DEPARTMENT OFTHE TREASURY

WASHINGTON, D.C.

SECRETARY OF THE TREASURY

April 20, 2009

Ms. Elizabeth Warren

Chair

Congressional Oversight Panel

732 North Capitol Street, NW

Rooms C-320 and C-617

Mailstop: COP

Washington, DC 20401

Dear Chair Warren:

I am writing to update you on the current state of funds provided to Treasury under the Emergency

Economic Stabilization Act. As you know, Congress released the second half ofthe $700 billion

allocated to Treasury through EESA in January. This letter is intended to ensure you are aware of our

current projections concerning the remaining funds available.

When the Obama Administration took office, Treasury had already committed over half ofthe funds

allocated for the Troubled Asset Relief Program. As you can see in Chart 1, Treasury projects that the

total usage ofthe programs announced under the previous administration will be $355.4 billion. This total

includes $117.4 billion in exceptional relief committed to ArG, Citigroup, Bank ofAmerica, Chrysler and

General Motors, $218 billion projected to be disbursed through the Capital Purchase Program (CPP), and

$20 billion committed under the original announcement for the Term Asset-Backed Securities Loan

Facility (TALF).

Today, Treasury estimates there is at least $109.6 billion in resources authorized under EESA still

available, but we anticipate that $25 billion will be paid back under the CPP over the next year - for a

total of $134.6 billion. This figure assumes - as reported by the Government Accountability Office - that

the projected amount committed to existing programs will be $590.4 billion. Because the most relevant

consideration is how much funds will remain available for new programs, we believe that our estimates

are conservative for two reasons. First, our estimates assume 100 percent take-up ofthe $220 billion made

available for our housing and liquidity programs, which require significant voluntary participation from

financial participants. Ifany ofthose programs experience less than full take-up, additional funds will be

available. Secondly, our projections anticipate only $25 billion will be paid back under CPP over the next

year, a figure lower than many private analysts expect.

As you can see in Chart 2, we have broken down our commitment of EESA funds under four categories:

1) Exceptional Relief: The first category includes funds already committed for exceptional reliefto

financial institutions and the auto industry, which have either been disbursed or will- with near

certainty - be needed in its entirety. When the Obama administration took office, the Treasury

Department had already committed $117.4 billion under this category, including $40 billion to

ArG, $52.5 billion to Citigroup and Bank ofAmerica and $24.9 billion to Chrysler, General
Motors and their financing companies. Since January 20th, Treasury has committed an additional

$30 billion to AIG and $5 billion to auto suppliers, for a total of $152.4 billion.

2) Capital Purchase Program: The second category consists ofthe CPP, which was announced at

$250 billion under the previous administration. Thus far, $199 billion has been disbursed through

the CPP. Although the CPP is still an ongoing program, the deadline for applications for most

types ofbanks has passed, allowing us to estimate projected usage. While there have recently

been a significant number ofwithdrawals from smaller banks in the pipeline, our current estimate

- considering future take-up from banks and insurance companies - is that $218 billion will be

disbursed.

3) Housing and Liquidity Initiatives: The third category consists ofnew initiatives directed towards

addressing weaknesses in the housing and credit markets. These programs include:

• The Making Home Affordable Program, with a maximum funding level of $50 billion.

(An additional $25 billion commitment will be funded under authority granted by the

Housing and Economic Recovery Act.)

• The Consumer and Business Lending Initiative, with a maximum funding level of $95

billion. Currently, our projection is that up to $80 billion will be allocated to the TALF,

including:

o $20 billion announced by the previous administration to support purchases of

newly-issued securities backed by credit card loans, auto loans, student loans

and SBA loans

o $35 billion announced in February that will also support purchases ofnew1yissued securities - but with asset classes expanded to include equipment leases

and commercial mortgage-backed securities

o $25 billion for the purchase oflegacy securities through the TALF structure as

part of our Public Private Investment Program.

Additionally, while securities backed by SBA loans are among the asset classes originally

included in the TALF, we chose to allocate up to $15 billion from the CBLI toward more

direct and immediate efforts to unlock the secondary market for small business loans.

