guaranteed 

debt. The additional preferred shares from the 

FDIC are included in the subsidy calculation for 

AGP, based on the net present value of expected 

future cash inflows. Termination of the agreement 

was not considered in the formulation estimates of 

the guarantee and therefore a modification that 

resulted in a subsidy cost reduction of $1.4 billion 

was recorded in fiscal year 2010. On September 29, 

2010, the OFS exchanged its existing Trust 

Preferred Securities for securities containing market 

terms to facilitate a sale. On September 30, 2010, 

the OFS agreed to sell its Trust Preferred Securities 

for $2.2 billion. The Trust Preferred Securities are 

valued at the sales price in the 2010 financial 

statements. The sale settled on October 5, 2010, and 

additional warrants were sold in January 2011 for 

$67.2 million, leaving only the $800.0 million of 

trust preferred stock related receivable from the 

FDIC valued at $739 million on the OFS Balance 

Sheet at September 30, 2011. This receivable was 

valued at $815 million as of September 30, 2010. 

FHA-Refinance Program

At the end of fiscal year 2010, the OFS entered into 

a loss-sharing agreement with the Federal Housing 

Administration (FHA) to support a program in 

which FHA guarantees refinancing of borrowers 

whose homes were worth less than the remaining 

amounts owed under their mortgage loans. No loans 

were refinanced in fiscal year 2010. In fiscal year 

2011, the OFS established a $50.0 million account, 

held by a commercial bank, serving as its agent, 

from which any required reimbursements for losses 

will be paid. At September 30, 2011, 334 loans that 

FHA had guaranteed, with a total value of $73 

million, had been refinanced under the program. 

OFS’ maximum exposure related to FHA’s 

guarantee totaled $5.7 million. After considering 

FHA’s estimated default rates, this resulted in OFS 

incurring a $1.0 million liability. The liability has 

been calculated, using credit reform accounting, as 

the present value of the estimated future cash 

outflows for the OFS’ share of losses incurred on any 

defaults of the disbursed loans. See Note 6 table, 

following and Note 5 above for further details.

Subsidy Cost and Reestimates

The recorded subsidy cost of a direct loan, equity 

investment or other credit program is based upon 

the calculated net present value of expected future 

cash flows. The OFS’ actions, as well as changes in 

legislation that change these estimated future cash

flows change subsidy cost, and are recorded as 

modifications. The cost or reduction in cost of a 

modification is recognized when it occurs.

During fiscal year 2011, modifications occurred in 

the AIFP (see Ally Financial Inc.) and CPP, reducing 

subsidy cost by $1.2 billion. During fiscal year 2010, 

modifications occurred within AIFP, CPP and the 

AGP, increasing subsidy cost by $47.9 million. 

The purpose of reestimates is to update original 

program subsidy cost estimates to reflect actual cash 

flow experience as well as changes in forecasts of 

future cash flows. Forecasts of future cash flows are 

updated based on actual program performance to 

date, additional information about the portfolio, 

additional publicly available relevant historical 

market data on securities performance, revised 

expectations for future economic conditions, and 

enhancements to cash flow projection methods. 

Financial statement reestimates for all programs 

were performed using actual financial transaction 

data through September 30, 2011 and 2010. For 

2011, a mix of market and security specific data 

publicly available as of August 31 and September 

30, 2011, was used for the CPP, AIG Investment, 

AIFP, SBA, CDCI and AGP programs. Security 

specific data through June 30, 2011, with market 

prices through August 31 and September 30, 2011, 

was used for the PPIP and TALF programs. For 

2010, a mix of market and security specific data 

publicly available as of August 31 and September 

30, 2010, was used for all programs except PPIP and 

TALF, which used security specific data through 

June 30 and market prices through August 31 and 

September 30, 2010.

The OFS assessed PPIP and TALF programs using 

security specific data available as of September 30, 

2011 and 2010 and, in its determination, there were 

no significant changes to the portfolio characteristics 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

82 NOTES TO THE FINANCIAL STATEMENTS

or performance that would require a revision to the 

reestimates for the fiscal years.

Net downward reestimates for the fiscal years ended 

September 30, 2011 and 2010, totaled $11.6 billion 

and $30.2 billion, respectively. Descriptions of the 

reestimates, by OFS Program, are as follows:

CPP

The downward reestimate for CPP of $816 million 

for the year ended September 30, 2011, is the net 

result of receipts significantly greater than cost on 

the sale of Citigroup common stock offset by a 

decline in the estimated market values of the 

remaining outstanding investments due to market 

conditions at September 30, 2011.

The net upward reestimate for the CPP of $3.9 

billion for the year ended September 30, 2010, is the 

net result of a decrease in the price of Citigroup 

common stock that was partially offset by an 

increase in the estimated value of the other 

investments within the CPP, due to improved 

market conditions during the period. 

AIG Investment Program

The $18.5 billion in downward reestimates for the 

year ended September 30, 2011 for the AIG 

Investment Program was due primarily to subsidy 

cost estimates recorded for $20.3 billion of new 

disbursements during the fiscal year. Under budget 

rules, the subsidy cost estimate for these new 

disbursements was determined based upon subsidy 

rates formulated in April 2009, the period in which 

OFS originally agreed to make the funding available 

to AIG. At that time, OFS calculated a subsidy rate 

of 98.98%, which resulted in an estimated subsidy 

cost of $20.1 billion associated with the $20.3 billion 

disbursed in fiscal year 2011. OFS calculated a 

$16.7 billion downward reestimate relating to these 

fiscal year 2011 disbursements that reflects 

improvements in AIG’s financial condition since the 

original subsidy rate was formulated. The 

remainder of the downward reestimate was due to 

the restructuring of the AIG investment to common 

stock offset by AIG’s financial condition at 

September 30, 2011. At year end, the subsidy 

allowance represented about 41% of the gross 

outstanding AIG Investment Program balance.

