TROUBLED ASSET 

RELIEF PROGRAM

Treasury Sees Some 

Returns as It Exits 

Programs and 

Continues to Fund 

Mortgage Programs

Report to Congressional Addressees

January 2013

GAO-13-192

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-192, a report to 

congressional addressees 

January 2013

TROUBLED ASSET RELIEF PROGRAM

Treasury Sees Some Returns As it Exits Programs 

and Continues to Fund Mortgage Programs

What GAO Found

As of September 30, 2012, the Department of the Treasury (Treasury) was 

managing assets totaling $63.2 billion in nonmortgage-related Troubled Asset 

Relief Programs (TARP) (see figure). As of this date, Treasury had exited 4 of 

the 10 nonmortgage-related programs, and in December 2012 Treasury 

announced the exit from a fifth program—the American International Group (AIG) 

Investment Program. Exactly when Treasury will exit the remaining five programs 

remains uncertain. Treasury has identified several factors that will affect its 

decisions. For example,

• for the Capital Purchase Program (CPP, created to provide capital to 

financial institutions), the financial condition of the participating 

institutions and the success of auctions;

• for the Community Development Capital Initiative (CDCI, created to 

provide capital to credit unions and financial institutions in underserved 

communities), which Treasury has not yet decided to exit, the financial 

condition of the participating institutions and the rate at which the 

institutions repay Treasury; and

• for the Automotive Industry Financing Program (AIFP, created to prevent 

a significant disruption of the American automotive industry). 

Some programs, such as CPP, have yielded returns that exceed the original 

investments. Others, such as CDCI and AIFP, have not.

Unlike the nonmortgage-related TARP programs, TARP-funded mortgage 

programs, which focus on mitigating foreclosures, are ongoing, and Treasury’s 

oversight of new requirements designed to improve servicers’ interactions with 

borrowers showed both challenges and improvements. Treasury allocated $45.6 

billion in TARP funds to three programs, including Making Home Affordable 

(MHA), but more than $40 billion of the funding has not yet been disbursed, and 

the programs have not reached the expected number of borrowers. The 

centerpiece of MHA is the Home Affordable Modification Program, which has 

provided about 1.1 million permanent modifications to borrowers. To help ensure 

that homeowners receive appropriate assistance from servicers under this and 

other MHA programs, since September 2011 Treasury has required servicers to 

identify a “relationship manager” to serve as the homeowner’s single point of 

contact throughout a delinquency or imminent default resolution process. GAO 

found that Treasury’s initial reviews of servicers’ implementation of this 

requirement had identified some inconsistencies. However, oversight of a second 

requirement designed to improve the resolution of borrower inquiries and 

disputes (escalated cases) showed that the nine largest servicers had met the 

performance target. Treasury officials said that the MHA program administrator, 

Fannie Mae, handled oversight of the escalation process and the vendors who 

supported in keeping with Treasury’s guidelines.

View GAO-13-192 or key components.

For more information, contact Thomas J. 

McCool at (202) 512-2642 or 

mccoolt@gao.gov. 

Why GAO Did This Study

The Emergency Economic Stabilization 

Act of 2008 authorized Treasury to 

create TARP, a $700 billion program 

designed to restore liquidity and 

stability to the financial system and to 

preserve homeownership by assisting 

borrowers struggling to make their 

mortgage payments. The act also 

required that GAO report every 60 

days on TARP activities in the financial 

and mortgage sectors. This report 

examines the condition and status of 

(1) nonmortgage-related TARP 

programs and (2) TARP-funded 

mortgage programs and Treasury’s 

efforts to better ensure that servicers 

are implementing as intended two new 

requirements designed to improve 

interactions with borrowers (the MHA 

single point of contact and resolution of 

escalated cases requirements). To do 

this work, GAO analyzed audited 

financial data for various TARP 

programs; reviewed documentation 

such as program terms and agency 

reports on TARP programs; and 

interviewed Office of Financial Stability 

officials.

Treasury generally agreed with the

findings. Treasury, Ally Financial, and 

General Motors provided technical 

comments that GAO incorporated, as 

appropriate.
Highlights of GAO-13-192 (Continued) 

United States Government Accountability Office

Status of Programs, as of September 30, 2012

Notes: The September 30, 2012, data are audited numbers from Treasury’s financial statements. Outstanding assets are presented at book value. 

a

The SBA 7(a) program is SBA’s primary program for helping small businesses obtain access to credit when they cannot obtain it from private lending 

institutions. The program provides credit for working capital and other business needs. 

b

Treasury no longer holds assets for this program that it must manage, though the Federal Deposit Insurance Corporation still holds Citigroup trust 

preferred stock and Treasury could receive income when these assets are sold. 

c

TARP-funded mortgage programs include a variety of programs to assist homeowners. Unlike the investment programs, these programs do not hold 

assets to manage and sell and thus have no outstanding assets. 
Page i GAO-13-192 Troubled Asset Relief Program 

Letter 1 

Background 3

Most Nonmortgage-Related Programs Continue to Wind Down 9

Mortgage Programs Remain Active, and Oversight Has Shown Both 

Challenges and Improvements 31

Agency Comments and Our Evaluation 42

Appendix I Objectives, Scope, and Methodology 45 

Appendix II Treasury’s Termination of the TARP Small Business 

Administration 7(a) Securities Purchase Program 48 

Appendix III Treasury’s Office of Financial Stability Staffing and 

Use of Private Sector Contracting 50 

Appendix IV Comments from the Department of the Treasury 54 

Appendix V GAO Contacts and Staff Acknowledgments 55 

Related GAO Products 56

Tables 

Table 1: Programs Supported by TARP Funding and Their 

Estimated Lifetime Income (Cost) as of September 30, 

2012 4

Table 2: Treasury Offerings of Its AIG Common Stock Holdings, 

May 2011 to December 2012 24

Table 3: Cumulative Value of Contracts and Financial Agency 

Agreements in Support of TARP 52

Contents 
Page ii GAO-13-192 Troubled Asset Relief Program

Figures

Figure 1: Timeline for Recent Major Events from TARP’s 

Implementation and Unwinding, October 3, 2008, through 

September 10, 2012 8

Figure 2: Status of CPP, as of September 30, 2012 10

Figure 3: Status of Institutions That Received CPP Investments, as 

of September 30, 2012 11

Figure 4: Number of Institutions Missing Scheduled Dividend or 

Interest Payments, by Quarter, as of August 31, 2012 13

Figure 5: Status of CDCI, as of September 30, 2012 16

Figure 6: Status of AIFP, as of September 30, 2012 18

Figure 7: GM’s Share Price, November 18, 2010, through December 

18, 2012 20

Figure 8: Status of TALF, as of September 30, 2012 26

Figure 9: Status of PPIP, as of September 30, 2012 29

Figure 10: HAMP Modifications Started Monthly, January 2010 

through September 2012 33

Figure 11: Status of Mortgage Programs as of September 2012 36

Figure 12: Status of SBA 7(a) Securities Purchase Program, as of 

September 30, 2012 49

Figure 13: OFS Employees and Detailees, November 21, 2008, 

through September 30, 2012 50
Page iii GAO-13-192 Troubled Asset Relief Program

Abbreviations

ABS asset-backed securities 

AIFP Automotive Industry Financing Program 

AGP Asset Guarantee Program

AIG American International Group, Inc. 

CAP Capital Assessment Program

CDCI Community Development Capital Initiative 

CDFI Community Development Financial 

Institutions 

CMBS commercial mortgage-backed securities 

CPP Capital Purchase Program 

Dodd-Frank Act Dodd-Frank Wall Street Reform and 

Consumer Protection Act 

EBIT earnings before interest and tax

EESA Emergency Economic Stabilization Act 

Federal Reserve Board of Governors of the Federal Reserve 

System 

FDIC Federal Deposit Insurance Corporation

FRBNY Federal Reserve Bank of New York 

FHA Federal Housing Administration 

FHA Short Refinance FHA Refinance of Borrowers in Negative 

or FHASR Equity Positions

GM General Motors 

GMAC General Motors Acceptance Corporation

HAFA Home Affordable Foreclosure Alternatives

HAMP Home Affordable Modification Program 

Hardest Hit Fund or HHF Housing Finance Agency Innovation Fund 

for the Hardest Hit Housing Markets

HUD Department of Housing and Urban 

Development

IPO initial public offering 

MHA Making Home Affordable 

OFS Office of Financial Stability 

PPIF public-private investment fund 

PPIP Public-Private Investment Program 

PRA Principal Reduction Alternative

RD Rural Development

RHS Department of Agriculture’s Rural Housing 

Service 

RMBS residential mortgage-backed securities

SBA Small Business Administration 

SBLF Small Business Lending Fund

TALF Term Asset-backed Securities Loan Facility 

TARP Troubled Asset Relief Program 

TIP Targeted Investment Program

Treasury Department of the Treasury
Page iv GAO-13-192 Troubled Asset Relief Program

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Page 1 GAO-13-192 Troubled Asset Relief Program 

United States Government Accountability Office

Washington, DC 20548 

January 7, 2013 

Congressional Addressees 

The Emergency Economic Stabilization Act of 2008 (EESA) initially 

authorized $700 billion to assist financial institutions and markets, 

businesses, homeowners, and consumers through the Troubled Asset 

Relief Program (TARP).1

 This amount was intended to provide confidence 

that the U.S. government would help address the greatest threat the 

financial markets and economy had faced since the Great Depression. As 

the severity and immediacy of the 2008 financial crisis began to diminish, 

Congress reduced the authorized amount to $475 billion as part of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act).2

TARP costs were not estimated to reach the authorized amounts, and 

over time the projected costs have declined as financial institutions repay 

some assistance and other programs move closer to their termination 

dates.3

 However, a number of banks that received investments under the 

Capital Purchase Program (CPP), the largest TARP program, have 

missed dividend or interest payments related to their government 

assistance, although the number of banks remaining in the program has 

decreased. TARP-funded housing programs also continue their 

expenditures in an effort to address the ongoing foreclosure crisis. 

 

1

EESA, Pub. L. No. 110-343, 122 Stat. 3765 (2008) (codified at 12 U.S.C. §§ 5201 et 

seq.). EESA originally authorized Treasury to purchase or guarantee up to $700 billion in 

troubled assets. The Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, 

Div. A, 123 Stat. 1632 (2009), amended EESA to reduce the maximum allowable amount 

of outstanding troubled assets under EESA by almost $1.3 billion, from $700 billion to 

$698.741 billion. 

2

The Dodd-Frank Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), (1) reduced Treasury’s 

authority to purchase or insure troubled assets to a maximum of $475 billion and 

(2) prohibited Treasury, under EESA, from incurring any additional obligations for a 

program or initiative unless the program or initiative had already been initiated prior to 

June 25, 2010. 

3

The Department of the Treasury, the Congressional Budget Office, and the Office of 

Management and Budget provided cost estimates that were all below $700 billion; the 

highest estimate was about half the $700 billion allocated for TARP. 

 
 

Page 2 GAO-13-192 Troubled Asset Relief Program

The Department of the Treasury (Treasury) is the primary agency 

implementing TARP, and it has undertaken a broad range of activities. 

Treasury established the Office of Financial Stability (OFS) to carry out 

TARP activities, which have included injecting capital into key financial 

institutions, implementing programs to address problems in the 

securitization markets, providing assistance to the automobile industry, 

and offering incentives for modifying residential mortgages, among other 

activities.

As required by EESA, we have provided oversight of TARP activities 

since they began in 2008. This 60-day report assesses the condition of 

TARP as of September 30, 2012.4

To assess the condition and status of nonmortgage-related TARP 

programs, we collected and analyzed data about program utilization and 

assets held, as applicable, focusing primarily on financial information that 

we had audited in the Office of Financial Stability’s (OFS) financial 

statements, as of September 30, 2012. In some instances we provided 

more recent, unaudited financial information.

Specifically, it examines the condition 

and status of (1) nonmortgage-related TARP programs; and (2) TARP 

mortgage programs, including Treasury’s efforts to ensure that servicers 

are implementing two requirements. These requirements are establishing 

a single point of contact for each borrower and following procedures for 

resolving disputed cases that are “escalated” or referred for review.

5

 

4

We have issued 60-day TARP reports as required by EESA section 116 (codified at 12 

U.S.C. § 5226). These reports may be found at www.gao.gov.

The financial information 

includes the types of assets held in the program, obligations that 

represent the highest amount ever obligated for a program, 

disbursements, and income. Further, we reviewed Treasury 

documentation such as program terms, press releases, and reports on 

TARP programs and costs. Also, we interviewed OFS program officials to 

determine the current status of each TARP program, the role of TARP 

staff, and exit considerations for TARP programs. To assess the condition 

5

We provided non-audited financial information for significant repayments occurring after 

September 30, 2012. This included information related to the American International 

Group (AIG) Investment Program, the Automotive Industry Financing Program (AIFP), and 

the Public-Private Investment Program (PPIP). In the first case, Treasury has recouped its 

assistance to AIG, and in case of AIFP, the updates relate directly to Treasury’s exit 

strategy. We added information for PPIP because the payment amounts were relatively 

large. Our future reports on TARP will address audited financial information for the various 

nonmortgage TARP programs for the post-September 30, 2012, period.
 

Page 3 GAO-13-192 Troubled Asset Relief Program

and status of TARP-funded mortgage programs and Treasury’s efforts to 

ensure that servicers were implementing the single point of contact 

requirement and procedures for resolving escalated cases, we analyzed 

Treasury’s public reports and statements; reviewed internal Treasury 

documentation; and interviewed OFS officials. For both objectives, we 

also leveraged our past reporting on TARP, as well as that of the Special 

Inspector General for TARP, as appropriate. Unless otherwise noted, we 

provide financial information about the TARP programs throughout this 

report as of September 30, 2012. Appendix I contains additional 

information about our scope and methodology.

We conducted this performance audit from September 2012 to January 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

When EESA was enacted on October 3, 2008, the U.S. financial system 

was facing a severe crisis that rippled throughout the global economy, 

moving from the U.S. housing market to an array of financial assets and 

interbank lending. The crisis restricted access to credit and made the 

financing on which businesses and individuals depended increasingly 

difficult to obtain. Further tightening of credit exacerbated a global 

economic slowdown. During the crisis, Congress, the President, federal 

regulators, and others undertook a number of steps to facilitate financial 

intermediation by banks and the securities markets. In addition to 

Treasury’s efforts, policy interventions were led by the Board of 

Governors of the Federal Reserve System (Federal Reserve) and the 

Federal Deposit Insurance Corporation. While the banking crisis in the 

United States no longer presents the same level of systemic concerns as 

it did in 2008, the financial system continues to face vulnerabilities, 

including lagging investor confidence, financial concerns about European 

banks and countries, and generally weak economic growth globally.