• The Public Private Investment Program <PPIP), with a maximum gross funding level

of $100 billion. This program designed to address the problem oflegacy securities and

legacy loans called for a net increase in funding of $75 billion from the EESA as well as

$25 billion devoted towards legacy securities through the TALF that is already counted

as part ofthe CBLI.

Together, the maximum funding available to these programs is $220 billion. As these are new

programs designed to restart illiquid markets and are completely dependent on voluntary private

sector participation, it is of course possible that there will be less than 100 percent usage ofthe

maximum amounts available. Yet, in the interest of providing a very conservative estimate of

remaining funds, we have currently assumed 100 percent usage ofthese new programs.

4) Paybacks: Seven recipients ofTARP funds through the CPP have already repaid Treasury and

several others have announced their intention to do so in the near future. We have made a

conservative estimate of$25 billion in repayments over the next year.

2
In addition to the programs discussed above, Treasury has stated its intention to provide additional

support to the auto industry - contingent on an acceptable restructuring - as well as capital under the

Capital Assistance Program. While Treasury has not announced specific commitments to these programs

or any other, we believe that even under the conservative estimate of available funds described here, we

have the resources to move forward implementing all aspects of our Financial Stability Plan.

Please let me know ifyou have any other questions on this matter.

Enclosures

Identical letters sent to:

The Honorable Chris Dodd, Chairman

The Honorable Richard Shelby, Ranking Member

The Honorable Barney Frank, Chairman

The Honorable Spencer Bachus, Ranking Member

The Honorable Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program

The Honorable Gene Dodaro, Acting Comptroller General ofthe United States

3
Chart 1: Projected Use ofTARPlFinancial Stability Plan Funds by Administration

Programs Announced Under Previous Administration

AIG $40 billion

CitilBank of America (Targeted Investment Program and $52.5 billion

Guarantees)

Autos $24.9 billion

Capital Purchase Program $218 billion

TALF 1.0 $20 billion

Programs Announced Under Obama Administration

Housing

AIG (Second Investment)

Auto Suppliers

Expansion ofConsumer and Business Lending Initiativel

TALF Asset Expansion (New Issuance)

TALF for Legacy Securities

Unlocking SBA Lending Markets

Public Private Investment Program

$50 billion

$30 billion

$5 billion

$35 billion

$25 billion

$15 billion

$100 billion ($75 billion net)

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Total

Total Remaininf!

Additional Funding

Autos

To be determined

Capital Assistance Program

Ability to convert existing preferred stockfrom CPP,

plus mandatory convertible capital to be determined

$565.4 billion

$134.6 billion

1 The Consumer and Business Lending Initiative also includes the $20 billion committed to TALF under the

previous administration, amounting to an overall total of$80 billion under TALF and $95 billion under the CBLI.
Chart 2: Projected Use ofTARP/Financial Stability Plan Funds by Category

Exceptional Relief

AIG $70 billion

CitilBank of America (Targeted Investment Program and $52.5 billion

Guarantees)

Autos $24.9 billion

Auto Suppliers $5 billion

[S-;'-;;tot~l----~~==~=~~~~~~~~====~~~=~~~~~=~~~-=~~~~~~~~~~~=~~~==~==~~~~~~~~~~~~~~::::::~~=~~:~~=~:~=~~~~~~~==~==Jiff!!!Jllio!i=~=-]

Capital Purchase Program

Capital Purchase Program $218 billion

Housing and Liquidity Initiatives

Housing

Consumer and Business Lending Initiative

TALF 1.0

TALF Asset Expansion (New Issuance)

TALF for Legacy Securities

Unlocking SBA Lending Markets

Public Private Investment Program

$50 billion

$20 billion

$35 billion

$25 billion

$15 billion

$100 billion ($75 billion net)

Total

Total Remaining

Additional Funding

Autos

To be determined

Capital Assistance Program

Ability to convert existing preferred stockfrom CPP,

plus mandatory convertible capital to be determined

$565.4 billion

$134.6 billion