The $12.0 billion in downward reestimate for the 

AIG Investment Program for the year ended 

September 30, 2010, was due to an increase in the 

estimated value of AIG assets and subordinated debt 

and improvements in market conditions over the 

period. 

TIP

The TIP program was closed in fiscal year 2011, 

with a final downward reestimate of $192 million, 

primarily due to a better than projected return on 

warrant sales. OFS received cumulative receipts of 

$4.0 billion on total investments of $40.0 billion. 

The $1.9 billion in net downward reestimate in the 

TIP in fiscal year 2010 included $2.2 billion in 

downward reestimate due to the repurchase of the 

program’s investments by the two institutions 

participating in the program. That downward 

reestimate amount was partially offset by a $277.4 

million upward reestimate from a slight reduction in 

the estimated value of outstanding warrants.

AIFP

The $9.9 billion in upward reestimates for the AIFP 

for the year ended September 30, 2011, was due to a 

decline of over $7.0 billion due to changes in the 

common stock price of New GM since its IPO and a 

decline in the estimated value of Ally investments 

due to market conditions.

The $19.3 billion in downward reestimates for the 

AIFP direct loan and equity investments for the year 

ended September 30, 2010, was due to $1.8 billion in 

payments exceeding projections, a reduction in 

estimated defaults due to improvements in the 

domestic automotive industry, and an increase in 

the bond prices and valuations used to estimate the 

cost of the remaining AIFP investments. 

CBLI

The CBLI programs had a downward reestimate of 

$210 million for the year ended September 30, 2011. 

The TALF program showed improved market 

conditions, resulting in a $105 million downward 

reestimate. The SBA and CDCI programs reported 

improved investment performance, resulting in $6 

million and $99 million downward reestimates, 

respectively.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 83

The TALF and SBA 7(a) Securities Purchase 

programs within the CBLI had a total upward 

reestimate of $23.7 million for the year ended 

September 30, 2010. The TALF program had a $23.3

million upward reestimate mostly due to a projected 

reduction in the size of the portfolio and higher than 

projected repayments. The SBA program had an 

upward reestimate of less than $1 million due to an 

increase in projected interest rates and a reduction 

in market risk. The CDCI program had a $7.3 

million upward reestimate for the period.

PPIP

The $1.8 billion downward reestimates for the PPIP 

for the year ended September 30, 2011, was due 

primarily to a decline in market risk projections, 

program repayments, and changes in projected 

performance of the PPIP portfolio. 

The $1.0 billion in downward reestimates for the 

PPIP debt and equity programs for the year ended 

September 30, 2010, was the net of a $1.2 billion 

upward reestimate in the PPIP debt program and 

$2.2 billion in downward reestimates for the PPIP 

equity programs, mostly due to the use of actual 

portfolio data for reestimates rather than the proxy 

data used in developing the baseline estimates and 

changes in market risks. 

AGP

The AGP Citigroup TRuPS held by the FDIC 

recorded an upward reestimate of $29.8 million for 

the year ended September 30, 2011, due to a decline 

in market conditions. 

The AGP had a net $87.3 million downward 

reestimate for the year ended September 30, 2010. 

The reestimate amount excludes an estimated cost 

savings of $1.4 billion that resulted from the 

cancellation of the $5.0 billion guarantee because 

this transaction was reflected in the subsidy 

modifications during fiscal year 2010. 

Summary Tables

The following detailed tables provide the net 

composition, subsidy cost, modifications and 

reestimates, a reconciliation of the subsidy cost 

allowance and budget subsidy rates and subsidy by 

component for each TARP direct loan, equity 

investment or other credit programs for the years 

ended September 30, 2011 and 2010. There were no 

budget subsidy rates for fiscal year 2011, except for 

the FHA-Refinance Program, and all disbursements 

were from loans or investments obligated in prior 

years.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

84 NOTES TO THE FINANCIAL STATEMENTS

(Dollars in Millions) TOTAL CPP AIG TIP AIFP CBLI PPIP

As of September 30, 2011

Direct Loans and Equity Investment Programs:

Direct Loans and Equity Investments Outstanding, Gross $ 122,405 17,299$ 51,087$ $ - $ 37,278 $ 798 $ 15,943

Subsidy Cost Allowance (42,301) (4,857) (20,717) - (19,440) 279 2,434

Direct Loans and Equity Investments Outstanding, Net $ 80,104 12,442$ 30,370$ $ - $ 17,838 $ 1,077 $ 18,377

New Loans or Investments Disbursed $ 23,839 $ - 20,292$ $ - $ - $ 126 $ 3,421

Obligations for Loans and Investments not yet Disbursed $ 8,479 $ - $ - - $ $ - $ 4,200 $ 4,279

Reconciliation of Subsidy Cost Allowance:

Balance, Beginning of Period $ 36,745 $ 1,546 21,405$ $ (1) $ 14,529 $ (58) $ (676)

 Subsidy Cost (Income) for Disbursements and Modifications 18,887 (1,010) 20,085 - (174) 1 (15)

 Interest and Dividend Revenue 3,461 1,283 450 - 1,280 20 428

 Fee Income 165 - 165 - - - -

 Net Proceeds from Sales and Repurchases of Assets

 in Excess of (Less than) Cost (2,262) 4,540 (1,918) 190 (5,165) - 91

 Net Interest Income (Expense) on Borrowings from BPD

 and Financing Account Balance (3,016) (686) (938) 3 (945) (32) (418)

Balance, End of Period, Before Reestimates 53,980 5,673 39,249 192 9,525 (69) (590)