Background
 

Page 4 GAO-13-192 Troubled Asset Relief Program

The passage of EESA resulted in a variety of programs supported with 

TARP funding.6

Table 1: Programs Supported by TARP Funding and Their Estimated Lifetime Income (Cost) as of September 30, 2012

(See table 1.) Treasury estimates several of the 

programs over their lifetimes will provide income to the government while 

others will incur a cost. Each program that remained active through 

September 30, 2012, will be addressed in this report.

Program Program description 

Lifetime income

(cost) estimate

(dollars in

billions) 

American International Group, Inc. 

(AIG) Investment Program 

(formerly Systemically Significant 

Failing Institutions Program) 

Provided support to AIG to avoid disruptions to financial markets as its 

financial condition deteriorated. 

($15.3) TARP

17.6 Non-TARPa

Asset Guarantee Program Provided federal government assurances for assets held by financial 

institutions that were viewed as critical to the functioning of the nation’s 

financial system. Bank of America and Citigroup were the only two institutions 

that participated in this program. 

3.9

Automotive Industry Financing 

Program (AIFP) 

Aimed to prevent a significant disruption of the American automotive industry 

through government investments in certain domestic automakers—Chrysler 

and General Motors (GM)—and auto financing companies Ally Financial 

(formerly known as General Motors Acceptance Corporation, or GMAC) and 

Chrysler Financial. 

(24.3)

Capital Assessment Program Created to provide capital to institutions not able to raise it privately to meet 

Supervisory Capital Assessment Program—or “stress test”—requirements. 

This program was never used. 

N/A

Capital Purchase Program (CPP) The largest TARP program, designed to provide capital investments to 

financially viable financial institutions. Treasury received preferred shares and 

subordinated debentures, along with warrants.b 

14.9

 

6

For more information on these programs, see our previous reports on TARP issued after 

each of its first 3 years of implementation: GAO, Troubled Asset Relief Program: As 

Treasury Continues to Exit Programs, Opportunities to Enhance Communication on Costs 

Exist, GAO-12-229 (Washington, D.C.: Jan. 9, 2012), Troubled Asset Relief Program: 

Status of GAO Recommendations to Treasury, GAO-11-906R (Washington, D.C.: 

Sept. 16, 2011), Troubled Asset Relief Program: Status of Programs and Implementation 

of GAO Recommendations, GAO-11-74 (Washington, D.C.: Jan. 12, 2011), and Troubled 

Asset Relief Program: One Year Later, Actions Are Needed to Address Remaining 

Transparency and Accountability Challenges, GAO-10-16 (Washington, D.C.: 

Oct. 8, 2009).

TARP Programs and 

Implementation
 

Page 5 GAO-13-192 Troubled Asset Relief Program 

 Program Program description 

Lifetime income 

(cost) estimate

(dollars in 

billions)

Consumer and Business Lending 

Initiative programs 

 Community Development Capital Initiative (CDCI) provided capital to 

Community Development Financial Institutions (CDFI) by purchasing 

preferred stock and subordinated debentures.c

 Small Business Administration (SBA) 7(a) Securities Purchase Program 

provided liquidity to secondary markets for government-guaranteed small 

business loans in SBA’s 7(a) loan program. 

 Term Asset-backed Securities Loan Facility (TALF) provided liquidity in 

securitization markets for various asset classes to improve access to 

credit for consumers and businesses. 

(0.2)

0.004

0.5

TARP-funded housing programs  Making Home Affordable includes several housing programs. The primary 

program has been the Home Affordable Modification Program (HAMP), 

under which Treasury shares the cost of reducing monthly payments on 

first lien mortgages with mortgage holders/investors and provides 

financial incentives to servicers, borrowers, and mortgage 

holders/investors for loans modified under the program.d

 Hardest Hit Fund seeks to help homeowners in the states hit hardest by 

unemployment and house price declines. 

 Support for the Department of Housing and Urban Development’s Federal 

Housing Administration (FHA) Short Refinance program enables 

homeowners whose mortgages exceed the value of their homes to 

refinance into more affordable mortgages. 

(45.6) for all 

programs

Public-Private Investment 

Program (PPIP) 

Created to address the challenge of “legacy assets” as part of Treasury’s 

efforts to repair balance sheets throughout the financial system. Treasury 

partnered with private funds to purchase residential and commercial 

mortgage-backed securities. 

2.4

Targeted Investment Program 

(TIP) 

Sought to foster market stability and strengthen the economy by making caseby-case investments in institutions that Treasury deemed critical to the 

functioning of the financial system. Bank of America and Citigroup were the 

only two institutions that participated in this program. 

4.0

Source: GAO analysis of Treasury data. 

Note: The data in this table are as of September 30, 2012, and do not reflect significant transactions 

related to AIG, GM, and PPP that occurred after that date but are discussed later in this report. 

a

In addition to using TARP to support AIG, Treasury also supported AIG through non-TARP 

assistance. Treasury received 562,868,096 common shares outside of TARP from a trust created by 

the Federal Reserve Bank of New York for the benefit of the Treasury. The trust exchanged its AIG 

Series C preferred shares, for AIG common shares. 

b

A warrant is an option to buy shares of common stock or preferred stock at a predetermined price on 

or before a specified date. 

c

CDFIs are financial institutions that provide financing and related services to communities and 

populations that lack access to credit, capital, and financial services. 

d

For more information on additional Making Home Affordable programs funded through TARP see 

GAO, Troubled Asset Relief Program: Further Actions Needed to Enhance Assessments and 

Transparency of Housing Programs, GAO-12-783 (Washington, D.C.: July 19, 2012). 
 

Page 6 GAO-13-192 Troubled Asset Relief Program

Many TARP programs have been winding down, and some have ended.7

• protect taxpayer investment and maximize overall investment returns 

within competing constraints, and promote the stability of financial 

markets and the economy by preventing disruptions to the financial 

system;

Treasury has stated that when deciding to sell assets and exit TARP 

programs, it strives to:

• bolster markets’ confidence in order to encourage private capital 

investment; and

• dispose of investments as soon as practicable.

While Treasury has identified these goals for the exit process for many 

programs, we and others have noted that these goals, at times, can 

conflict.8

 

7

In addition to programs that are moving towards exit, the Asset Guarantee Program, the 

Capital Assessment Program, the Targeted Investment Program, and the SBA 7(a) 

Securities Purchase Program are no longer active, and Treasury no longer holds assets 

related to these programs that it must manage. We have previously reported on programs 

that ended in 2012 (see app. II). The Asset Guarantee Program, which provided federal 

government assurances for assets held by financial institutions deemed critical to the 

functioning of the U.S. financial system, still had a receivable outstanding from the Federal 

Deposit Insurance Corporation (FDIC) as of September 30, 2012, that could affect the 

overall cost of TARP.

For example, we previously reported that deciding to unwind 

some of its assistance to General Motors (GM) by participating in an initial 

public offering (IPO) presented Treasury with a conflict between 

maximizing taxpayer returns and exiting as soon as practicable. Holding 

its shares longer could have meant realizing greater gains for the 

taxpayer but only if the stock appreciated in value. By participating in 

GM’s November 2010 IPO, Treasury tried to fulfill both goals, selling 

almost half of its shares at an early opportunity. Treasury officials stated 

that although they strove to balance these competing goals, they had no 

strict formula for doing so. Rather, they ultimately relied on the best 

available information in deciding when to start exiting this program.

8

See GAO, TARP: Treasury’s Exit from GM and Chrysler Highlights Competing Goals, 

and Results of Support to Auto Communities Are Unclear, GAO-11-471 (Washington, 

D.C.: May 10, 2011). The Congressional Oversight Panel also noted these competing 

goals. See Congressional Oversight Panel, January Oversight Report: Exiting TARP and 

Unwinding Its Impact on the Financial Markets (Washington, D.C.: Jan. 14, 2010).
 

Page 7 GAO-13-192 Troubled Asset Relief Program

Moreover, in some cases Treasury’s ability to exercise control over the 

timing of its exit from TARP programs is limited. For example, Treasury 

has limited control over its exit from the Public-Private Investment 

Program (PPIP), because the program’s exit depends on when each 

public-private investment fund (PPIF) decides to sell its investments. 

Treasury continues to face this tension in its goals with a number of 

TARP programs. Figure 1 provides an overview of key dates for TARP 

implementation and the unwinding of some programs. In addition, 

appendix III provides information on Treasury’s administration of the 

TARP programs, including an update on the staffing challenges we have

previously reported and Treasury’s reliance on the private sector to assist 

with TARP administration and operations. 
 

Page 8 GAO-13-192 Troubled Asset Relief Program

Figure 1: Timeline for Recent Major Events from TARP’s Implementation and Unwinding, October 3, 2008, through September 

10, 2012
 

Page 9 GAO-13-192 Troubled Asset Relief Program

Most nonmortgage-programs continue to wind down, but the status and 

potential ending date of each nonmortgage-related TARP program varies. 

Key information includes,

• the estimated date, if known, that the program will end or stop 

acquiring new assets and no longer receive funding;

• Treasury’s estimated date for exiting the program or selling the assets 

it acquired while the program was open;

• outstanding assets, as applicable, as of September 30, 2012;9

• the lifetime estimated costs (or income) for each program as 

calculated by Treasury.

and

While repayments and income from CPP investments have exceeded the 

original outlays, the financial strength of participating institutions and the 

outcome of future securities auctions will help determine when the 

remaining institutions exit the program. As we have reported, Treasury 

disbursed $204.9 billion to 707 financial institutions nationwide from 

October 2008 through December 2009.10

 

9

Note that some numbers in our program figures will not total due to rounding.

As of September 30, 2012, 

Treasury had received $219.5 billion in repayments and income from its 

CPP investments, exceeding the amount originally disbursed by $14.6 

billion (see fig. 2). The repayment and income amount included $193.2 

billion in repayments of original CPP investments, as well as $11.8 billion 

in dividends, interest, and fees; $7.7 billion in warrant income; and $6.9 

billion in net proceeds in excess of costs. After accounting for write-offs 

and realized losses on sales totaling $3.0 billion, CPP had $8.7 billion in 

10See GAO-11-74. We also reported on CPP in Troubled Asset Relief Program: 

Opportunities Exist to Apply Lessons Learned from the Capital Purchase Program to 

Similarly Designed Programs and to Improve the Repayment Process, GAO-11-47 

(Washington, D.C.: Oct. 4, 2010) and Capital Purchase Program: Revenues Have 

Exceeded Investments, but Concerns about Outstanding Investments Remain, 

GAO-12-301 (Washington, D.C.: Mar. 8, 2012).

Most NonmortgageRelated Programs 

Continue to Wind 

Down

Institutions’ Financial 

Strength and the Outcomes 

of Auctions Will Help 

Determine When 

Remaining Participants 

Exit CPP
 

Page 10 GAO-13-192 Troubled Asset Relief Program 

outstanding investments as of September 30, 2012. Treasury estimates 

lifetime income of $14.9 billion for CPP as of September 30, 2012.11

Figure 2: Status of CPP, as of September 30, 2012 

a

The total amount of repayments includes $363 million from institutions that transferred to the 

Community Development Capital Initiative and $2.2 billion from institutions that transferred to the 

Small Business Lending Fund. 

Over half (417) of the 707 institutions that originally participated in CPP 

had exited the program as of September 30, 2012.12 Of the 417 

 

11Throughout this report we use “lifetime income” to refer to instances when cost 

estimates suggest that certain TARP programs could result in net income for the taxpayer 

because the proceeds from Treasury’s investments (e.g., repayments, dividends, and 

interest payments) are expected to exceed costs. 

12See Department of the Treasury, Troubled Asset Relief Program (TARP) Monthly 105(a) 

Report-September 2012 (Washington, D.C.: Oct. 10, 2012). 
 

Page 11 GAO-13-192 Troubled Asset Relief Program 

institutions that have exited CPP, about 42 percent, or 175 institutions, 

exited by repaying their investments.13 Another 40 percent, or 165 

institutions, exited CPP by exchanging their securities under other federal 

programs: 28 through TARP’s Community Development Capital Initiative 

(CDCI) and 137 through the non-TARP Small Business Lending Fund 

(SBLF) (see fig. 3).14 Of the remaining 18 percent of CPP recipients that 

exited the program, 56 had their securities sold by Treasury, 18 went into 

bankruptcy or receivership, and 3 merged with another institution. 

Figure 3: Status of Institutions That Received CPP Investments, as of September 

30, 2012 

 

13Additionally, 16 institutions have made partial repayments but remain in the program. 

14CDCI is a TARP program that provides capital to Community Development Financial 

Institutions that have a federal depository institution supervisor. The program structure is 

similar to CPP but includes credit unions and provides more favorable capital terms. SBLF 

was created by the Small Business Jobs Act of 2010, Pub. L. No. 111-240, 124 Stat. 2504 

(2010), enacted on September 27, 2010. SBLF is a capital support program that 

encourages small and midsize banks and community development loan funds to lend to 

small businesses. 
 

Page 12 GAO-13-192 Troubled Asset Relief Program

As of September 30, 2012, much of the $8.7 billion in outstanding 

investments was concentrated in a relatively small number of institutions. 

The largest single outstanding investment was $967.9 million, and the top 

three outstanding investments totaled $2.3 billion—27 percent of the 

amount outstanding. The top 25 remaining CPP investments accounted 

for $5.4 billion, or 63 percent of the outstanding amount. In addition, while 

290 of the original 707 institutions remained in CPP, their $8.7 billion in 

outstanding investments accounted for just 4 percent of what Treasury 

originally disbursed.

