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UNITED STATES DEPARTMENT OF THE TREASURY 

FOURTH TRANCHE REPORT TO CONGRESS 

JANUARY 7, 2009 

I. INTRODUCTION 

This Fourth Tranche Report to Congress meets the requirement for reporting at the $250 billion 

commitment level under section 105(b) of the Emergency Economic Stabilization Act of 2008 

(EESA). The recent transactions under the newly established Automotive Industry Financing 

Program and Targeted Investment Program, when combined with $187.5 billion of transactions 

under the Capital Purchase Program and the $40 billion transaction under the program for 

Systemically Significant Failing Institutions, bring the total amount of transactions to $266.9 

billion. Treasury will submit the next report when transaction levels reach the $300 billion level. 

The Report addresses the following six areas: 

• A description of all the transactions made during the reporting period. 

• A description of the pricing mechanism for the transactions. 

• A justification of the price paid for, and other financial terms associated with, the 

transactions. 

• A description of the impact of the exercise of such authority on the financial system. 

• A description of the challenges that remain in the financial system, including any 

benchmarks yet to be achieved. 

• An estimate of additional actions under the authority provided pursuant to the EESA that 

may be necessary to address such challenges. 

II. TRANSACTION INFORMATION BY PROGRAM 

This Fourth Tranche Report discusses transactions under three programs: the Capital Purchase 

Program (CPP), the Automotive Industry Financing Program (AIFP), and the Targeted 

Investment Program (TIP). Since the last tranche report, submitted to Congress on December 2, 

2008, Treasury has closed $65.4 billion in transactions under these three programs. A report 

listing all transactions under the Troubled Asset Relief Program is attached as Appendix 1, and 

has been posted on our web site. 

Capital Purchase Program 

Treasury continues to invest funds in financial institutions across the United States through the 

CPP, in order to build these institutions’ capital base and increase their capacity to lend to 

businesses and consumers. Since the last tranche report, Treasury has closed $26 billion in 

transactions under the CPP, bringing the total amount of funds disbursed under the CPP to 

$177.54 billion, with an additional $10 billion scheduled to settle at a later date. Treasury has 

completed CPP transactions with 215 United States financial institutions and Community 

Development Financial Institutions in over 40 states and Puerto Rico. 
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Under the CPP, Treasury will purchase up to $250 billion of senior preferred shares on 

standardized terms. The Program is available to qualifying U.S. controlled banks, savings 

associations, and certain bank and savings and loan holding companies engaged solely or 

predominately in financial activities permitted under the relevant law. We reported in detail on 

the CPP in Treasury’s First Tranche Report to Congress and Second Tranche Report to 

Congress, and provided an update in Treasury’s Third Tranche Report to Congress, and there 

have been no changes to the purpose or use of the CPP since the submission of these reports. 

Automotive Industry Financing Program 

Treasury announced a new program in December, the AIFP, to prevent a significant disruption of 

the American automotive industry, which would pose a systemic risk to financial market stability 

and have a negative effect on the economy of the United States. The program requires 

participating institutions to implement plans that will achieve long-term viability. Participating 

institutions must also adhere to rigorous executive compensation standards and other measures to 

protect the taxpayer’s interests, including limits on the institution’s expenditures and other 

corporate governance requirements. Guidelines for the AIFP are published on Treasury’s web 

site. Between December 29 and January 2, Treasury committed to provide $19.4 billion in 

TARP funds under this program, with an additional $4 billion subject to certain conditions. 

On December 29, 2008, Treasury purchased $5 billion of senior preferred equity with an 8% 

annual distribution right from GMAC LLC (GMAC) through the AIFP. Under the agreement, 

GMAC issued warrants to Treasury to purchase, for a nominal price, additional preferred equity 

in an amount equal to 5% of the preferred equity purchased. These warrants were exercised at 

closing of the investment transaction. The additional preferred equity provides for a 9% annual 

distribution right. Additionally, Treasury committed to lend up to $1 billion of TARP funds to 

GM so that GM can participate in a rights offering by GMAC in support of GMAC’s 

reorganization as a bank holding company. The rights offering is expected to close, and the loan 

to GM is expected to be funded, on January 16, 2009. The loan will be secured by GMAC 

equity interests owned by GM and those being acquired by GM in the rights offering, and it will 

be exchangeable at any time, at Treasury's option, for the GMAC equity interests being acquired 

by GM in the rights offering. The ultimate level of funding under this facility will depend upon 

the level of current investor participation in GMAC’s rights offering. 

Treasury completed an additional transaction with GM on December 31. Under the GM 

agreement, Treasury will provide GM with up to a total of $13.4 billion in a three-year loan from 

the TARP, secured by various collateral. Treasury funded $4 billion of this loan immediately, 

and committed to fund an additional $5.4 billion on January 16, 2009. Treasury will provide an 

additional $4 billion on February 17, 2009, subject to certain conditions. To protect taxpayers, 

the agreement requires GM to develop and implement a restructuring plan to achieve long-term 

financial viability. The restructuring plan is to be reviewed by a designee of the President, who 

will determine whether the goals of the restructuring have been met. If the President’s Designee 

does not find that the goals have been met, the loan will be automatically accelerated and will 

come due 30 days thereafter. This agreement also includes other binding terms and conditions 

designed to protect taxpayer funds, including compliance with certain enhanced executive 
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compensation and expense control requirements. Furthermore, Treasury received a warrant for 

shares of GM common stock and an additional senior unsecured note in the principal amount of 

$748.6 million. 