 Subsidy Reestimates (11,679) (816) (18,532) (192) 9,915 (210) (1,844)

Balance, End of Period $ 42,301 $ 4,857 20,717$ $ - $ 19,440 $ (279) $ (2,434)

Reconciliation of Subsidy Cost (Income):

 Subsidy Cost (Income) for Disbursements $ 20,071 $ - 20,085$ $ - $ - $ 1 $ (15)

 Subsidy Cost (Income) for Modifications (1,184) (1,010) - - (174) - -

 Subsidy Reestimates (11,679) (816) (18,532) (192) 9,915 (210) (1,844)

Total Direct Loan and Equity Investment Programs

 Subsidy Cost (Income) $ 7,208 $ (1,826) $ 1,553 $ (192) $ 9,741 $ (209) $ (1,859)

Troubled Asset Relief Program Loans and Equity Investments

Note: There are no budget execution rates for FY 2011; the OFS authority expired October 3, 2010 with no additional commitments made after September 30, 2010.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 85

(Dollars in Millions) TOTAL CPP AIG TIP AIFP CBLI PPIP

As of September 30, 2010

Direct Loans and Equity Investment Programs:

Direct Loans and Equity Investments Outstanding, Gross $ 179,197 49,779$ $ 47,543 $ - $ 67,238 $ 908 $ 13,729

Subsidy Cost Allowance (36,745) (1,546) (21,405) 1 (14,529) 58 676

Direct Loans and Equity Investments Outstanding, Net $ 142,452 48,233$ $ 26,138 $ 1 $ 52,709 $ 966 $ 14,405

New Loans or Investments Disbursed $ 23,373 $ 277 $ 4,338 $ - $ 3,790 $ 811 $ 14,157

Obligations for Loans and Investments not yet Disbursed $ 36,947 $ - $ 22,292 $ - $ 2,066 4,339$ $ 8,250

Reconciliation of Subsidy Cost Allowance:

Balance, Beginning of Period $ 53,077 $ (7,770) $ 30,054 $ (341) $ 31,478 $ (344) $ -

 Subsidy Cost (Income) for Disbursements and Modifications 7,533 (16) 4,293 - 2,644 275 337

 Interest and Dividend Revenue 6,977 3,131 - 1,143 2,475 - 228

 Net Proceeds from Sales and Repurchases of Assets

 in Excess of Cost 8,013 6,676 - 1,237 99 - 1

 Net Interest Expense on Borrowings from BPD

 and Financing Account Balance (4,690) (2,018) (981) (161) (1,309) (20) (201)

 Writeoffs (3,934) (2,334) - - (1,600) - -

Balance, End of Period, Before Reestimates 66,976 (2,331) 33,366 1,878 33,787 (89) 365

 Subsidy Reestimates (30,231) 3,877 (11,961) (1,879) (19,258) 31 (1,041)

Balance, End of Period $ 36,745 $ 1,546 $ 21,405 $ (1) $ 14,529 $ (58) $ (676)

Reconciliation of Subsidy Cost (Income):

 Subsidy Cost for Disbursements $ 6,067 $ 16 $ 4,293 $ - $ 1,146 $ 275 $ 337

 Subsidy Cost (Income) for Modifications 1,466 (32) - - 1,498 - -

 Subsidy Reestimates (30,231) 3,877 (11,961) (1,879) (19,258) 31 (1,041)

Total Direct Loan and Equity Investment Programs

 Subsidy Cost (Income) $ (22,698) $ 3,861 (7,668)$ $ (1,879) $ (16,614) $ 306 $ (704)

Troubled Asset Relief Program Loans, Equity Investments and Asset Guarantee Program Budget Subsidy Rates:

(Dollars in Millions) AGP CPP AIG TIP AIFP CBLI PPIP

Budget Subsidy Rate, Excluding Modifications and Reestimates (see Note below):

As of September 30, 2010

 Interest Differential -25.62% 37.70% 30.39% 11.72%

 Defaults 16.36% 13.78% 3.93% 0.00%

 Fees and Other Collections -3.00% -0.38% 0.00% -0.41%

 Other 18.03% -20.85% -0.41% -10.34%

Total Budget Subsidy Rate (See Note below) N/A 5.77% N/A N/A 30.25% 33.91% 0.97%

Subsidy Cost by Component:

 Interest Differential $ (71) $ 1,415 $ 1,429 $ 246 $ 1,880

 Defaults 45 2,907 522 32 -

 Fees and Other Collections - (8) - (15) (55)

 Other 50 (29) (790) (3) (1,488)

Total Subsidy Cost, Excluding Modifications and Reestimates N/A $ 16 $ 4,293 N/A $ 1,146 $ 275 $ 337

Troubled Asset Relief Program Loans and Equity Investments

Note: The rates reflected in the table above are FY 2010 budget execution rates by program. The subsidy rates disclosed pertain only to the FY 2010 cohorts. These rates cannot be 

applied to the direct loans disbursed during FY 2010 to yield the subsidy expense. The subsidy cost (income) for new loans reported in FY 2010 could result from disbursements of 

loans from both FY 2010 cohorts and prior year cohorts. The subsidy cost (income) reported in FY 2010 also includes modifications and re-estimates. Therefore, the Total Subsidy 

Cost Excluding Modifications and Reestimates will not equal the New Loans or Investments Disbursed multiplied by the Budget Subsidy Rate.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

86 NOTES TO THE FINANCIAL STATEMENTS

Troubled Asset Relief Program - Other Credit Programs

(Dollars in Millions) 2011 2010 2011 2010

Asset Guarantee Program

 Intragovernmental Portion (See Note below) $ 739 $ 815

 Portion held by OFS, net - 2,240

Total Asset Guarantee Program $ 739 $ 3,055

Guaranteed Loans Outstanding:

 Maximum OFS Exposure on FHA Guaranteed Loans Outstanding, 

 Related to Loss Sharing Agreement $ 6 $ -

Total Liability for Losses $ (1) $ -

Reconciliation of Asset Guarantee Program/Liability for Losses

Balance, Beginning of Period $ (3,055) $ (1,765) $ - $ -

 Subsidy Cost (Income) for Disbursements and Modifications - (1,418) 1 -

 Dividend Revenue 15 265 - -

 Net Proceeds from Sales of Assets in Excess of Cost 2,301 - - -

 Net Interest Expense on Borrowings from BPD

 and Financing Account Balance (30) (50) - -

Balance, End of Period, Before Reestimates (769) (2,968) 1 -

 Subsidy Reestimates 30 (87) - -

Balance, End of Period $ (739) $ (3,055) $ 1 $ -

Reconciliation of Subsidy Cost (Income)

 Subsidy Cost for Guarantees/Losses $ - $ - $ 1 $ -

 Subsidy Cost (Income) for Modifications - (1,418) - -

 Subsidy Reestimates 30 (87) - -

Total Subsidy Cost (Income) $ 30 $ (1,505) $ 1 $ -

Budget Subsidy Rate, Excluding Modifications and Reestimates:

As of September 30, 2011

 Interest Differential 0.00%

 Defaults 1.26%

 Fees and Other Collections 0.00%

 Other 0.00%

Total Budget Subsidy Rate N/A N/A 1.26% N/A

Subsidy Cost by Component:

 Interest Differential $ -

 Defaults 1

 Fees and Other Collections -

 Other -

Total Subsidy Cost, Excluding Modifications and Reestimates N/A N/A $ 1 N/A

Asset Guarantee Program FHA-Refinance Program

Note: At September 30, 2010, the net present value of the future cash flows for the Asset Guarantee Program consisted of (i) $800 million of Citigroup trust preferred securities, plus 

dividends thereon, that the FDIC agreed to transfer to OFS contingent on Citigroup repaying previously issued FDIC guaranteed debt and (ii) additional Citigroup trust preferred 

securities valued at $2,240 million, for a total of $3,055 million. At September 30, 2011, only the contingent payment from the FDIC remained outstanding. The other securities were 

sold during fiscal year 2011.

As Of September 30, As Of September 30, 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 87

NOTE 7. DUE TO THE GENERAL FUND

As of September 30, 2011, the OFS accrued $4.6 

billion of downward reestimates payable to the 

General Fund. As of September 30, 2010, the OFS 

accrued $25.1 billion of downward reestimates and 

one downward modification payable to the General 

Fund (See Note 6). Due to the General Fund is a 

Non-Entity liability on the Balance Sheet. 

NOTE 8. PRINCIPAL PAYABLE TO THE BUREAU OF THE PUBLIC DEBT 

(BPD)

Equity investments, direct loans and other credit 

programs accounted for under credit reform 

accounting are funded by subsidy appropriations 

and borrowings from the BPD. The OFS also 

borrows funds to pay the Treasury General Fund for 

negative subsidy costs and downward reestimates in 

advance of receiving the expected cash flows that 

cause the negative subsidy or downward reestimate. 

The OFS makes periodic principal repayments to the 

BPD based on the analysis of its cash balances and 

future disbursement needs. All debt is 

intragovernmental and covered by budgetary 

resources. See additional details on borrowing 

authority in Note 11, Statement of Budgetary 

Resources.

Debt transactions for the fiscal years ended 

September 30, 2011 and 2010, were as follows: 

(Dollars in Millions) 2011 2010

Beginning Balance, Principal Payable to the BPD $ 140,404 $ 143,335

 New Borrowings 35,974 49,025

 Repayments (46,881) (51,956)

Ending Balance, Principal Payable to the BPD $ 129,497 $ 140,404

As of September 30,

Borrowings from the BPD by the TARP program, outstanding as of September 30, 2011 and 2010, were as 

follows:

(Dollars in Millions) 2011 2010

Capital Purchase Program $ 19,003 $ 49,503

American International Group, Inc. Investment Program 52,285 23,061

Targeted Investment Program - 710

Automotive Industry Financing Program 32,419 45,706

Consumer & Business Lending Initiative 1,165 1,073

Public-Private Investment Program 23,792 17,918

Asset Guarantee Program 833 2,433

Total Borrowings Outstanding $ 129,497 $ 140,404

As of September 30,

Borrowings are paid to the BPD as collections are 

available. As of September 30, 2011, borrowings 

carried remaining terms ranging from 3 to 30 years, 

with interest rates from 1.0% to 4.7%. As of 

September 30, 2010, borrowings carried terms 

ranging from 5 to 31 years. Interest rates on 

borrowings ranged from 2.2% to 4.7%. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

88 NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. COMMITMENTS AND CONTINGENCIES 

The OFS is party to various legal actions and claims 

brought by or against it. In the opinion of 

management and the Chief Counsel, the ultimate 

resolution of these legal actions and claims will not 

have a material effect on the OFS financial 

statements. The OFS has not incurred any loss 

contingencies that would be considered probable or 

reasonably possible for these cases. Refer to Note 6 

for additional commitments relating to the TARP’s 

Direct Loan, Equity Investments and Other Credit 

Programs.

NOTE 10. STATEMENT OF NET COST

The Statement of Net Cost (SNC) presents the net 

cost of (income from) operations for the OFS under 

the strategic goal of ensuring the overall stability 

and liquidity of the financial system, preventing 

avoidable foreclosures and preserving 

homeownership. The OFS has determined that all 

initiatives and programs under the TARP fall within 

this strategic goal.