However, the number of institutions that have missed payments has been 

rising. The cumulative number of financial institutions that had missed at 

least one scheduled dividend or interest payment by the end of the month 

in which the payments were due rose from 219 as of August 31, 2011, to 

242 as of August 31, 2012.15 These 242 institutions represent over onethird of the 707 institutions that participated in CPP and account for a 

cumulative total of 1,631 missed payments.16

 

15Under CPP terms, institutions pay cumulative dividends on their preferred shares, 

except for banks that are not subsidiaries of holding companies, which pay noncumulative 

dividends. Some other types of institutions, such as S-corporations, received their CPP 

investment in the form of subordinated debt and pay Treasury interest rather than 

dividends. An S-corporation makes a valid election to be taxed under subchapter S of 

chapter 1 of the Internal Revenue Code and thus does not pay any income taxes. Instead, 

the corporation’s income or losses are divided among and passed through to its 

shareholders.

As of August 31, 2012, 208 

institutions had missed three or more payments and 142 had missed six 

or more. The total amount of missed dividend and interest payments was 

$376 million, although some of these payments were later made prior to 

the end of the reporting month. On a quarterly basis, the number of 

institutions missing dividend or interest payments due on their CPP 

investments increased steadily from 8 in February 2009 to 150 in August 

2012, or about half of the institutions still in the program (see fig. 4). This 

16These figures differ from the number of dividend or interest payments outstanding 

because some institutions made their payments after the end of the reporting month. CPP 

dividend and interest payments are due on February 15, May 15, August 15, and 

November 15 of each year, or the first business day subsequent to those dates. The 

reporting period ends on the last day of the calendar month in which the dividend or 

interest payment is due. In its dividend and interest reports, Treasury no longer considers 

a payment to be missed or unpaid once the institution (1) repays its investment amount 

and exits CPP, (2) repays dividends by way of capitalization at the time of exchange, or 

(3) enters bankruptcy or its bank subsidiary is placed into receivership. We included such 

institutions in our counts.
 

Page 13 GAO-13-192 Troubled Asset Relief Program

increase occurred despite the reduced program participation, so the 

proportion of those missing scheduled payments has risen accordingly.

Figure 4: Number of Institutions Missing Scheduled Dividend or Interest Payments, by Quarter, as of August 31, 2012

Note: Dividend and interest payments are due on a quarterly basis. The number of participating 

institutions on any given quarter did not reach 707 (i.e., the total number of institutions that 

participated in CPP) because these institutions entered and exited the programs at different points in 

time. Also, 300 institutions remained in CPP as of August 31, 2012, but as of September 30, 2012, 

that number had decreased to 290. 

The number of institutions missing payments has stabilized in recent 

quarters, but most of the institutions with missed payments had missed 

them repeatedly. In particular, 133 of the 150 institutions that missed 

payments in August 2012 had also missed payments in each of the 

previous three quarters. Moreover, these 150 institutions had missed an 

average of 7.3 additional previous payments, while 4 had never missed a 

previous payment. Institutions can elect whether to pay dividends and 

may choose not to pay for a variety of reasons, including decisions that 

they or their federal and state regulators make to conserve cash and 

maintain (or increase) capital levels. Institutions are required to pay 

dividends only if they declare dividends, although unpaid cumulative 

dividends generally accrue and the institution must pay them before 

making payments to other types of shareholders, such as holders of 

common stock.
 

Page 14 GAO-13-192 Troubled Asset Relief Program

In May 2012, Treasury announced a strategy to wind down its remaining 

investments. The strategy includes three options that the department 

says will protect taxpayer interests, promote financial stability, and 

preserve the strength of the nation’s community banks. These options 

include allowing banks to repurchase or restructure their investments or 

selling Treasury-held stock through public auctions. In considering these 

options, Treasury will need to balance the goals of protecting taxpayersupported investments while expeditiously unwinding the program. 

Treasury officials said that they would continue to evaluate the CPP exit 

strategy, but added that they expected to continue using these options for 

the foreseeable future.

The first option allows banks, with the approval of their regulators, to 

repurchase from Treasury their preferred shares in full. Treasury points 

out that this strategy has been used since 2009 and is one it expects 

some banks to continue to use through late 2013. Under this option, 

Treasury’s ability to exit the program largely depends on the ability of 

institutions to repay their investments. Institutions will have to 

demonstrate that they are financially strong enough to repay the CPP 

investments in order to receive regulatory approval to exit the program. 

Dividend rates will increase from 5 percent to 9 percent for remaining 

institutions beginning in late 2013, a development that may prompt 

institutions to repay their investments. If broader interest rates are low, 

especially approaching the dividend reset, banks could have further 

incentive to redeem their preferred shares.

A second option allows banks to restructure their investments, usually in 

connection with a merger or a plan to raise new capital. With this option, 

Treasury receives cash or other securities that generally can be sold 

more easily than preferred stock. Treasury officials said that, as of early 

October 2012, approximately 28 restructurings had occurred. The officials 

expected a limited number of restructurings to continue, but added that 

because Treasury’s investments were sometimes sold at a discount 

during restructuring, they would approve the sales only if the terms 

represented the best deal for taxpayers.

Under the third option, Treasury may sell its preferred stock through 

public auctions. Treasury conducted the first such auction of CPP 

investments in March 2012 and reported that it generated strong investor 

interest. As of September 30, 2012, Treasury had conducted six auctions 

resulting in the sale of 40 investments with total net proceeds of about 

$1.3 billion. Treasury also reported that this option can be beneficial for 

community banks that do not have easy access to the capital markets, 
 

Page 15 GAO-13-192 Troubled Asset Relief Program

because it could attract new, private capital to replace the temporary 

TARP support. Treasury expects this option to continue to be part of its 

effort to wind down CPP. Thus far, Treasury has sold investments 

individually, but noted that it might combine other investments, particularly 

smaller ones, into pools. Whether Treasury sells stock individually or in 

pools, the outcome of this option will depend largely on investor demand 

for these securities.

Treasury disbursed $570 million to its 84 CDCI participants and 

completed funding the program in September 2010 (see fig. 5).17 As we 

previously reported, CDCI is structured much like CPP, in that it has 

provided capital to financial institutions by purchasing equity and 

subordinated debt from them.18

 

17Twenty-eight of these institutions previously participated in CPP. According to Treasury, 

of this amount, approximately $363 million from these 28 institutions was exchanged from 

investments under CPP into CDCI. Institutions interested in transferring to CDCI from CPP 

were required to be (1) current on dividend payments, (2) in good standing with CPP, and 

(3) in compliance with all reporting requirements.

No additional funds are available through 

the program, as CDCI’s funding authority expired in September 2010. As 

of September 2012, Treasury expects CDCI will cost approximately $200 

million over its lifetime, less than half of the $570 million obligated to the 

program. Officials stated that CDCI will have a lifetime cost, while CPP is 

estimated to result in lifetime income, in part because CDCI provides a 

lower dividend rate that increases the net financing cost to Treasury. 

Also, unlike CPP, the program does not require warrants from 

participating institutions that would have helped offset Treasury’s costs. 

As of September 30, 2012, two CDCI participants have repaid Treasury 

$2.85 million, and Treasury has received $22 million in dividend 

payments from CDCI participants.

18While similar to CPP, CDCI differs from CPP in several important aspects: (1) CDCI 

provides financial assistance to CDFIs, which in turn provide financial services to 

underserved communities; (2) CDCI also provides assistance to credit unions, unlike CPP; 

and (3) CDCI provides more favorable capital terms to its participants than CPP, including 

a longer repayment period at a lower dividend rate. For more details, see GAO-11-74. 

The Financial Strength of 

CDCI Participants Will 

Affect When Treasury 

Terminates the Program
 

Page 16 GAO-13-192 Troubled Asset Relief Program

Figure 5: Status of CDCI, as of September 30, 2012

Note: Treasury began holding common stock for CDCI after September 30, 2011. 

a

Treasury first announced CDCI in October 2009. The program first provided capital to CDFIs in 

2010. 

As with CPP, Treasury must continue to monitor the performance of CDCI 

participants because their financial strength will affect their ability to repay 

Treasury. According to Treasury officials, Treasury will continue to hold its 

CDCI investments and has not made any disposition decisions about the 

program. However, they said that when Treasury decides to exit the CDCI 

program, it will need tools in place similar to those used by CPP 

institutions to exit the CPP program. As of September 30, 2012, 5 of the 

84 CDCI participants had missed at least one dividend or interest 

payment, and 2 of the participants had paid accrued and unpaid 

dividends after missing the initial scheduled payment date(s), according 

to Treasury. While the continuing weak economy could negatively affect 

distressed communities and the CDFIs that serve them, the program’s 

low dividend rates may help participants remain current on payments.

When Treasury will exit CDCI is unknown, but the dividend rate that 

program participants pay increases in 2018. However, Treasury officials 

noted that the program was intended to be long term and said that they 
 

Page 17 GAO-13-192 Troubled Asset Relief Program

believed the program was meeting its objective by providing long-term, 

low-cost capital. CDCI institutions have an opportunity to keep CDCI 

capital in their communities, which are usually moderate and low income, 

for a longer time. Treasury officials indicated that, as with CPP 

investments, Treasury’s current practice was to hold CDCI investments 

but that this strategy could change, and Treasury could opt to sell its 

CDCI shares.

Since investing roughly $80 billion in the automotive industry, as of 

September 30, 2012, Treasury had received more than $40 billion in 

proceeds. Nevertheless, Treasury still held substantial investments in GM 

and Ally Financial, which included 32 percent of GM’s common stock, 74 

percent of Ally Financial’s common stock, and $5.9 billion of Ally 

Financial’s mandatory convertible preferred stock (see fig. 6).

19

 

19On December 18, 2012, Treasury announced it would sell 200 million of its remaining 

GM shares to the company, which would reduce Treasury’s investment to 19 percent. If 

Treasury converted its mandatory convertible preferred securities, its common equity in 

Ally Financial would increase to 81 percent.

Competing Goals and 

Market Conditions Have 

Affected Treasury’s Exit 

from GM and Ally
 

Page 18 GAO-13-192 Troubled Asset Relief Program

Figure 6: Status of AIFP, as of September 30, 2012

Notes: Numbers may not sum because of rounding. Ally Financial was formerly known as the General 

Motors Acceptance Corporation, or GMAC. The figures in this graphic do not reflect Treasury’s 

December announcement about its exit plans for its GM investments, which are discussed in the text 

of the report. 
 

Page 19 GAO-13-192 Troubled Asset Relief Program

Treasury officials told us that they continued to monitor GM’s financial 

condition as well as overall market and economic conditions as they 

developed a divestment strategy for GM. In general, GM’s financial 

condition has improved since the IPO, but the company continued to

address challenges with its European operations. Specifically, GM’s net 

income rose 43 percent—from about $6.5 billion in 2010 to about $9.3 

billion in 2011, with the company achieving 11 straight quarters of 

profitability since its formation in July 2009. However, the company saw a 

decline in net income in 2012—from about $8.5 billion in the first three 

quarters of 2011 to about $5.1 billion in the first three quarters of 2012.

GM officials reported this decline was largely due to increased losses in 

the company’s European Operations, a region where the automotive 

industry as a whole struggles. The company continues to post losses in 

Europe, with vehicle sales declining 7.4 percent between the first three 

quarters of 2011 and the first three quarters of 2012. In contrast, GM’s 

North American sales increased 3.2 percent over 2011 levels for that 

same time period. The company has reported taking actions to help 

restructure its European operations and expects financial results to 

improve.20

The company has also recently made a number of other changes in an 

effort to improve its financial condition and flexibility. In June 2012, in an 

effort to de-risk its pension plans and further strengthen its balance sheet, 

GM announced that it would provide certain U.S. salaried retirees with a 

continued monthly payment administered and paid by The Prudential 

Insurance Company of America and others with a voluntary lump-sum 

payment option, which it estimated would reduce its salaried pension 

obligation by about $29 billion. In November 2012 GM announced plans 

for its captive financing subsidiary, GM Financial, to acquire Ally 

Financial, Inc.’s International Operations in 14 countries, which the 

company expects to drive higher vehicle sales in China, Mexico, Europe 

and Latin America. Also in November 2012, GM secured a new $11 

billion revolving to help improve GM Financial’s financial flexibility.

 

20In its third quarter earnings release, GM estimated the adjusted earnings before interest 

and tax (EBIT) for its European operations to be at a loss of $1.5 billion to $1.8 billion for 

2012, depending on the level of restructuring activity in the fourth quarter. The company is 

also targeting 2013 to be slightly better than 2012 with break-even EBIT adjusted results 

by mid-decade. 
 

Page 20 GAO-13-192 Troubled Asset Relief Program

In December 2012, two years after the GM IPO, Treasury announced that 

it would sell 200 million or 40 percent of its remaining shares in the 

company, and intends to sell the other remaining 300.1 million shares 

through a pre-arranged written trading plan within the next 12 to 15 

months, subject to market conditions. In May 2011, we reported that GM’s 

share price would have to increase dramatically from current levels to an 

average of more than $54 for Treasury to fully recoup its investment. 

Because the December 2012 sale price of $27.50 per share is 

considerably less than the breakeven level, GM’s shares will now have to 

increase to roughly $72 per share, or more than double the average 2012 

share price, for Treasury to fully recoup its investment (see fig. 7).21

Figure 7: GM’s Share Price, November 18, 2010, through December 18, 2012

 

21See GAO-11-471. Additional reporting on AIFP appears in GAO, Troubled Asset Relief 

Program: Automaker Pension Funding and Multiple Federal Roles Pose Challenges for 

the Future, GAO-10-492 (Washington, D.C.: Apr. 6, 2010); Troubled Asset Relief 

Program: Continued Stewardship Needed as Treasury Develops Strategies for Monitoring 

and Divesting Financial Interests in Chrysler and GM, GAO-10-151 (Washington, D.C.: 

Nov. 2, 2009); and Auto Industry: Summary of Government Efforts and Automakers’ 

Restructuring to Date, GAO-09-553 (Washington, D.C.: Apr. 23, 2009). 
 