On January 2, 2009, Treasury provided a three-year $4 billion loan to Chrysler Holding 

LLC (Chrysler) under the new AIFP. The loan is secured by various collateral, including parts 

inventory, real estate, and certain equity interests held by Chrysler. Like the GM agreement, this 

agreement requires Chrysler to submit a restructuring plan to achieve long-term viability for 

review by the President’s designee and provides for acceleration of the loan if those goals are not 

met. The agreement includes other binding terms and conditions designed to protect taxpayer 

funds, including compliance with certain enhanced executive compensation and expense-control 

requirements. Furthermore, Treasury received a senior unsecured note of Chrysler payable to 

Treasury in the principal amount of $267 million. 

Targeted Investment Program 

Treasury also announced the Targeted Investment Program (TIP) in December. The TIP is 

designed to prevent a loss of confidence in financial institutions that could result in significant 

market disruptions, threatening the financial strength of similarly situated financial institutions, 

impairing broader financial markets, and undermining the overall economy. Institutions will be 

considered for this program on a case-by-case basis, based on a number of factors described in 

the program guidelines. These factors include the threats posed by destabilization of the 

institution, the risks caused by a loss of confidence in the institution, and the institution’s 

importance to the nation’s economy. Program guidelines for the TIP were published on 

Treasury’s web site on January 2, as required by section 101(d) of the EESA. 

Treasury completed the first transaction under the TIP on December 31, 2008, when it invested 

$20 billion in Citigroup perpetual preferred stock and warrants. Under the agreement with 

Citigroup, Treasury will receive an 8% annual dividend, payable quarterly. As part of this 

agreement, Citigroup must implement rigorous executive compensation standards and other 

restrictions on corporate expenditures. As previously disclosed on October 28, 2008, Treasury 

invested $25 billion in Citigroup through the CPP. 

 

III. ASSESSMENT OF CURRENT MEASURES AND THE CHALLENGES AHEAD 

Impact of the Transactions 

The measures Treasury has taken under EESA have been part of a comprehensive strategy to 

stabilize the financial system and housing markets, and strengthen our financial institutions. The 

strategy is working. Treasury’s actions, in concert with the work of other regulators, has 

stemmed a series of financial institution failures and made the financial system fundamentally 

more stable than it was when Congress passed EESA. 
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Treasury is monitoring the effects our strategy is having on lending and is working with banking 

regulators to develop appropriate ways of measuring these effects. Through the CPP, Treasury 

has moved rapidly to move capital into the system, with funds placed in large and small 

institutions in over 40 states and Puerto Rico. By injecting capital into healthy banks, the CPP 

has helped banks maintain strong balance sheets and eased the pressure on them to scale back 

their lending and investment activities while enabling greater lending capacity. We are still at a 

point of low confidence, due to the financial crisis and the economic downturn. As long as 

confidence remains low, banks will remain cautious about extending credit, and consumers and 

businesses will remain cautious about taking on new loans. As confidence returns, Treasury 

expects to see more credit demanded and extended. 

Treasury’s investment in GM, GMAC, and Chrysler prevented significant disruption to the 

economy, while putting the companies on a path to the major restructuring necessary to achieve 

long-term viability. GM and Chrysler had issued a substantial amount of debt that is widely 

distributed throughout the global financial system. A disorderly bankruptcy filing by GM and 

Chrysler would have called into question not only this debt, but also debt issued by other 

automotive companies. Potential losses on this debt would have impacted financial institutions, 

which are already suffering losses in this credit environment. In addition, GM and Chrysler 

employ over 150,000 people in 48 states, and provide healthcare and pension benefits for a large 

number of people. A disorderly bankruptcy could have negatively affected these individuals, as 

well as ancillary businesses such as auto dealers, part suppliers, and service providers. 

Treasury’s investment in Citigroup was necessary to prevent a significant adverse effect on U.S. 

and global financial markets. Citigroup is one of the nation’s largest financial institutions, 

providing commercial and retail banking services and other financial services in the United 

States and internationally. The company has some 200 million customer accounts and does 

business in more than 100 countries. At the end of the third quarter of 2008, Citigroup had assets 

of $2.05 trillion, making it the second largest banking organization in the United States in terms 

of assets. In an environment of high volatility and severe financial market strains, the loss of 

confidence in a major financial institution could result in significant market disruptions and 

threaten the financial strength of similarly situated financial institutions and thus broader 

financial markets and pose a threat to the overall economy. Treasury’s investment in Citigroup 

provided additional liquidity and has helped restore confidence in that institution. 

Challenges That Lie Ahead 

Treasury is actively engaged in developing additional programs to strengthen our financial 

system so that credit flows to our communities. We have made significant progress, but 

recognize there is no single action the federal government can take to end the financial market 

turmoil and the economic downturn. Treasury is confident that it is pursuing the right strategy to 

stabilize the financial system and support the flow of credit into the U.S. economy. 

As a result of Treasury’s decision to support GM, GMAC, and Chrysler, Treasury has effectively 

allocated the first $350 billion from the TARP. The actual disbursement of allocated but 

undisbursed funds is subject, in the case of the CPP, to approval of bank capital applications, 
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many of which remain with the regulators and will not reach Treasury for review for some 

weeks, and to closing of CPP transactions, which in turn remain subject to documentation, 

shareholder approvals in certain cases, and other closing procedures. Further, disbursement is 

also subject to finalizing the structure of the Federal Reserve-Treasury consumer credit program 

(TALF), which we discussed in the Third Tranche Report to Congress. In the very short term, 

the allocated but not yet disbursed TARP balances, in conjunction with the powers of the Federal 

Reserve and the FDIC, are likely to provide the necessary resources to address a significant 

financial market event. Treasury believes, however, that the remainder of the TARP funds will 

be needed to support financial market stability.