The OFS SNC reports the annual accumulated full 

cost of the TARP’s output, including both direct and 

indirect costs of the program services and output 

identifiable to TARP, in accordance with SFFAS No. 

4, Managerial Cost Accounting Concepts and 

Standards.

The OFS SNC for fiscal year 2011 includes $3.8

billion of intragovernmental costs relating to 

interest expense on borrowings from the BPD and 

$781.5 million in intragovernmental revenues 

relating to interest income on financing account 

balances. The OFS SNC for fiscal year 2010 

includes $5.9 billion of intragovernmental costs 

relating to interest expense on borrowings from the 

BPD and $1.2 billion in intragovernmental revenues 

relating to interest income on financing account 

balances. 

Subsidy allowance amortization on the SNC is the 

difference between interest income on financing 

fund account balances, dividends and interest 

income on direct loans, equity investments and other 

credit programs from TARP participants, and 

interest expense on borrowings from the BPD. 

Credit reform accounting requires that only subsidy 

cost, not the net of other costs (interest expense and 

dividend and interest income), be reflected in the 

SNC. The subsidy allowance account is used to 

present the loan or equity investment at the 

estimated net present value of future cash flows.

NOTE 11. STATEMENT OF BUDGETARY RESOURCES

The Statement of Budgetary Resources (SBR) 

presents information about total budgetary 

resources available to the OFS and the status of 

those resources. For the year ended September 30, 

2011, the OFS’ total resources in budgetary accounts 

were $16.4 billion and resources in non-budgetary 

financing accounts, including borrowing authority 

and spending authority from collections of loan 

principal, liquidation of equity investments, interest, 

dividends and fees were $86.5 billion. For the year 

ended September 30, 2010, the OFS’ total resources 

in budgetary accounts were $34.5 billion and 

resources in non-budgetary financing accounts were 

$160.8 billion. 

Permanent Indefinite Appropriations

The OFS receives permanent indefinite 

appropriations annually, if necessary, to fund 

increases in the projected subsidy costs of direct 

loans, equity investment and other credit programs 

as determined by the reestimation process required 

by the FCRA. 

Additionally, Section 118 of the EESA states that 

the Secretary may issue public debt securities and 

use the resulting funds to carry out the Act and that 

any such funds expended or obligated by the 

Secretary for actions authorized by this Act, 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

NOTES TO THE FINANCIAL STATEMENTS 89

including the payment of administrative expenses, 

shall be deemed appropriated at the time of such 

expenditure or obligation.

Borrowing Authority 

The OFS is authorized to borrow from the BPD 

whenever funds needed to disburse direct loans and 

equity investments, and to enter into asset 

guarantee and loss-sharing arrangements, exceed 

subsidy costs and collections in the non-budgetary 

financing accounts. For the year ended September 

30, 2011, the OFS had borrowing authority available 

of $8.4 billion. For the year ended September 30, 

2010, the OFS had borrowing authority available of 

$10.2 billion. 

The OFS uses dividends and interest received as 

well as principal repayments on direct loans and 

liquidation of equity investments to repay debt in 

the non-budgetary direct loan, equity investment 

and other credit program financing accounts. These 

receipts are not available for any other use per 

credit reform accounting guidance.

Apportionment Categories of 

Obligations Incurred: Direct versus 

Reimbursable Obligations

All of the OFS apportionments are Direct and are 

Category B. Category B apportionments typically 

distribute budgetary resources on a basis other than 

calendar quarters, such as by activities, projects, 

objects or a combination of these categories. The 

OFS obligations incurred are direct obligations 

(obligations not financed from intragovernmental 

reimbursable agreements).

Undelivered Orders

Undelivered orders as of September 30, 2011, were 

$43.4 billion in budgetary accounts and $13.2 billion 

in non-budgetary financing accounts. Undelivered 

orders as of September 30, 2010, were $68.7 billion 

in budgetary accounts and $41.9 billion in nonbudgetary financing accounts. 

Explanation of Differences Between 

the Statement of Budgetary 

Resources and the Budget of the 

United States Government

Federal agencies and entities are required to explain 

material differences between amounts reported in 

the SBR and the actual amounts reported in the 

Budget of the U. S. Government (the President’s 

Budget). 

The President’s Budget for 2013, with the “Actual” 

column completed for fiscal year 2011, has not yet 

been published as of the date of these financial 

statements. The Budget is currently expected to be 

published and delivered to Congress in early 

February 2012. The Budget will be available from 

the Government Printing Office.

The 2012 Budget of the U. S. Government, with the 

“Actual” column completed for the period ended 

September 30, 2010, was published in February 

2011, and reconciled to the SBR. The only 

differences between the two documents were due to:

• Rounding;

• Expired funds that are not shown in the 

Actual column of the budget; and

• A $32.1 million downward modification 

transferred to the general fund shown in the 

“Actual” column as an outlay at September 

30, 2010, that was not recorded in the SBR 

until 2011. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

90 NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. RECONCILIATION OF OBLIGATIONS INCURRED TO NET COST 

OF (INCOME FROM) OPERATIONS

The OFS presents the SNC using the accrual basis 

of accounting. This differs from the obligation-based 

measurement of total resources supplied, both 

budgetary and from other sources, on the SBR. The 

reconciliation of obligations incurred to net cost of 

operations shown below categorizes the differences 

between the two, and illustrates that the OFS 

maintains reconcilable consistency between the two 

types of reporting.