Page 21 GAO-13-192 Troubled Asset Relief Program

In addition to its outstanding investments in GM, Treasury remains 

heavily invested in Ally Financial. According to Treasury officials, the 

department continues to explore all potential options for divesting its 

interest in Ally Financial, including public and private options such as a 

possible IPO or selling its equity in a private transaction. However, since 

we last reported on Ally Financial the company has undergone a number 

of changes that could affect the timing of Treasury’s exit.22 For instance, 

on May 14, 2012, Ally Financial’s mortgage subsidiary Residential 

Capital, LLC, and certain of its subsidiaries, filed for Chapter 11 

bankruptcy. The company is also in the process of selling its international 

business, which includes auto finance, insurance, and banking and 

deposit operations in Canada, Mexico, Europe, the United Kingdom, 

China, and South America. According to Ally Financial, contracts for each 

of these countries have been signed, and deal closings are expected to 

occur in stages throughout the first half of 2013. Ally Financial reported 

that these actions would improve the financial viability of the company 

and increase the likelihood of repaying Treasury. Ally’s net income for the 

first three quarters of 2012 has declined from the same period in 2011—

decreasing from a positive $49 million in 2011 to a loss of $204 million in 

2012. This loss is primarily attributable to charges related to the 

Residential Capital, LLC, bankruptcy filing in the second quarter of 

2012.23

The challenges facing Ally Financial and reductions in the share prices of 

common stock holdings in GM highlight how market conditions contribute 

to the risks associated with AIFP and the variability of lifetime cost 

estimates. The projected lifetime cost of AIFP has increased since 2010 

and as of September 30, 2012, was estimated at $24.3 billion—about 

$700 million more than in September 2011 and almost $10 billion more 

than in September 2010. According to Treasury officials, Treasury 

 

22On March 31, 2011, Ally Financial filed a registration statement with the Securities and 

Exchange Commission for a proposed IPO. Additionally, Treasury officials have not ruled 

out the possible sale of its equity in a private transaction.

23 In 2012, Ally’s net income declined from $310 million in the first quarter to a loss of 

$898 million in the second quarter, and then increased to $384 million in the third quarter. 

Ally’s second quarter net income included a non-recurring charge of $1.192 billion related 

to the Residential Capital, LLC, bankruptcy. Ally officials noted that the company’s core 

income for the first three quarters of 2012—which excludes the Residential Capital, LLC 

bankruptcy filing and reflects the income (loss) from continuing operations before taxes 

and primarily bond exchange original issue discount ("OID") amortization expense—has 

increased from $1.009 billion in 2011 to $1.451 billion in 2012.
 

Page 22 GAO-13-192 Troubled Asset Relief Program

continues to balance its goals of exiting as soon as practicable and 

maximizing taxpayer returns.

On December 11, 2012, Treasury announced that it agreed to sell all of 

its remaining shares of AIG common stock, and on December 14, 2012, 

announced that it had received payment from its final sale of AIG stock, 

bringing to an end the government’s assistance to the company. Prior to 

TARP, in September 2008 AIG received assistance in the form of a loan 

from the Federal Reserve Bank of New York (FRBNY). In exchange, AIG 

provided shares of preferred stock to the AIG Credit Facility Trust that 

FRBNY created. These preferred shares were converted to common 

stock and then transferred to the Treasury. In addition to this and other 

non-TARP support, Treasury provided assistance to AIG in November 

2008 through TARP by purchasing preferred shares that were also later 

converted to common stock. In late January 2011, following the 

recapitalization of AIG, Treasury owned 1.655 billion common shares in 

AIG (1.092 billion TARP and 0.563 billion non-TARP) and a $20.3 billion 

preferred interest in two special purpose vehicle subsidiaries of AIG.24

In May 2011, Treasury began to sell its AIG shares. Since then and 

through six offerings, Treasury has sold all of its shares of AIG common 

stock, both TARP and non-TARP shares. The shares it sold in May 2011 

and March 2012 to the public brought $29 per share; the shares it sold in 

 

24Specifically, in September 2008, a trust created by FRBNY received 100,000 shares of 

Series C preferred stock, and the Treasury received a 77.9 percent voting interest in AIG, 

in exchange for an FRBNY revolving loan. This transaction predated TARP. In November 

2008, Treasury used TARP funds to purchase $40 billion in cumulative preferred shares of 

Series D stock, which was exchanged in April 2009 for $41.6 billion of Series E 

noncumulative preferred stock (the difference of $1.6 billion was in accumulated but 

unpaid dividends on the Series D stock). That same month, Treasury used TARP funds to 

purchase 300,000 shares of Series F noncumulative preferred stock and a warrant to 

purchase up to 3,000 shares of AIG common stock in exchange for providing AIG with a

$29.835 billion equity facility. In January 2011, AIG was recapitalized, and Treasury 

exchanged its Series E and F preferred stock for 1.0921 billion shares of common shares 

and a $20.3 billion preferred interest in two special purpose vehicle subsidiaries of AIG. 

We refer to these shares as “TARP shares.” Also in January, the trust exchanged its 

Series C preferred stock for 562.9 million shares of common stock and subsequently 

transferred these shares to Treasury. We refer to these shares as “non-TARP shares.” 

Treasury owned a total of 1.655 billion common shares in AIG or approximately 92 

percent of the company as of January, 2011. For additional information on the non-TARP 

assistance provided to AIG see GAO, Financial Crisis: Review of Federal Reserve System 

Financial Assistance to American International Group, Inc., GAO-11-616 (Washington, 

D.C.: Sept. 30, 2011).

Treasury Sold Its

Remaining AIG Shares
 

Page 23 GAO-13-192 Troubled Asset Relief Program

May and August of 2012 to the public brought $30.50 per share; and the 

shares it sold in September and December 2012 to the public brought 

$32.50 per share. The share price, on a weighted average basis, was 

$31.18, exceeding Treasury’s break-even price of $28.73 per share on an 

overall cost basis for both the TARP and non-TARP shares.25 At an 

average price of $31.18 per share, the returns include about $34 billion 

on the 1.092 billion TARP shares and $17.6 billion on the 563 million nonTARP shares—totaling over $51.6 billion in proceeds. (See table 2.) 

While it has sold its remaining AIG common shares, Treasury continues 

to hold warrants to purchase approximately 2.7 million shares of AIG 

common stock.

 

25See GAO, Troubled Asset Relief Program: The Government’s Exposure to AIG 

Following the Company’s Recapitalization, GAO-11-716 (Washington, D.C.: July 18, 

2011). As discussed in GAO-11-716, this calculation is based on a cash-in/cash-out 

approach and reflects Treasury’s primary goal of recouping taxpayers’ costs. It includes 

only the cost of the liquidation preferences in the Series E and Series F preferred 

shares—$47.543 billion—to calculate a breakeven share price of $28.73. Under a different 

approach that captures $47.543 billion of liquidation preferences in Series E and Series F 

preferred shares, plus $1.605 billion of unpaid dividends and fees (for a total of $49.148 

billion), the breakeven share price would increase to approximately $29.70, which 

represents the minimum average price at which Treasury would need to sell all of its 

shares to fully recover the $49.148 billion. Additional AIG reporting includes GAO, 

Troubled Asset Relief Program: Third Quarter 2010 Update of Government Assistance 

Provided to AIG and Description of Recent Execution of Recapitalization Plan, GAO-11-46 

(Washington, D.C.: Jan. 20, 2011); Troubled Asset Relief Program: Update of 

Government Assistance Provided to AIG, GAO-10-475 (Washington, D.C.: Apr. 27, 2010); 

and Troubled Asset Relief Program: Status of Government Assistance Provided to AIG, 

GAO-09-975 (Washington, D.C.: Sept. 21, 2009).
 

Page 24 GAO-13-192 Troubled Asset Relief Program

Table 2: Treasury Offerings of Its AIG Common Stock Holdings, May 2011 to December 2012

Execution dates

Treasury shares 

sold to the public 

(includes over 

allotments sold)

Treasury shares 

sold to AIG

Price per 

share Proceeds

Treasury’s 

remaining AIG 

common shares

Percent

government 

equity remaining 

in AIG

May 24, 2011 200,000,000 $29.00 $5,800,000,000 1,455,037,962 77

March 8, 2012 103,448,276 103,448,276 29.00 6,000,000,008 1,248,141,410 70

May 6, 2012

May 7, 2012

98,360,656

24,590,163a

65,573,770

0 

30.50

30.50

4,999,999,993

749,999,972

1,084,206,984

1,059,616,821

63

61

Aug. 3, 2012

Aug 6, 2012

65,573,770

24,590,164b

98,360,656

0 

30.50

30.50

4,999,999,993

750,000,002

895,682,395

871,092,231 53

Sept. 10, 2012

Sept. 11, 2012

400,000,000

83,076,922c

153,846,153

0 

32.50

32.50

17,999,999,973

2,699,999,965

317,246,078

234,169,156

21.5

15.9

Dec. 11, 2012 234,169,156 0 32.50 7,610,497,570 0d 0 

Totals 1,233,809,107 421,228,855 $51,610,497,476

Source: GAO analysis of Treasury data.

a

These additional shares were sold as a result of underwriters exercising their overallotment option and 

were sold under the same prospectus and registration statement as the shares sold on May 6, 2012.

b

These additional shares were sold as a result of underwriters exercising their overallotment option and 

were sold under the same prospectus and registration statement as the shares sold on August 3, 2012.

c

These additional shares were sold as a result of underwriters exercising their overallotment option 

and were sold under the same prospectus and registration statement as the shares sold on 

September 10, 2012. 

d

After the closing of December 11, 2012, offering, Treasury will continue to hold warrants to purchase 

approximately 2.7 million shares of AIG common stock. Proceeds from the sale of these warrants will 

provide an additional positive return to taxpayers. 

Treasury received approximately $72.8 billion of proceeds and cancelled 

$2 billion of its commitment, undrawn, on the AIG investments, exceeding 

the $69.8 billion total Treasury commitment to assist AIG by 

approximately $5 billion. As of December 2012, the total reflected the

$54.3 billion generated on Treasury’s common stock sales and AIG 

repaid $20.3 billion on the preferred interests in two special purpose 

vehicle subsidiaries of AIG. In addition, Treasury said that it received 

$930 million in interest and participation rights on the special purpose 

vehicle investments. Treasury’s returns from selling common stock have 

been in addition to those realized by the returns of other assistance to 

AIG. With AIG’s final repayment of all FRBNY assistance to the company

in 2012, FRBNY had realized returns in the form of interest, dividends, 
 

Page 25 GAO-13-192 Troubled Asset Relief Program

and fees in excess of the assistance it provided AIG through a revolving 

credit facility and several special purpose vehicles.26

As of September 30, 2012, prior to the December 2012 sale of AIG shares. 

Treasury lowered its expected lifetime cost from $24.3 billion to $15.3 

billion for its TARP shares and increased its expected income from $12.8 

billion to $17.6 billion for its non-TARP shares, changing what was an 

expected net estimated cost of $11.5 billion to a net expected gain of $2.3 

billion for assistance to AIG.27

The Federal Reserve established TALF in an effort to reopen the 

securitization markets and improve access to credit for consumers and 

businesses.28 As of September 30, 2012, Treasury is committed to 

contributing as much as $1.4 billion to provide credit protection to FRBNY 

for TALF loans should borrowers fail to repay and surrender the assetbacked securities (ABS) or commercial mortgage-backed securities 

(CMBS) pledged as collateral.29

 

26See 

To date, Treasury has disbursed $100 

million for start-up costs related to the FRBNY-established TALF specialpurpose vehicle, TALF LLC (see fig. 8). TALF LLC receives a portion of 

GAO-12-574 for a more detailed discussion of FRBNY’s assistance to AIG.

27Unlike the other lifetime estimates reported here, the lifetime income estimate of $17.6 

billion for Treasury’s non-TARP shares has not been audited by GAO. The estimate was 

obtained from the Department of the Treasury, Troubled Asset Relief Program: Monthly 

Report to Congress (Washington, D.C.: Nov. 9, 2012).

28FRBNY provided loans to certain institutions and business entities in return for collateral 

in the form of securities that are forfeited if the loans are not repaid. Securitization is a 

process that aggregates into pools similar debt instruments—such as loans, leases, or 

receivables. Interest-bearing securities backed by these pools are then sold to investors. 

These ABS provide a source of liquidity for consumers and small businesses, because 

financial institutions can take assets that they would otherwise hold on their balance 

sheets, sell them as securities, and use the proceeds to originate new loans, among other 

purposes. CMBS are securitizations with cash flows backed by principal and interest 

payments on a pool of loans on commercial properties. For additional information about 

securitization and about TALF, see GAO, Federal Reserve System: Opportunities Exist to 

Strengthen Policies and Processes for Managing Emergency Assistance, GAO-11-696 

(Washington, D.C.: July 21, 2011), and Troubled Asset Relief Program: Treasury Needs to 

Strengthen Its Decision-Making Process on the Term Asset-Backed Securities Loan 

Facility, GAO-10-25 (Washington, D.C.: Feb. 5, 2010). 

29Initially, Treasury committed to providing as much as $20 billion in credit protection to 

FRBNY, but in July 2010, Treasury and the Federal Reserve agreed to reduce the credit 

protection to $4.3 billion. In June 2012, they agreed to reduce the credit protection aqain, 

this time to $1.4 billion. 

Treasury Expects Lifetime 

Income from Term Assetbacked Securities Loan 

Facility (TALF) and Plans 

to Exit the Program by 

2015
 

Page 26 GAO-13-192 Troubled Asset Relief Program

the interest income earned on TALF loans (known as excess interest 

under the program) that can be used to purchase any borrowersurrendered collateral from FRBNY.

Figure 8: Status of TALF, as of September 30, 2012

a

Although the program was first announced in November 2008, the first program activity was initiated 

in March 2009. 

b

The outstanding investments is the $100 million contributed by Treasury to the TALF special purpose 

vehicle. The net estimated value of Treasury’s outstanding investments is the projected returns from 

the SPV consisting of the $100 million contributed by Treasury to TALF LLC and the TARP share of 

the SPV’s excess interest as calculated using Statements of Federal Financial Accounting Standards 

that are consistent with the Federal Credit Reform Act (Credit Reform Accounting). 

FRBNY stopped issuing new TALF loans in 2010.30

 

30TALF expired on March 31, 2010, for loans backed by ABS and legacy CMBS, and on 

June 30, 2010, for loans backed by newly issued CMBS. 

Treasury officials 

report that FRBNY TALF loan balances, which were $29.7 billion in 

September 2010, had fallen to $11.3 billion as of September 30, 2011, 

and to $1.5 billion as of September 26, 2012. Agency officials also 

indicated that all TALF loans were current and that borrowers continued 

to pay down their loans.
 

Page 27 GAO-13-192 Troubled Asset Relief Program

Excess interest in TALF LLC grew by more than 30 percent between 

October 2010 and September 2011, rising from $523 million to $685.6 

million. Over the next year (September 2011 to September 2012), it grew 

to $754.2 million. If the balance of excess interest in TALF LLC exceeds 

the value of any surrendered collateral, Treasury may not need to 

disburse any additional funds for the program and could instead realize 

lifetime income because it will receive 90 percent of funds remaining in 

TALF LLC after all obligations are repaid and the program ends. Further, 

the equity that borrowers hold in TALF collateral has grown since TALF 

loans were first issued.31

Treasury expects to exit TALF by 2015, although it does not have 

complete control over its exit because its role in TALF is secondary to that 

of the Federal Reserve. Treasury models loan repayments using TALF 

loan terms and data provided by the Federal Reserve and projects 

repayment schedules, collateral cash flows, prepayments, and 

performance loss rates. Based on these analyses, Treasury expects that 

the last TALF loan will be paid in 2015. No borrowers have surrendered 

TALF collateral to date, and all loans are current. However, should TALF 

LLC be required to purchase and manage TALF assets, Treasury could 

be involved in TALF beyond 2015, as TALF assets may have maturity 

dates that extend beyond the loan maturity dates.

As of September 30, 2012, Treasury estimated 

that TALF would result in a lifetime income of approximately $517 million. 

Treasury officials told us in September 2012 that they did not have any 

particular concerns about the CMBS market that would have an effect on 

current TALF holdings, and that prices remained strong throughout 2012. 

Despite these positive trends, the officials told us that FRBNY and 

Treasury staff will continue to monitor market conditions and credit rating 

agency actions that could affect TALF assets. As we have previously 

reported, market value fluctuations could affect future results.

 

31FRBNY established the “haircut” or amount of equity the borrower holds in TALF 

collateral based on its weighted average life and market risks for each sector and 

subsector. The haircut is also the difference between the value of the TALF collateral and 

the value of the loan. In other words, if haircuts have grown, the borrower has more equity 

in the collateral and should be less likely to default on the loan. See GAO-10-25 for more 

details. 
 

Page 28 GAO-13-192 Troubled Asset Relief Program

Treasury created PPIP, partnering with private funds, to purchase 

troubled mortgage-related assets from financial institutions. Treasury 

provided the PPIFs with equity and loan commitments of approximately 

$7.4 billion and $14.7 billion, respectively, but disbursed a total of $18.6 

billion. PPIFs have finished their 3-year investment period, which started 

at each fund’s inception date. There were nine PPIFs established through 

PPIP, the first of which was liquidated in the first quarter of 2010 and the 

last terminated in December 2012.32 PPIFs with terminated investment 

periods can no longer draw money from Treasury or make new 

investments under this authority, and Treasury has not granted approval 

for any new draws under the PPIP program.33

According to Treasury, as of September 30, 2012, PPIFs had accessed 

about 86 percent of the equity and debt available through Treasury and 

private investors, and had repaid Treasury a total of $6.7 billion in debt 

financing. In addition, since September 30, 2012, Treasury has received 

around $5.5 billion of payments under PPIP. As of September 30, 2012, 

Treasury estimates that PPIP will ultimately result in lifetime income of 

With the investment 

periods ended, PPIFs must begin unwinding their positions and 

completely divest within 5 years, although Treasury can decide to extend 

this period for up to 2 additional years for each PPIF. According to 

Treasury, the PPIF liquidated in the first quarter of 2010 yielded Treasury 

a profit of $20.1 million on its $156.3 million equity investments and the 

PPIF whose investment period ended in September 2011 returned all of 

its equity proceeds to Treasury and fully wound down its fund. Three 

additional PPIFs have returned 100 percent of Treasury and private 

investors’ equity investments in the fund with equity gains and fully repaid 

Treasury’s debt. According to Treasury, these three funds have a small 

amount of capital remaining to unwind their operations. The investment 

periods for the remaining PPIFs have subsequently ended and thus have 

begun to unwind.

 

32According to Treasury, of the remaining seven PPIFs, one terminated its investment 

period in September 2011 and another PPIF terminated its investment period in July 2012. 

Investment periods for four other PPIFs terminated in October 2012 and the remaining 

one terminated in November 2012.

33PPIFs received an approximately equal share of equity from Treasury and private 

investors. PPIFs also received access to credit from Treasury. PPIFs were able to draw 

on these funds to invest in eligible residential mortgage-backed securities and commercial 

mortgage-backed securities. According to Treasury officials, approvals could be given for 

pending transactions placed prior to the end of the investment period, for example.

The Investment Periods for 

PPIP Funds Have 

Terminated, and All PPIF 

Funds Have Begun 

Unwinding
 

Page 29 GAO-13-192 Troubled Asset Relief Program

about $2.4 billion (see fig. 9). As of November 5, 2012, the four PPIFs 

that have sold all of their remaining investments and returned 

substantially all of the proceeds have generated more than $1.4 billion in 

realized gains and income on Treasury’s equity and warrant investments. 

However, according to Treasury, the ultimate results will depend on a 

variety of factors, including when PPIFs choose to divest and the 

performance of the assets they hold.

Figure 9: Status of PPIP, as of September 30, 2012

Note: The figures in this graphic do not reflect the approximately $5.5 billion of payments under PPIP 

received after September 30, 2012, which are discussed in the text of the report. 

a

PPIFs began their investment periods in 2009. The program was first announced in March 2009. 

b

The stipulated exit date is 2017, though the program could be extended through 2019. 
 

Page 30 GAO-13-192 Troubled Asset Relief Program

Treasury officials said that their role while PPIFs were in their investment 

periods was to follow the progress of each PPIF’s investment strategy 

and the risks and target returns of the portfolios. In this role, Treasury 

staff and contractors monitored compliance with PPIP terms. With the end 

of the PPIFs’ investment periods, Treasury officials said that Treasury 

would focus on the strategies PPIFs used to maintain and ultimately 

divest themselves of their portfolios. Also, Treasury officials said that the 

contractors hired to provide investment fund consulting and analysis of 

PPIF portfolios would continue to provide such services in this 

postinvestment period.

Current PPIP terms stipulate an exit by 2017.34 Unlike the circumstances 

found in some other TARP programs, Treasury officials do not face the 

same consideration of competing goals in exiting the program because 

the terms of the program dictate when the PPIFs must wind down. 

However, Treasury officials noted that PPIFs can liquidate at any time 

before the exit date. Officials also noted that the program was designed to 

discourage firms from keeping their investments outstanding longer than 

needed by the PPIF fund managers after the investment period expired, 

at which time PPIFs would no longer have access to debt financing from 

Treasury, unless permitted by provisions within the loan agreement and 

approved by Treasury. Now that the investment periods have terminated, 

PPIFs must pay down their Treasury loans and make distributions to their 

partners as the PPIFs receive proceeds from RMBS and CMBS 

payments and dispositions. Officials noted that this program structure 

created an incentive for PPIFs to sell their assets promptly once their 

access to Treasury ended. The officials also said that they were not 

concerned about any effects of PPIPs’ eventual winding down on 

markets, as the 5-year period for unwinding would likely mitigate them.

 

34While PPIP is scheduled to end in 2017 (8 years after the last PPIP was initiated), it 

could be extended for 2 years. Such decisions would occur on a case-by-case basis for 

each PPIF, depending on market conditions and other factors.
 

Page 31 GAO-13-192 Troubled Asset Relief Program

To help meet EESA’s goals of preventing avoidable foreclosures and 

preserving homeownership, Treasury allocated $45.6 billion in TARP 

funds to three mortgage programs:

• Making Home Affordable (MHA), which has several components, 

including the Home Affordable Modification Program (HAMP);

• Housing Finance Agency Innovation Fund for the Hardest Hit Housing 

Markets (Hardest Hit Fund or HHF); and

• Department of Housing and Urban Development’s (HUD) Federal 

Housing Administration (FHA) Refinance of Borrowers in Negative 

Equity Positions (FHA Short Refinance or FHASR).35

The bulk of the funds allocated to TARP programs to help distressed 

borrowers avoid foreclosure—$40.1 billion—had not yet been disbursed 

as of September 30, 2012. The estimated lifetime cost for the mortgage 

programs is $45.6 billion. Unlike for the programs discussed previously, 

Treasury will continue to disburse TARP funds under the mortgage 

programs for several more years. Specifically, homeowners have until 

December 31, 2013, to apply for assistance under MHA programs, and 

Treasury will continue to pay incentives for up to 5 years after the last 

permanent modification begins. Treasury’s obligation under FHASR will 

continue until September 2020. Unlike TARP expenditures under some 

other programs, such as those that provided capital infusions to banks, 

expenditures under these programs are generally direct outlays of funds 

with no provision for repayment.36

 

35Treasury also refers to FHASR as the FHA-Refinance Program.

36Under the FHASR program, if FHA recovers any amount of a claim payment from a 

servicer, FHA will remit Treasury’s share to Treasury. 

Mortgage Programs 

Remain Active, and 

Oversight Has Shown 

Both Challenges and 

Improvements
 

Page 32 GAO-13-192 Troubled Asset Relief Program

The centerpiece of Treasury’s MHA program is HAMP, which seeks to 

help eligible borrowers facing financial distress avoid foreclosure by 

reducing their monthly first-lien mortgage payments to more affordable 

levels.37

Treasury originally announced that up to 3 million to 4 million borrowers 

would be helped under HAMP.

Treasury announced HAMP (now called HAMP Tier 1) on 

February 18, 2009. Generally, HAMP Tier 1 is available to qualified 

borrowers who occupy their properties as their primary residences and 

whose first-lien mortgage payment is more than 31 percent of their 

monthly gross income. Treasury shares with mortgage holders or 

investors the cost of lowering borrowers’ monthly payments to 31 percent 

of monthly income for a 5-year period. In an effort to reach more 

borrowers, Treasury established HAMP Tier 2, which servicers began 

implementing in June 2012. HAMP Tier 2 is available for either owneroccupied or rental properties, and borrowers’ monthly mortgage 

payments prior to modification do not have to exceed a specified 

threshold. Treasury also provides incentive payments for modifications 

under HAMP Tier 1 and HAMP Tier 2 to servicers and investors, and to 

borrowers under HAMP Tier 1.

38 However, Treasury reported that through 

September 2012 only about 1.1 million permanent modifications had been 

started.39

 

37HAMP first-lien modifications are available to qualified borrowers who took out their 

loans on or before January 1, 2009. Only single-family properties (one to four units) with 

mortgages no greater than $729,750 for a one-unit property are eligible. 

Monthly activity peaked during the early part of 2010 and has 

experienced a significant decline, as shown in figure 10. Since June 1, 

2010, when Treasury began requiring all servicers to perform full income 

38We have made a number of recommendations to Treasury regarding its efforts to 

implement the MHA program. See GAO, Troubled Asset Relief Program: Further Actions 

Needed to Enhance Assessments and Transparency of Housing Programs, GAO-12-783 

(Washington, D.C.: July 19, 2012); GAO-11-288; Troubled Asset Relief Program: Further 

Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs, 

GAO-10-634 (Washington, D.C.: June 24, 2010); and Troubled Asset Relief Program: 

Treasury Actions Needed to Make the Home Affordable Modification Program More 

Transparent and Accountable, GAO-09-837 (Washington, D.C: July 23, 2009). While 

Treasury has taken various actions consistent with our recommendations, several of our 

MHA-related recommendations remain open. We will be providing a status report of these 

recommendations later in 2013.

39Under HAMP, borrowers must successfully complete a trial modification of at least 3 

months before receiving a permanent modification. Totals include HAMP modifications 

completed by Fannie Mae and Freddie Mac, which participate in HAMP but do not receive 

TARP funding for incentives.

TARP-Funded Mortgage 

Programs Continue to 

Assist Homeowners, but 

Much of the Funding 

Remains Unspent
 

Page 33 GAO-13-192 Troubled Asset Relief Program

verification to determine a borrower’s eligibility for HAMP before offering a 

trial modification, the monthly number of new trial modifications reported 

by servicers has remained below 40,000. Monthly trial modification starts 

during September 2012 were the lowest reported since the initial roll-out 

of the program in 2009. Treasury has not yet published data on the 

number of trial periods or permanent modifications started under HAMP 

Tier 2, according to Treasury officials.

Figure 10: HAMP Modifications Started Monthly, January 2010 through September 2012
 

Page 34 GAO-13-192 Troubled Asset Relief Program

In addition to HAMP, Treasury has implemented a number of additional 

MHA components that use TARP funds to augment or complement the 

HAMP first-lien modification program:40

• Home Affordable Foreclosure Alternatives Program. The Home 

Affordable Foreclosure Alternatives Program offers assistance to 

homeowners looking to exit their homes through a short sale or deedin-lieu of foreclosure. Treasury offers incentives to eligible 

homeowners, servicers, and investors under the program. Through 

September 2012, servicers reported completing about 74,000 short 

sales and 1,900 deeds-in-lieu under the program.

• Home Price Decline Protection Incentives. This program provides 

investors with additional incentives to modify loans under HAMP on 

properties located in areas where home prices have recently declined 

and where investors are concerned that price declines may persist. 

Through September 2012, Treasury had paid about $269 million to 

investors in program incentives to support the HAMP modification of 

more than 154,000 loans.

• Principal Reduction Alternative (PRA). PRA requires servicers to 

evaluate the benefit of principal reduction for mortgages that have a 

loan-to-value ratio of 115 percent or more and that are not owned or 

guaranteed by Fannie Mae or Freddie Mac. Servicers are required to 

evaluate homeowners for PRA when evaluating them for a HAMP 

first-lien modification but are not required to actually reduce principal 

as part of the modification. Through September 2012, servicers 

reported having started about 78,000 permanent modifications with 

principal reductions under PRA.

• Second Lien Modification Program. The Second Lien Modification 

Program provides additional assistance to homeowners receiving a 

HAMP first-lien permanent modification who have an eligible second 

lien with participating servicers. When a borrower’s first lien is 

 

40Another Treasury program, the Home Affordable Unemployment Program, does not 

entail the use of TARP or other federal program funds. The Unemployment Program 

requires servicers participating in MHA to grant qualified unemployed borrowers a 

forbearance period for a minimum of 12 months. During this period, mortgage payments 

are temporarily reduced or suspended while borrowers look for new jobs. Borrowers can 

apply for a HAMP modification either when they secure employment or before the 

forbearance period ends. Treasury reported that more than 27,000 Unemployment 

Program forbearance plans had been started through August 2012.
 