The Reconciliation of Obligations Incurred to Net 

Cost of (Income from) Operations for the fiscal years 

ended September 30, 2011 and 2010 is as follows:

Dollars in Millions 2011 2010

Resources Used to Finance Activities:

Budgetary Resources Obligated

 Obligations Incurred $ 67,646 $ 173,631

 Spending Authority from Offsetting Collections and Recoveries (91,708) (191,538)

 Offsetting Receipts (61,832) (118,860)

Net Obligations (85,894) (136,767)

Other Resources 1 1

Total Resources Used to Finance Activities (85,893) (136,766)

Resources Used to Finance Items Not Part of Net Cost of (Income from) Operations:

 Net Obligations in Direct Loan, Equity Investment and Asset Guarantee Financing Funds 23,249 40,139

 Change in Resources Obligated for Goods, Services and Benefits Ordered but not yet Provided 25,330 (12,639)

 Resources that Fund the Acquisition of Assets (50) -

 Resources that Fund Prior Period Expenses and Net Downward Reestimates 23,562 109,747

Total Resources Used to Finance Items Not Part of Net Cost of (Income from) Operations 72,091 137,247

Total Resources Used to Finance the Net Cost of (Income from) Operations (13,802) 481

Components of Net Cost of (Income from) Operations that Will Not Require or Generate 

Resources in the Current Period:

 Accrued Upward (Downward) Reestimates at Year-End 23,293 (23,563)

 Other 6 -

Total Components of Net Cost of (Income from) Operations that Will Not Require or 

Generate Resources in the Current Period 23,299 (23,563)

Net Cost of (Income from) Operations $ 9,497 $ (23,082)

RECONCILIATION OF OBLIGATIONS INCURRED TO NET COST OF (INCOME FROM) OPERATIONS
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

REQUIRED SUPPLEMENTARY INFORMATION 91

Dollars in Millions

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

BUDGETARY RESOURCES

 Unobligated Balances Brought Forward $ 11,075 $ 10,548 $ 10,949 $ 10,548 $ 126 $ -

 Recoveries of Prior Year Unpaid Obligations 3,057 4,664 3,018 4,664 39 -

 Budget Authority:

 Appropriations 2,278 - 1,886 - 392 -

 Borrowing Authority - 77,914 - 77,914 - -

 Spending Authority from Offsetting Collections

 Earned: Collected - 107,307 - 107,307 - -

 Change in Unfilled Orders Without Advance - (23,320) - (23,320) - -

 Anticipated for Rest of Year w/o Advances - - - - - -

 Total Budget Authority 16,410 177,113 15,853 177,113 557 -

 Permanently Not Available - (90,568) - (90,568) - -

TOTAL BUDGETARY RESOURCES (Note 10) $ 16,410 $ 86,545 $ 15,853 $ 86,545 $ 557 $ -

STATUS OF BUDGETARY RESOURCES

 Obligations Incurred - Direct $ 2,244 $ 65,402 $ 1,886 $ 65,402 $ 358 $ -

 Unobligated Balance:

 Apportioned and Available 36 511 - 511 36 -

 Not Available 14,130 20,632 13,967 20,632 163 -

TOTAL STATUS OF BUDGETARY RESOURCES $ 16,410 $ 86,545 $ 15,853 $ 86,545 $ 557 $ -

CHANGE IN OBLIGATED BALANCES

Obligated Balance Brought Forward:

 Unpaid Obligations $ 69,128 $ 41,918 $ 68,898 $ 41,918 $ 230 $ -

 Uncollected Customer Payments from Federal Sources - (23,816) - (23,816) - -

Obligated Balance, Net, Brought Forward 69,128 18,102 68,898 18,102 230 -

 Obligations Incurred 2,244 65,402 1,886 65,402 358 -

 Gross Outlays (24,501) (89,498) (24,148) (89,498) (353) -

 Recoveries of Prior Year Unpaid Obligations (3,057) (4,664) (3,018) (4,664) (39) -

 Change in Uncollected Customer Payments from Federal Sources - 23,320 - 23,320 - -

Obligated Balance, Net, End of Period:

 Unpaid Obligations 43,814 13,158 43,618 13,158 196 -

 Uncollected Customer Payments from Federal Sources - (496) - (496) - -

Obligated Balance, Net, End of Period $ 43,814 $ 12,662 $ 43,618 $ 12,662 $ 196 $ -

NET OUTLAYS

 Gross Outlays $ 24,501 $ 89,498 $ 24,148 $ 89,498 $ 353 $ -

 Offsetting Collections - (107,307) - (107,307) - -

 Distributed Offsetting Receipts (61,832) - (61,832) - - -

NET OUTLAYS $ (37,331) $ (17,809) $ (37,684) $ (17,809) $ 353 $ -

2011

Combined TARP Programs TARP Administrative

OFFICE OF FINANCIAL STABILITY (TROUBLED ASSET RELIEF PROGRAM)

REQUIRED SUPPLEMENTARY INFORMATION

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2011

(Unaudited)
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

92 REQUIRED SUPPLEMENTARY INFORMATION

Dollars in Millions

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

BUDGETARY RESOURCES

 Unobligated Balances Brought Forward $ 28,156 $ 8,945 $ 28,126 $ 8,945 $ 30 $ -

 Recoveries of Prior Year Unpaid Obligations 1,173 39,364 1,118 39,364 55 -

 Budget Authority:

 Appropriations 5,151 - 4,745 - 406 -

 Borrowing Authority - 69,440 - 69,440 - -

 Spending Authority from Offsetting Collections

 Earned: Collected - 156,112 - 156,112 - -

 Change in Unfilled Orders Without Advance - (5,111) - (5,111) - -

 Total Budget Authority 34,480 268,750 33,989 268,750 491 -

 Permanently Not Available - (107,976) - (107,976) - -

TOTAL BUDGETARY RESOURCES (Note 10) $ 34,480 $ 160,774 $ 33,989 $ 160,774 $ 491 $ -

STATUS OF BUDGETARY RESOURCES

 Obligations Incurred - Direct $ 23,405 $ 150,226 $ 23,040 $ 150,226 $ 365 $ -

 Unobligated Balance:

 Apportioned and Available 142 7,692 101 7,692 41 -

 Not Available 10,933 2,856 10,848 2,856 85 -

TOTAL STATUS OF BUDGETARY RESOURCES $ 34,480 $ 160,774 $ 33,989 $ 160,774 $ 491 $ -

CHANGE IN OBLIGATED BALANCES

Obligated Balance Brought Forward:

 Unpaid Obligations $ 56,151 $ 79,202 $ 55,992 $ 79,202 $ 159 $ -

 Uncollected Customer Payments from Federal Sources - (28,927) - (28,927) - -

Obligated Balance, Net, Brought Forward 56,151 50,275 55,992 50,275 159 -

 Obligations Incurred 23,405 150,226 23,040 150,226 365 -

 Gross Outlays (9,255) (148,146) (9,016) (148,146) (239) -

 Recoveries of Prior Year Unpaid Obligations (1,173) (39,364) (1,118) (39,364) (55) -

 Change in Uncollected Customer Payments from Federal Sources - 5,111 - 5,111 - -

Obligated Balance, Net, End of Period:

 Unpaid Obligations 69,128 41,918 68,898 41,918 230 -

 Uncollected Customer Payments from Federal Sources - (23,816) - (23,816) - -

Obligated Balance, Net, End of Period $ 69,128 $ 18,102 $ 68,898 $ 18,102 $ 230 $ -

NET OUTLAYS

 Gross Outlays $ 9,255 $ 148,146 $ 9,016 $ 148,146 $ 239 $ -

 Offsetting Collections - (156,112) - (156,112) - -

 Distributed Offsetting Receipts (118,860) - (118,860) - - -

NET OUTLAYS $ (109,605) $ (7,966) $ (109,844) $ (7,966) $ 239 $ -

2010

Combined TARP Programs TARP Administrative

OFFICE OF FINANCIAL STABILITY (TROUBLED ASSET RELIEF PROGRAM)

REQUIRED SUPPLEMENTARY INFORMATION

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2010 

(Unaudited)
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

93 APPENDIX A: TARP GLOSSARY

Part 3: Appendices
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

94 APPENDIX A: TARP GLOSSARY

APPENDIX A: TARP GLOSSARY

Asset-Backed Security (ABS): 

 

A financial 

instrument representing an interest in a pool of 

other assets, typically consumer loans. Most 

ABS are backed by credit card receivables, auto 

loans, student loans, or other loan and lease 

obligations.

Asset Guarantee Program (AGP): A TARP 

program under which Treasury, together with 

the Federal Reserve and the FDIC, agreed to 

share losses on certain pools of assets held by 

systemically significant financial institutions 

that faced a high risk of losing market 

confidence due in large part to a portfolio of 

distressed or illiquid assets.

Automotive Industry Financing Program (AIFP): 

A TARP program under which Treasury-OFS 

provided loans or equity investments in order to 

avoid a disorderly bankruptcy of one or more 

auto companies that would have posed a 

systemic risk to the country’s financial system.

Capital Purchase Program (CPP): A TARP 

program pursuant to which Treasury-OFS 

invested in preferred equity securities and other 

securities issued by financial institutions.

Commercial Mortgage-Backed Securities 

(CMBS): A financial instrument representing an 

interest in a commercial real estate mortgage or 

a group of commercial real estate mortgages.

Commercial Paper (CP): An unsecured debt 

instrument with a short maturity period, 270 

days or less, typically issued by large financial 

institutions or other large commercial firms.

Community Development Capital Initiative 

(CDCI): A TARP program that provides low-cost 

capital to CDFIs to encourage lending to small 

businesses and help facilitate the flow of credit 

to individuals in underserved communities.

 

Community Development Financial Institution 

(CDFI): A financial institution that focuses on 

providing financial services to low- and 

moderate- income, minority and other 

underserved communities, and is certified by the 

CDFI Fund, an office within Treasury-OFS that 

promotes economic revitalization and 

community development.

 

Consumer and Business Lending Initiative 

(CBLI): A series of programs created under 

TARP which included the TALF, the CDCI, and 

the SBA 7(a) Securities Purchase Program. 

These were designed to jump start the credit 

markets that provide financing to consumers 

and businesses and otherwise support small 

banks.

Emergency Economic Stabilization Act (EESA):

The law that created the Troubled Asset Relief 

Program (TARP).

 

Government-Sponsored Enterprises (GSEs): 

Private corporations created by the U.S. 

Government. Fannie Mae and Freddie Mac are 

GSEs.

 

Home Affordable Modification Program (HAMP): 

A TARP program Treasury-OFS established to 

help responsible but struggling homeowners 

reduce their mortgage payments to affordable 

levels and avoid foreclosure.

Legacy Securities: CMBS and non-agency RMBS 

issued prior to 2009 that were originally rated 

AAA or an equivalent rating by two or more 

NRSROs without ratings enhancement and that 

are secured directly by actual mortgage loans, 

leases or other assets and not other securities. 

Making Home Affordable (MHA): A 

comprehensive plan

 

to stabilize the U.S. housing 

market and help responsible, but struggling, 

homeowners reduce their monthly mortgage 

payments to more affordable levels and avoid 

foreclosure. HAMP is part of MHA.

Mortgage-Backed Securities (MBS): A type of 

ABS representing an interest in a pool of similar 

mortgages bundled together by a financial 

institution.