Page 35 GAO-13-192 Troubled Asset Relief Program

modified under HAMP, participating program servicers must offer to 

modify the borrower’s eligible second lien according to a defined 

protocol.41

• Government-insured or guaranteed loans (FHA-HAMP and RDHAMP). FHA and the Department of Agriculture’s Rural Housing 

Service (RHS) have implemented modification programs similar to 

HAMP Tier 1 for FHA-insured and RHS-guaranteed first-lien mortgage 

loans. Each of these programs results in loan modifications that 

provide borrowers with an affordable monthly mortgage payment 

equal to 31 percent of the homeowners’ monthly gross income and 

requires borrowers to complete a trial payment plan before permanent 

modification. If a modified FHA-insured or RHS-guaranteed mortgage 

loan meets Treasury’s eligibility criteria, the borrower and servicer can 

receive TARP-funded incentive payments from Treasury. Treasury 

reported that there were nearly 9,100 permanent modifications started 

that received Treasury FHA-HAMP incentives through September 

2012. According to Treasury officials, servicers had reported only 11 

modifications that qualified for Rural Development (RD)-HAMP 

incentives as of September 30, 2012.

This assistance can result in a modification or even full or 

partial extinguishment of the second lien. On February 16, 2012, 

Treasury doubled the amount of incentives provided on second-lien 

modifications that included principal reduction and became effective 

on or after June 1, 2012. Through September 2012, servicers 

reported starting about 97,000 second-lien modifications, of which 

about 24,000 fully extinguished the second lien.

• Treasury/FHA Second Lien Program (FHA2LP). Under this program, 

Treasury provides incentive payments to servicers and investors if 

they partially or fully extinguish second liens associated with an FHA 

Short Refinance. Servicers can receive a one-time payment of $500 

for each second lien extinguished under the program, and investors 

are eligible for incentive payments based on the amount of principal 

extinguished. According to Treasury, no second liens had been 

extinguished and no incentive payments made under the 

Treasury/FHA Second Lien Program as of September 30, 2012.

 

41In order to be eligible for the Second Lien Modification Program, borrowers’ loans must 

meet certain criteria. For example, the loan must have been originated on or before 

January 1, 2009; have an unpaid balance of greater than $5,000 and a premodification 

monthly payment greater than $100; and can be modified only once under the program.
 

Page 36 GAO-13-192 Troubled Asset Relief Program

Treasury obligated $29.9 billion to MHA, of which nearly $4.0 billion had 

been disbursed as of September 2012 (see fig. 11). Treasury estimated 

that an additional $6.5 billion could be spent on incentives for HAMP 

modifications and other MHA interventions that were already in effect as 

of September 2012, assuming none of these modifications default. After 

combining these potential incentive payments with incentives already 

paid, Treasury estimated that $19.4 billion of the $29.9 billion remain

available for future modifications and other interventions.

Figure 11: Status of Mortgage Programs as of September 2012
 

Page 37 GAO-13-192 Troubled Asset Relief Program

a

Borrowers have until December 31, 2013, to apply for HAMP. Trial modifications must be successful 

for at least 3 months before borrowers can convert into a permanent modification. Incentives are paid 

for up to 5 years after the date a trial modification is converted to a permanent modification and 

servicers have several months to submit loan data for incentive payments. As a result, the last HAMP 

incentive payment is likely to occur sometime in 2019. 

b

Treasury’s estimated lifetime cost estimates reflect the actual outlay of funds to the mortgage-related 

programs and do not use the same Credit Reform accounting as the other program-specific lifetime 

cost estimates. 

In addition to the MHA program, Treasury has allocated $7.6 billion in 

TARP funds for HHF, which seeks to help homeowners in 18 states hit 

hardest by unemployment and house price declines (Alabama, Arizona, 

California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, 

Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode 

Island, South Carolina, and Tennessee) plus the District of Columbia. 

States were chosen because they had experienced steep home price 

declines, high levels of unemployment in the economic downturn, or both. 

According to Treasury, each state housing agency gathered public input 

to implement programs designed to meet the distinct challenges 

homeowners in their state were facing. As a result, HHF programs vary 

across states, but services offered often include mortgage payment 

assistance for unemployed homeowners and reinstatement assistance to 

cover arrearages (e.g., one-time payment to bring a borrower’s delinquent 

mortgage current).42

Treasury has also allocated $8.1 billion in TARP funds to the FHA Short 

Refinance program to enable homeowners whose mortgages exceed the 

value of their homes to refinance into more affordable mortgages. This 

opportunity allows borrowers who are current on their mortgage—or if 

they are delinquent, who successfully complete a trial period—to qualify 

for an FHA Short Refinance loan if the lender or investor writes off the 

unpaid principal balance of the original first lien mortgage by at least 10 

percent. Treasury entered into a letter of credit facility with Citibank in 

order to fund up to $8 billion of any losses associated with providing FHA 

Short Refinance loans. Treasury’s commitment extends until September 

2020, and to the extent that FHA experiences losses on those refinanced 

Treasury reported that it had disbursed 

approximately $1.5 billion to the states for the HHF program as of 

September 2012. States reported having spent about $742 million 

through September 2012 to help more than 77,000 homeowners since 

the program began, and $199 million on administrative expenses.

 

42See GAO-12-783 for an expanded discussion of the various state programs.
 

Page 38 GAO-13-192 Troubled Asset Relief Program

mortgage loans, Treasury will pay claims up to the predetermined 

percentage after FHA has paid its portion of the claim. Treasury will also 

pay a fee to the issuer of the letter of credit based on the amount of funds 

drawn against the letter of credit and any unused amount. The terms of 

the agreement cap the fee at $117 million. As of September 30, 2012, 

FHA had insured 1,774 loans with a total face value of $307 million under 

the refinance program. As of September 30, 2012, Treasury had paid 

about $7.2 million in fees to Citibank, which issued the letter of credit. 

Treasury also placed $50 million in a reserve account to cover any future

loss claims on these loans, although no funds have been disbursed for 

loss claim payments.

Through its monitoring of processes put in place to improve servicers’ 

communication with borrowers and resolution of disputes, Treasury has 

identified some implementation challenges but has also found 

improvements in performance. One process, which Treasury announced 

in May 2011, requires large servicers participating in HAMP to identify a 

“relationship manager” to serve as the borrower’s single point of contact 

throughout the delinquency or imminent default resolution process, 

effective September 1, 2011.43 By implementing this requirement, called 

the single point of contact requirement, Treasury was seeking to enhance 

communications between servicers and borrowers during the delinquency 

resolution process.44

 

43The requirement applies to servicers with program participation caps of $75,000,000 or 

more as of May 18, 2011, although all participating servicers are encouraged to adopt this 

practice. Treasury’s requirement is similar to a requirement issued by federal banking 

regulators as part of consent orders obtained against 14 servicers and by the April 2012 

national mortgage settlement agreed to by state attorneys general, the federal 

government, and five servicers. 

To monitor servicers’ implementation of the single 

point of contact requirement, Treasury adopted compliance review 

procedures to determine whether servicers (1) had established a single 

point of contact in accordance with MHA requirements, (2) were 

monitoring assignments and activities to verify that they were in 

accordance with internal policies and MHA guidance, and (3) had created 

44In November 2012, Treasury issued a report entitled, Making Contact: The Path to 

Improving Mortgage Industry Communication with Homeowners, which describes how the 

largest servicers have implemented the single point of contact requirement, including the 

different customer relationship models servicers are using. The report is available at 

http://www.treasury.gov/initiatives/financial-stability/reports/Documents/SPOC%20Special

%20Report_Final.pdf accessed on December 12, 2012.

Treasury Has Identified 

Both Implementation 

Challenges and 

Improvements in 

Processes Aimed at 

Enhancing Borrower 

Assistance
 

Page 39 GAO-13-192 Troubled Asset Relief Program

written notices of assignments or changes and sent accurate, timely 

information on them to borrowers. Following the effective date of 

Treasury’s requirement, Treasury’s compliance agent, MHA-C, used 

these procedures to assess servicers’ implementation of the single point 

of contact requirement during dedicated compliance reviews, according to 

Treasury.

These initial reviews revealed some initial challenges with implementing 

the requirement, including delays in assigning relationship managers to 

borrowers and poor communication of assignments and reassignments. 

Servicers’ performance was reflected in the qualitative measures of 

internal controls included in the servicer assessments that Treasury 

publishes quarterly, according to Treasury. The reviews also identified 

areas in which the servicers differed in their implementation of the 

requirements, such as the precise timing of the assignment of relationship 

managers. Treasury officials said that servicers have many options for 

appropriately implementing the requirement, given the flexibility provided 

in its guidance, and noted that servicers were making progress in 

addressing the issues identified in the initial compliance reviews. 

However, Treasury officials also stated that they were considering 

whether to issue additional guidance to clarify the requirements and to 

help ensure greater consistency across servicers.

Treasury put in place another process aimed at enhancing borrower 

assistance: a case escalation process for resolving borrower inquiries and 

disputes. In June 2010, we reported that it was unclear whether the 

process that Treasury had established for resolving concerns about 

HAMP eligibility determinations was effective. The escalation process in 

place at that time lacked standard requirements for complaint tracking, 

and Treasury had not clearly communicated the availability of the 

escalation process through the HOPE Hotline to the borrower.45

 

45

In 

November 2010, Treasury announced requirements for servicers to adopt 

a standard process for resolving certain borrower MHA disputes—called 

escalated cases—effective February 1, 2011. Treasury now requires that 

servicers have procedures and personnel in place to provide timely and 

appropriate responses to escalated cases. Escalated cases include but 

are not limited to:

GAO-10-634. 
 

Page 40 GAO-13-192 Troubled Asset Relief Program

• allegations that the servicer did not assess the borrower for the 

applicable MHA program(s) according to program guidelines;

• inquiries regarding inappropriate program denials or the content of a 

nonapproval notice; and

• disputes or inquiries about the initiation or continuance of a 

foreclosure action in violation of program guidelines.

In addition, MHA Help and the HAMP Solution Center (collectively 

referred to as the MHA support centers) can refer escalated cases to the 

servicer on behalf of either borrowers or third parties assisting borrowers. 

MHA Help, which is a team of specialists dedicated exclusively to working 

with borrowers and servicers to resolve escalated MHA cases, receives 

cases from borrowers who call the HOPE Hotline. A third party, such as a 

housing counselor, may escalate a case through the HAMP Solution 

Center.

In its capacity as the MHA program administrator, Fannie Mae staffs the 

HAMP Solution Center and oversees vendors that staff MHA Help and 

the HOPE Hotline, according to Treasury. In order to resolve a case 

escalated through these support centers, the servicer must obtain the 

concurrence of the center that escalated the case with the proposed 

resolution. If the case cannot be resolved at the support center, it is 

forwarded to Treasury, which works with the servicer to resolve the issue

Treasury has adopted procedures to monitor the performance of servicers 

and borrower support centers in resolving escalated cases. Treasury 

currently publicly reports on one servicer performance measure related to 

escalations: the average number of days required to resolve escalated 

cases involving loans not owned or guaranteed by Fannie Mae or Freddie 

Mac. Treasury established a target of 30 calendar days or fewer

(including processing time by the support center). In the most recent two 

quarters for which data were available (the second and third quarters of 

2012), the nine largest MHA servicers achieved that target. In the two 

prior quarters, one of these servicers did not achieve the target.

In addition to reporting on the timeliness of the escalation process, 

Treasury conducts other reviews to monitor the program administrator’s 

management of its vendors and the outcomes of the process. The 

program administrator prepares weekly and monthly performance reports 

for the HOPE Hotline and the MHA support centers. These reports 

include case escalation information for the larger MHA servicers. 
 

Page 41 GAO-13-192 Troubled Asset Relief Program

Treasury officials in the Office of Financial Agents and the 

Homeownership Preservation Office review these reports with the 

program administrator and, as necessary, its vendors. In addition, 

Treasury reviews a sample of escalated case files monthly to ensure that 

staff at the support centers are providing the services Treasury expects of 

them. Staff from the Homeownership Preservation Office score the files—

five from each support center—on seven criteria that indicate whether:

• the resolution template was properly completed;

• the full course of the resolution could be easily identified and 

understood;

• the case was resolved according to the escalation case process;

• MHA policy and guidance were appropriately applied;

• engagement with the servicer led to timely closure of the case;

• reasonable efforts had been made to reach the requestor and resolve 

the inquiry; and

• the support center representative demonstrated homeowner 

advocacy.

Treasury began scoring escalated case files in January 2012, and 

according to documents Treasury provided to us, the support centers’ 

scores improved substantially between January 2012 and June 2012. 

Treasury officials said that they had provided training for staff of the 

support centers to serve as advocates for homeowners and had provided 

additional training for this purpose. The most notable improvement in the 

support centers’ scores was in the area of demonstrating homeowner 

advocacy. Treasury’s continued attention to resolutions of escalated 

cases and the performance of the support centers and servicers is 

instrumental in helping to ensure that eligible borrowers receive 

appropriate assistance.
 

Page 42 GAO-13-192 Troubled Asset Relief Program 

We provided a draft of this report to Treasury for its review and comment. 

In its written comments, reproduced in appendix IV, Treasury generally 

concurred with our findings. We also provided relevant portions of the 

draft report to Ally Financial and General Motors to verify the factual 

information they provided about their companies and business trends. 

Treasury, Ally Financial, and General Motors provided technical 

comments that we have incorporated as appropriate. 

We are sending copies of this report to the Financial Stability Oversight 

Board, Special Inspector General for TARP, interested congressional 

committees and members, and Treasury. The report also is available at 

no charge on the GAO website at http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

A. Nicole Clowers at (202) 512-8678 or clowersa@gao.gov for questions 

about non-mortgage-related TARP programs, or Mathew Scire at 

(202) 512-8678 or sciremj@gao.gov for questions about mortgage-related 

TARP programs. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in 

appendix V. 

Thomas J. McCool 

Director 

Center for Economics, Applied Research and Methods 

 

Agency Comments 

and Our Evaluation 
 

Page 43 GAO-13-192 Troubled Asset Relief Program 

List of Addressees 

The Honorable Barbara Mikulski 

Chairwoman 

The Honorable Thad Cochran 

Vice Chairman 

Committee on Appropriations 

United States Senate 

The Honorable Tim Johnson 

Chairman 

The Honorable Richard C. Shelby 

Ranking Member 

Committee on Banking, 

 Housing, and Urban Affairs 

United States Senate 

The Honorable Chairman 

The Honorable Jeff Sessions 

Ranking Member 

Committee on the Budget 

United States Senate 

The Honorable Max Baucus 

Chairman 

The Honorable Orrin G. Hatch 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable Hal Rogers 

Chairman 

The Honorable Nita Lowey 

Ranking Member 

Committee on Appropriations 

House of Representatives 

The Honorable Paul Ryan 

Chairman 

The Honorable Chris Van Hollen 

Ranking Member 

Committee on the Budget 

House of Representatives 
 

Page 44 GAO-13-192 Troubled Asset Relief Program 

The Honorable Jeb Hensarling 

Chairman 

The Honorable Maxine Waters 

Ranking Member 

Committee on Financial Services 

House of Representatives 

The Honorable Dave Camp 

Chairman 

The Honorable Sandy Levin 

Ranking Member 

Committee on Ways and Means 

House of Representatives 
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-13-192 Troubled Asset Relief Program

The objectives in this report were to examine the condition and status of 

(1) nonmortgage-related Troubled Asset Relief Programs (TARP) 

programs and (2) TARP mortgage programs, including Treasury’s efforts 

to ensure that servicers are implementing two new requirements.

To assess the condition and status of all the nonmortgage-related 

programs initiated under the TARP, we collected and analyzed data about 

program utilization and assets held, as applicable, focusing primarily on 

financial information that we had audited in the Office of Financial 

Stability’s (OFS) financial statements, as of September 30, 2012. In some 

instances we provided more recent, unaudited financial information. The 

financial information includes the types of assets held in the program, 

obligations that represent the highest amount ever obligated for a 

program (to provide historical information on total obligations), 

disbursements, and income. We also provide information on program 

start dates, defining them based on the start of the first activity under a 

program, and we provide program end dates, based on official 

announcements or program terms from the Department of the Treasury 

(Treasury). Finally, we provide approximate program exit dates—either 

estimated by Treasury or actual if the exit already occurred—that reflect 

the time when a program will no longer hold assets that need to be 

managed. We also used OFS cost estimates for TARP that we audited as 

part of the financial statement audit. In addition, we tested OFS’s internal 

controls over financial reporting as they relate to our annual audit of 

OFS’s financial statements. The financial information used in this report is 

sufficiently reliable to assess the condition and status of TARP programs 

based on the results of our audits of fiscal years 2009, 2010, 2011, and 

2012 financial statements for TARP.1

Further, we reviewed Treasury documentation such as program terms, 

press releases, and reports on TARP programs and costs. Also, we 

interviewed OFS program officials to determine the current status of each 

TARP program, the role of TARP staff while most programs continue to 

unwind, and to update what is known about exit considerations for TARP 

programs. Other TARP officials we interviewed included those 

responsible for financial reporting. Additionally, in reporting on these 

programs and their exit considerations we leveraged our previous TARP 

 

1

See GAO-13-126R, GAO-12-169, GAO-11-174, and GAO-10-301. 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 46 GAO-13-192 Troubled Asset Relief Program

reports and publications from the Special Inspector General for TARP, as 

appropriate. In addition, we did the following: 

• For the Capital Purchase Program, we used OFS’s reports to describe 

the status of the program, including the amount of investments 

outstanding, the number of institutions that had exited the program, 

and the amount of dividends paid. In addition, we reviewed Treasury’s 

press releases on the program and interviewed officials from 

Treasury.

• For the Community Development Capital Initiative, we interviewed 

program officials to determine what exit concerns Treasury has for the 

program.

• To update the status of the Automotive Industry Financing Program 

and Treasury’s plans for managing its investment in the companies, 

we leveraged our past work and reviewed information on Treasury’s 

plans for overseeing its remaining financial interests in General 

Motors (GM) and Ally Financial, including Treasury reports. To obtain 

information on the current financial condition of the companies, we 

reviewed information on GM’s and Ally Financial’s finances and 

operations, including financial statements and industry analysts’ 

reports. We also interviewed officials from Treasury.

• To update the status of the American International Group, Inc. (AIG) 

Investment Program (formerly the Systemically Significant Failing 

Institutions Program), we reviewed relevant documents from Treasury 

and other parties. For the AIG Investment Program, these documents 

included Emergency Economic Stabilization Act of 2008 (EESA) 

monthly 105(a) reports provided periodically to Congress by Treasury, 

public information made available by the Federal Reserve Bank of 

New York, and other relevant documentation such as AIG’s financial 

disclosures and Treasury’s press releases. We also interviewed 

officials from Treasury.

• For the Term Asset-Backed Securities Loan Facility (TALF), we 

reviewed program terms and requested data from Treasury about 

loan prepayments and TALF LLC activity. Additionally, we interviewed 

OFS officials about their role in the program as it continues to unwind.

• To update the status of the Public-Private Investment Program, we 

analyzed program quarterly reports, term sheets, and other 

documentation related to the public-private investment funds. We also 
Appendix I: Objectives, Scope, and 

Methodology

Page 47 GAO-13-192 Troubled Asset Relief Program

interviewed OFS staff responsible for the program to determine the 

status of the program while it remains in active investment status.

• To obtain the final status for Small Business Administration (SBA) 7(a) 

Securities Purchase Program that Treasury exited and for which 

Treasury no longer holds assets that it must manage, we reviewed 

Treasury’s recent reports and leveraged our past work.

To assess the status of TARP-funded mortgage programs and Treasury’s 

efforts to ensure servicers are implementing the Making Home Affordable 

(MHA) single point of contact and resolution of escalated cases 

requirements, we reviewed Treasury reports, guidance, and 

documentation and interviewed Treasury officials. Specifically, to 

determine the status of Treasury’s TARP-funded housing programs, we 

obtained and reviewed Treasury’s published reports on the programs and 

servicer performance, as well as guidelines and related updates issued 

by Treasury for each of the programs. In addition, we obtained 

information from and interviewed Treasury officials about the status of the 

TARP-funded mortgage programs, including the actions Treasury had 

taken to address our prior recommendations. To assess the status of 

Treasury’s efforts to ensure servicers are implementing the MHA single 

point of contact requirement, we reviewed Treasury’s compliance review 

procedures and review findings related to single point of contact for 

several of the largest MHA servicers. To assess Treasury’s oversight of 

the escalated case resolution process, we obtained documentation from 

Treasury of its process for monitoring the MHA borrower support 

centers—MHA Help and the Home Affordable Modification Program 

(HAMP) Solution Center—and reviewed monthly performance reports. 

We also interviewed Treasury officials about their oversight of the single 

point of contact requirement and case escalation process.

We conducted this performance audit from September 2012 to January 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Treasury’s Termination of the 

TARP Small Business Administration 7(a) 

Securities Purchase Program 

Page 48 GAO-13-192 Troubled Asset Relief Program

The SBA 7(a) Securities Purchase Program was launched as part of 

TARP to help facilitate the recovery of the secondary market for small 

business loans. Under this program, Treasury purchased securities that 

comprised the guaranteed portion of SBA 7(a) loans.

These loans finance a wide range of small business needs, including 

working capital, machinery, equipment, furniture, and fixtures. Treasury 

originally invested $367 million in 31 SBA 7(a) securities between March 

and September 2010. These securities comprised more than 1,000 loans 

from 17 different industries, including retail, food services, manufacturing, 

scientific and technical services, health care, and educational services. 

Since Treasury began its purchases, the SBA 7(a) market has recovered 

with new SBA 7(a) loan volumes returning to precrisis levels.

Treasury sold its eight remaining securities in the portfolio for 

approximately $63.2 million in proceeds on January 24, 2012. That sale 

marked the wind down of this TARP program. In total, Treasury recovered 

$376 million through sales ($334 million) and principal and interest 

payments ($42 million) over the life of the SBA 7(a) Securities Purchase 

Program. After considering Treasury’s cost of financing, the SBA 7(a) 

Securities Purchase Program resulted in an income of approximately $4 

million to taxpayers on Treasury’s original investment of $367 million 

(see fig. 12). 

Appendix II: Treasury’s Termination of the 

TARP Small Business Administration 7(a) 

Securities Purchase Program
Appendix II: Treasury’s Termination of the 

TARP Small Business Administration 7(a) 

Securities Purchase Program 

Page 49 GAO-13-192 Troubled Asset Relief Program

Figure 12: Status of SBA 7(a) Securities Purchase Program, as of September 30, 2012

Note: This figure represents financial information as of September 30, 2012. 

a

The program’s first activity was in March 2010, although it was first announced in March 2009. 

b

The program’s funding ended in September 2010, though some purchases that were previously 

committed to prior to September were fulfilled after that date. 
Appendix III: Treasury’s Office of Financial 

Stability Staffing and Use of Private Sector 

Contracting 

Page 50 GAO-13-192 Troubled Asset Relief Program 

As we noted in our 2012 annual TARP report, Treasury has addressed 

several staffing challenges that we had previously identified, and the 

overall staffing numbers, which began to decline in 2011, continued to 

decrease through September 30, 2012 (see fig. 13).1

 Treasury’s Office of 

Financial Stability (OFS) used employees (including term employees) and 

detailees from other Treasury offices and other federal agencies to meet 

its workload requirements. 

Figure 13: OFS Employees and Detailees, November 21, 2008, through September 

30, 2012 

OFS’s overall staffing numbers declined from 198 in 2011 to 163 in 2012, 

but staffing levels within individual OFS offices have fluctuated according 

to the resources needed. Many OFS staff were not replaced because 

their skill sets were no longer needed; for example, many staff in the 

 

1

See GAO-12-229. 

Appendix III: Treasury’s Office of Financial 

Stability Staffing and Use of Private Sector 

Contracting 

Office of Financial 

Stability Staffing 
Appendix III: Treasury’s Office of Financial 

Stability Staffing and Use of Private Sector 

Contracting

Page 51 GAO-13-192 Troubled Asset Relief Program

Chief Investment Office were not replaced as the investment programs 

wound down.

According to Treasury officials, Treasury evaluates departing staff on a 

case-by-case basis to determine whether a vacancy needs to be filled 

and whether present staff can cover the departing staff’s responsibilities, 

and only one new staff person was added in 2012. In addition, OFS 

officials stated that OFS had detailed some of its staff to other Treasury 

programs, as Treasury had exited several programs and no longer had 

assets to manage for them and many of the other TARP programs were 

winding down. Treasury officials continue to anticipate that staffing levels 

in OFS offices will decrease over time, and some staff have moved or 

may relocate to other parts of Treasury or other federal agencies.

Treasury also has addressed several turnover-related staffing issues. We 

previously reported that a number of staff from the OFS leadership team 

departed in 2010 and 2011, and in 2013 the terms of two other leadership 

team members are scheduled to expire. As we previously reported, OFS 

addressed this leadership challenge by replacing the Assistant Secretary of 

Financial Stability with OFS’s former Chief Counsel in 2011 and replacing 

departing OFS leaders with existing OFS staff members (generally to term 

positions). We also reported that OFS had been addressing other staffing 

issues, including implementation of its staffing plan.

Since TARP was established, Treasury has relied on the private sector to 

assist OFS with TARP administration and operations. Treasury engages 

with private sector firms through financial agency agreements, contracts, 

and blanket purchase agreements.2

 

2

A blanket purchase agreement is a method of filling anticipated repetitive needs for 

supplies or services through qualified sources of supply. The agreement contains the 

basic terms and conditions governing the types of services the firms will provide. As 

specific needs arise, blanket purchase agreements allow Treasury to issue task orders to 

the firms describing the specific services required, establishing time frames, and setting 

pricing arrangements.

According to OFS procedures, 

financial agency agreements are used for services that cannot be 

provided with existing Treasury or contractor resources. Specifically, 

Treasury has relied on financial agents for asset management, 

transaction structuring, disposition services, custodial services, and 

administration and compliance support for the TARP housing assistance 

Contracts and Other 

Agreements Supporting 

TARP Administration and 

Operations
Appendix III: Treasury’s Office of Financial 

Stability Staffing and Use of Private Sector 

Contracting

Page 52 GAO-13-192 Troubled Asset Relief Program

programs. In addition, Treasury uses TARP contracts for a variety of 

legal, investment consulting, accounting, and other services and supplies.

Through September 30, 2012, Treasury had awarded 19 financial agency 

agreements, 13 of which remained active, and awarded or used 131 

contracts and blanket purchase agreements, of which about 40 percent 

remained active.3

Table 3: Cumulative Value of Contracts and Financial Agency Agreements in Support of TARP

As shown in table 3, the obligated value of the financial 

agency agreements and contracts totaled more than $900 million, with 

most of the funding going for financial agency agreements. The increase 

in obligations since 2010 is largely due to Treasury’s reliance on financial 

agents to support the oversight of TARP assets and the continued 

implementation of the housing programs over the last couple of years. 

Also, 3 of its financial agency agreements for transaction structuring and 

disposition services remained active.

Obligated value through 

fiscal year 2010

Obligated value through 

fiscal year 2011

Obligated value through 

fiscal year 2012

Financial agency agreements $327,355,188 $547,487,042 $722,512,644

Contracts 108,907,207 154,934,812 184,892,212

Total $436,262,395 $702,421,854 $907,404,856

Source: GAO analysis of Treasury data.

The vast majority of the financial agency agreement obligations shown 

above (approximately $525 million) are for Federal National Mortgage 

Association (Fannie Mae) and Federal Home Loan Mortgage Corporation 

(Freddie Mac), which provide administrative and compliance services, 

respectively, for the TARP housing programs.4

 

3

The 131 contracts and blanket purchase agreements include six contractual 

arrangements in which OFS is engaging vendors that have existing contracts with other 

Treasury offices or bureaus or with other federal agencies. For more information about 

Treasury’s use of financial agency agreements and contracts and blanket purchase 

agreements, see GAO, Treasury Continues to Implement Its Oversight System for 

Addressing TARP Conflicts of Interest, 

The two largest contracts 

are $35 million with PricewaterhouseCoopers, LLP for internal control 

services and $17 million with Cadwalader, Wickersham & Taft, LLP for 

GAO-12-984R (Washington, D.C.: Sept. 18, 2012).