Non-Agency Residential Mortgage-Backed 

Securities: RMBS that are not guaranteed or 

issued by Freddie Mac, Fannie Mae, any other 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2011

APPENDIX A: TARP GLOSSARY 95

GSE, Ginnie Mae, or a U.S. federal government 

agency.

Preferred Stock: Equity ownership that usually 

pays a fixed dividend and gives the holder a 

claim on corporate earnings superior to common 

stock owners. Preferred stock also has priority in 

the distribution of assets in the case of 

liquidation of a bankrupt company.

 

Public-Private Investment Fund (PPIF): An 

investment fund established to purchase Legacy 

Securities from financial institutions under 

PPIP.

Public-Private Investment Program (PPIP): A 

TARP program designed to improve the health 

of financial institutions holding real estaterelated assets. The program is designed to 

increase the flow of credit throughout the 

economy by partnering with private investors to 

purchase Legacy Securities from financial 

institutions.

Qualifying Financial Institution (QFI): Private 

and public U.S.-controlled banks, savings 

associations, bank holding companies, certain 

savings and loan holding companies, and mutual 

organizations.

Residential Mortgage-Backed Securities 

(RMBS): 

 

A financial instrument representing an 

interest in a group of residential real estate 

mortgages.

 

SBA: U.S. Small Business Administration.

SBA 7(a) Securities Purchase Program: A TARP 

 

program under which Treasury-OFS purchases 

securities backed by the guaranteed portions of 

the SBA 7(a) loans.

Servicer: An a

 

dministrative party that collects 

payments and generates reports regarding 

mortgage payments.

Targeted Investment Program (TIP): A TARP 

program that was created to stabilize the 

financial system by making investments in 

institutions that are critical to the functioning of 

the financial system. 

Term Asset-Backed Securities Loan Facility 

(TALF): A

 

program under which the Federal 

Reserve Bank of New York makes term nonrecourse loans to buyers of AAA-rated AssetBacked Securities in order to stimulate 

consumer and business lending by the issuers of 

those securities. Treasury-OFS used TARP 

funds to provide credit support for the TALF as 

part of its Consumer and Business Lending 

Initiative.

Troubled Asset Relief Program (TARP): The 

Troubled Asset Relief Program, which was 

established under EESA to stabilize the 

financial system and prevent a systemic 

collapse.

Trust Preferred Security: A security that has 

both equity and debt characteristics, created by 

establishing a trust and issuing debt to it. A 

company may create a trust preferred security to 

realize tax benefits, since the trust is tax 

deductible.

Warrant: A financial instrument that represents 

the right, but not the obligation, to purchase a 

certain number of shares of common stock of a 

company at a fixed price.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

96 APPENDIX B: ABBREVIATIONS AND ACRONYMS

APPENDIX B: ABBREVIATIONS and ACRONYMS

 

ABS Asset-Backed Securities

AGP Asset Guarantee Program

AIFP Automotive Industry Financing Program

AIG American International Group, Inc.

BofA Bank of America Corporation

CBLI Consumer and Business Lending Initiative

CBO Congressional Budget Office

CDFI Community Development Financial Institution

CMBS Commercial Mortgage-Backed Securities

CP Commercial Paper

COP Congressional Oversight Panel

CPP Capital Purchase Program

CDCI Community Development Capital Initiative

EESA Emergency Economic Stabilization Act of

2008 

FCRA Federal Credit Reform Act of 1990

FHA Federal Housing Administration

FRBNY Federal Reserve Bank of New York

GAO Government Accountability Office

GSE Government-Sponsored Enterprise

HAFA Home Affordable Foreclosure Alternatives

 

 

 

 

HHF Hardest Hit Fund

HAMP Home Affordable Modification Program

HPDP Home Price Decline Protection

IPO Initial Public Offering

LIBOR London Interbank Offered Rate

LTV Loan-to-Value Ratio

MBS Mortgage-Backed Security

MHA Making Home Affordable Program

NPV Net Present Value

OFS Office of Financial Stability

OMB Office of Management and Budget

PPIF Public-Private Investment Fund

PPIP Public-Private Investment Program

PRA Principal Reduction Alternative

QFI Qualifying Financial Institution

RMBS Residential Mortgage-Backed 

Securities

SIGTARP Special Inspector General for the 

Troubled Asset Relief Program

SPV Special Purpose Vehicle

TALF Term Asset-Backed Securities Loan 

Facility

TARP Troubled Asset Relief Program

TIP Targeted Investment Program
Office of Financial Stability Websites:

www.FinancialStability.gov

www.MAKINGHOMEAFFORDABLE.gov

Documents Referenced in the AFR:

Three-Year Anniversary Report 

http://www.treasury.gov/initiatives/financial-stability/Pages/default.aspx

Agency Financial Reports, including 2011, 2010 and 2009:

http://www.treasury.gov/initiatives/financial-stability/briefing-room/reports/agency_reports/Pages/default.aspx

Housing Scorecard:

http://portal.hud.gov/hudportal/documents/huddoc?id=Sept2011NatlScorecard.pdf

Warrant Disposition Report:

www.treasury.gov/initiatives/financial-stability/briefing-room/reports/other/Pages/default.aspx

Housing Finance Agency Hardest Hit Fund:

www.financialstability.gov/roadtostability/hardesthitfund.html

PPIP Quarterly Reports

http://www.treasury.gov/initiatives/financial-stability/programs/Credit%20Market%20Programs/ppip/Documents/PPIP%20Report%2009-2011.pdf

Making Home Affordable Monthly Reports:

http://www.treasury.gov/initiatives/financial-stability/results/MHA-Reports/Pages/default.aspx 

CPP Quarterly Report:

http://www.treasury.gov/initiatives/financial-stability/results/cpp/Pages/default.aspx.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

98 APPENDIX B: ABBREVIATIONS AND ACRONYMS