4

Congress established Fannie Mae and Freddie Mac as government sponsored entities, 

chartering them as for-profit, shareholder-owned corporations to stabilize and assist the 

U.S. secondary mortgage market and facilitate the flow of mortgage credit.
Appendix III: Treasury’s Office of Financial 

Stability Staffing and Use of Private Sector 

Contracting

Page 53 GAO-13-192 Troubled Asset Relief Program

legal services. Treasury also has encouraged small and minority- and 

women-owned businesses to pursue opportunities for TARP contracts 

and financial agency agreements. The majority of these businesses 

participating in TARP are subcontractors.

Treasury has taken a number of actions since 2008, in part in response to 

recommendations we made, to establish a structured system to manage 

potential conflicts of interest involving its contractors and financial agents. 

The system is based on a regulation Treasury issued in interim form in 

2009 and final form in 2011 that prohibits retained entities from engaging 

in activities that create organizational or personal conflicts of interest 

without a waiver or mitigation under a Treasury-approved plan.5

Treasury has developed and implemented a multifaceted process to 

manage and oversee potential conflicts of interest that is managed by 

OFS’s Office of the Chief Compliance Officer. The process includes 

reviewing proposed contracts and financial agency agreements, 

approving contractor and financial agent mitigation plans, responding to 

conflict-of-interest inquiries from contractors and financial agents, 

verifying that contractors and financial agents are regularly certifying that 

they are preventing or properly mitigating actual or potential conflicts of 

interest, and preparing feedback reports that provide a snapshot of how 

each contractor and financial agent is performing with respect to conflictof-interest requirements. In addition, because the monitoring of conflicts 

of interest is based to some degree on self-reported information that 

contractors and financial agents submit, Treasury began conducting 

onsite design and compliance reviews in 2011. These reviews are 

designed to evaluate the effectiveness of contractors’ and financial 

agents’ internal controls and procedures for identifying and addressing 

conflicts of interest.

The 

regulation sets forth standards to address actual and potential conflicts 

that may arise, establishes responsibilities for contractors and financial 

agents in preventing conflicts from occurring, and outlines Treasury’s 

process for reviewing and addressing conflicts.

 

5

31 C.F.R. Part 31.

Managing Potential 

Conflicts of Interest
Appendix IV: Comments from the Department 

of the Treasury

Page 54 GAO-13-192 Troubled Asset Relief Program

Appendix IV: Comments from the 

Department of the Treasury
Appendix V: GAO Contacts and Staff 

Acknowledgments

Page 55 GAO-13-192 Troubled Asset Relief Program

Thomas J. McCool, (202) 512-2642 or mccoolt@gao.gov

A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov

Mathew J. Scire, (202) 512-8678 or sciremj@gao.gov

In addition to the contacts named above, Dan Garcia-Diaz; Gary Engel; 

and William T. Woods (lead directors); Marcia Carlsen; Lynda Downing; 

Harry Medina; Joseph O’Neill; John Oppenheim; Raymond Sendejas; and 

Karen Tremba (lead assistant directors); Donald Brown; Emily Chalmers; 

Rachel DeMarcus; Sarah Farkas; John Forrester; Christopher Forys; 

Jackie Hamilton; Heather Krause; Risto Laboski; Aaron Livernois; John 

Lord; Marc Molino; Dragan Matic; and Erin Schoening have made 

significant contributions to this report.

Appendix V: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts

Staff 

Acknowledgments
Related GAO Products

Page 56 GAO-13-192 Troubled Asset Relief Program

Treasury Continues to Implement Its Oversight System for Addressing 

TARP Conflicts of Interest. GAO-12-984R. Washington, D.C.: 

September 18, 2012.

Troubled Asset Relief Program: Further Actions Needed to Enhance 

Assessments and Transparency of Housing Programs. GAO-12-783. 

Washington, D.C.: July 19, 2012.

Foreclosure Mitigation: Agencies Could Improve Effectiveness of Federal 

Efforts with Additional Data Collection and Analysis. GAO-12-296. 

Washington, D.C.: June 28, 2012.

Troubled Asset Relief Program: Government’s Exposure to AIG Lessens 

as Equity Investments Are Sold. GAO-12-574. Washington, D.C.: 

May 7, 2012.

Capital Purchase Program: Revenues Have Exceeded Investments, but 

Concerns about Outstanding Investments Remain. GAO-12-301. 

Washington, D.C.: March 8, 2012.

Management Report: Improvements Are Needed in Internal Control over 

Financial Reporting for the Troubled Asset Relief Program. 

GAO-12-415R. Washington, D.C.: February 13, 2012.

Troubled Asset Relief Program: As Treasury Continues to Exit Programs, 

Opportunities to Enhance Communication on Costs Exist. GAO-12-229. 

Washington, D.C.: January 9, 2012

Financial Audit: Office of Financial Stability (Troubled Asset Relief 

Program) Fiscal Years 2011 and 2010 Financial Statements.

GAO-12-169. Washington, D.C.: November 10, 2011.

Troubled Asset Relief Program: Status of GAO Recommendations to 

Treasury. GAO-11-906R. Washington, D.C.: September 16, 2011.

Troubled Asset Relief Program: The Government’s Exposure to AIG 

Following the Company’s Recapitalization. GAO-11-716. Washington, 

D.C.: July 28, 2011.

Troubled Asset Relief Program: Results of Housing Counselors Survey 

on Borrowers’ Experiences with the Home Affordable Modification 

Program. GAO-11-367R. Washington, D.C.: May 26, 2011.

Related GAO Products
Related GAO Products

Page 57 GAO-13-192 Troubled Asset Relief Program

Troubled Asset Relief Program: Survey of Housing Counselors about the 

Home Affordable Modification Program, an E-supplement to 

GAO-11-367R. GAO-11-368SP. Washington, D.C.: May 26, 2011.

TARP: Treasury’s Exit from GM and Chrysler Highlights Competing 

Goals, and Results of Support to Auto Communities Are Unclear. 

GAO-11-471. Washington, D.C.: May 10, 2011.

Management Report: Improvements Are Needed in Internal Control Over 

Financial Reporting for the Troubled Asset Relief Program. 

GAO-11-434R. Washington, D.C.: April 18, 2011.

Troubled Asset Relief Program: Status of Programs and Implementation 

of GAO Recommendations. GAO-11-476T. Washington, D.C.: 

March 17, 2011.

Troubled Asset Relief Program: Treasury Continues to Face 

Implementation Challenges and Data Weaknesses in Its Making Home 

Affordable Program. GAO-11-288. Washington, D.C.: March 17, 2011.

Troubled Asset Relief Program: Actions Needed by Treasury to Address 

Challenges in Implementing Making Home Affordable Programs. 

GAO-11-338T. Washington, D.C.: March 2, 2011.

Troubled Asset Relief Program: Third Quarter 2010 Update of 

Government Assistance Provided to AIG and Description of Recent 

Execution of Recapitalization Plan. GAO-11-46. Washington, D.C.: 

January 20, 2011.

Troubled Asset Relief Program: Status of Programs and Implementation 

of GAO Recommendations. GAO-11-74. Washington, D.C.:

January 12, 2011.

Financial Audit: Office of Financial Stability (Troubled Asset Relief 

Program) Fiscal Years 2010 and 2009 Financial Statements. 

GAO-11-174. Washington, D.C.: November 15, 2010.

Troubled Asset Relief Program: Opportunities Exist to Apply Lessons 

Learned from the Capital Purchase Program to Similarly Designed 

Programs and to Improve the Repayment Process. GAO-11-47. 

Washington, D.C.: October 4, 2010.
Related GAO Products

Page 58 GAO-13-192 Troubled Asset Relief Program

Troubled Asset Relief Program: Bank Stress Test Offers Lessons as 

Regulators Take Further Actions to Strengthen Supervisory Oversight. 

GAO-10-861. Washington, D.C.: September 29, 2010.

Financial Assistance: Ongoing Challenges and Guiding Principles 

Related to Government Assistance for Private Sector Companies. 

GAO-10-719. Washington, D.C.: August 3, 2010.

Troubled Asset Relief Program: Continued Attention Needed to Ensure 

the Transparency and Accountability of Ongoing Programs. 

GAO-10-933T. Washington, D.C.: July 21, 2010.

Management Report: Improvements are Needed in Internal Control Over 

Financial Reporting for the Troubled Asset Relief Program. 

GAO-10-743R. Washington, D.C.: June 30, 2010.

Troubled Asset Relief Program: Treasury’s Framework for Deciding to 

Extend TARP Was Sufficient, but Could be Strengthened for Future 

Decisions. GAO-10-531. Washington, D.C.: June 30, 2010.

Troubled Asset Relief Program: Further Actions Needed to Fully and 

Equitably Implement Foreclosure Mitigation Programs. GAO-10-634. 

Washington, D.C.: June 24, 2010.

Debt Management: Treasury Was Able to Fund Economic Stabilization 

and Recovery Expenditures in a Short Period of Time, but Debt 

Management Challenges Remain. GAO-10-498. Washington, D.C.: 

May 18, 2010.

Troubled Asset Relief Program: Update of Government Assistance 

Provided to AIG. GAO-10-475. Washington, D.C.: April 27, 2010.

Troubled Asset Relief Program: Automaker Pension Funding and Multiple 

Federal Roles Pose Challenges for the Future. GAO-10-492. Washington, 

D.C.: April 6, 2010.

Troubled Asset Relief Program: Home Affordable Modification Program 

Continues to Face Implementation Challenges. GAO-10-556T. 

Washington, D.C.: March 25, 2010.

Troubled Asset Relief Program: Treasury Needs to Strengthen Its 

Decision-Making Process on the Term Asset-Backed Securities Loan 

Facility. GAO-10-25. Washington, D.C.: February 5, 2010.
Related GAO Products

Page 59 GAO-13-192 Troubled Asset Relief Program

Troubled Asset Relief Program: The U.S. Government Role as 

Shareholder in AIG, Citigroup, Chrysler, and General Motors and 

Preliminary Views on its Investment Management Activities. 

GAO-10-325T. Washington, D.C.: December 16, 2009.

Financial Audit: Office of Financial Stability (Troubled Asset Relief 

Program) Fiscal Year 2009 Financial Statements. GAO-10-301. 

Washington, D.C.: December 9, 2009.

Troubled Asset Relief Program: Continued Stewardship Needed as 

Treasury Develops Strategies for Monitoring and Divesting Financial 

Interests in Chrysler and GM. GAO-10-151. Washington, D.C.: 

November 2, 2009.

Troubled Asset Relief Program: Capital Purchase Program Transactions 

for October 28, 2008, through September 25, 2009, and Information on 

Financial Agency Agreements, Contracts, Blanket Purchase Agreements, 

and Interagency Agreements Awarded as of September 18, 2009. 

GAO-10-24SP. Washington, D.C.: October 8, 2009.

Troubled Asset Relief Program: One Year Later, Actions Are Needed to 

Address Remaining Transparency and Accountability Challenges. 

GAO-10-16. Washington, D.C.: October 8, 2009.

Debt Management: Treasury Inflation Protected Securities Should Play a 

Heightened Role in Addressing Debt Management Challenges. 

GAO-09-932. Washington, D.C.: September 29, 2009.

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-1048T. Washington, 

D.C.: September 24, 2009.

Troubled Asset Relief Program: Status of Government Assistance 

Provided to AIG. GAO-09-975. Washington, D.C.: September 21, 2009.

Troubled Asset Relief Program: Treasury Actions Needed to Make the 

Home Affordable Modification Program More Transparent and 

Accountable. GAO-09-837. Washington, D.C.: July 23, 2009.

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-920T. Washington, 

D.C.: July 22, 2009.
Related GAO Products

Page 60 GAO-13-192 Troubled Asset Relief Program

Troubled Asset Relief Program: Status of Participants’ Dividend 

Payments and Repurchases of Preferred Stock and Warrants. 

GAO-09-889T. Washington, D.C.: July 9, 2009.

Troubled Asset Relief Program: Capital Purchase Program Transactions 

for October 28, 2008, through May 29, 2009, and Information on Financial 

Agency Agreements, Contracts, Blanket Purchase Agreements, and 

Interagency Agreements Awarded as of June 1, 2009. GAO-09-707SP. 

Washington, D.C.: June 17, 2009.

Troubled Asset Relief Program: June 2009 Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-658. Washington, D.C.: 

June 17, 2009.

Auto Industry: Summary of Government Efforts and Automakers’ 

Restructuring to Date. GAO-09-553. Washington, D.C.: April 23, 2009.

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-504. Washington, D.C.: 

March 31, 2009.

Troubled Asset Relief Program: Capital Purchase Program Transactions 

for the Period October 28, 2008 through March 20, 2009 and Information 

on Financial Agency Agreements, Contracts, and Blanket Purchase 

Agreements Awarded as of March 13, 2009. GAO-09-522SP. 

Washington, D.C.: March 31, 2009.

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-539T. Washington, 

D.C.: March 31, 2009.

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-484T. Washington, 

D.C.: March 19, 2009.

Federal Financial Assistance: Preliminary Observations on Assistance 

Provided to AIG. GAO-09-490T. Washington, D.C.: March 18, 2009.

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-474T. Washington, 

D.C.: March 11, 2009.
Related GAO Products

Page 61 GAO-13-192 Troubled Asset Relief Program

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-417T. Washington, 

D.C.: February 24, 2009.

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-359T. Washington, 

D.C.: February 5, 2009.

Troubled Asset Relief Program: Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-296. Washington, D.C.: 

January 30, 2009.

Troubled Asset Relief Program: Additional Actions Needed to Better 

Ensure Integrity, Accountability, and Transparency. GAO-09-266T. 

Washington, D.C.: December 10, 2008.

Auto Industry: A Framework for Considering Federal Financial 

Assistance. GAO-09-247T. Washington, D.C.: December 5, 2008.

Auto Industry: A Framework for Considering Federal Financial 

Assistance. GAO-09-242T. Washington, D.C.: December 4, 2008.

Troubled Asset Relief Program: Status of Efforts to Address Defaults and 

Foreclosures on Home Mortgages. GAO-09-231T. Washington, D.C.: 

December 4, 2008.

Troubled Asset Relief Program: Additional Actions Needed to Better 

Ensure Integrity, Accountability, and Transparency. GAO-09-161. 

Washington, D.C.: December 2, 2008.

(250690)
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