TROUBLED ASSET 

RELIEF PROGRAM

As Treasury Continues 

to Exit Programs, 

Opportunities to 

Enhance 

Communication on 

Costs Exist

Report to Congressional Addressees

January 2012

GAO-12-229

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-229, a report to 

congressional addressees

January 2012

TROUBLED ASSET RELIEF PROGRAM

As Treasury Continues to Exit Programs, 

Opportunities to Enhance Communication on Costs 

Exist

What GAO Found

Many TARP programs continue to be in various stages of unwinding and some 

programs, notably those that focus on the foreclosure crisis, remain active. The 

figure provides an overview of selected programs and the amount disbursed 

and outstanding, as applicable. Treasury has articulated broad principles for 

exiting TARP, including exiting TARP programs as soon as practicable and 

seeking to maximize taxpayer returns, goals that at times conflict. Some of the 

programs that Treasury continues to unwind, such as investments in American 

International Group, Inc. (AIG), require Treasury to actively manage the timing 

of its exit as it balances its competing goals. For other programs, such as the 

Capital Purchase Program (CPP)—which was created to provide capital to 

financial institutions—Treasury’s exit will be driven primarily by the financial 

condition of the participating institutions. Consequently, the timing of Treasury’s 

exit from TARP remains uncertain. 

Treasury continues to manage the various TARP programs using OFS staff, 

financial agents, and contractors. Overall OFS staffing has declined slightly for 

the first time as staff responsible for managing TARP investment programs and 

those in term-appointed leadership positions have departed. However, staff in 

some offices within OFS have increased—for example, in the Office of Internal 

Review, which helps to ensure that financial agents and contractors comply with 

laws and regulations. Through September 30, 2011, about half of Treasury’s 

116 contracts remained active, along with 14 of the 17 financial agency 

agreements. Treasury has continued to strengthen its management and 

oversight of contractors and financial agents and conflict-of-interest 

requirements. In response to a GAO recommendation, OFS has finalized a plan 

to address staffing levels and expertise that includes identifying critical positions 

and conducting succession planning, in light of the temporary nature of its work.

Treasury and CBO project that TARP costs will be much lower than the amount 

authorized when the program was initially announced. Treasury’s fiscal year

2011 financial statement, audited by GAO, estimated that the lifetime cost of 

TARP would be about $70 billion—with CPP expected to generate the most 

lifetime income, or net income in excess of costs. OFS also reported that from 

inception through September 30, 2011, the incurred cost of TARP transactions 

was $28 billion. Although Treasury regularly reports on the cost of TARP 

programs and has enhanced such reporting over time, GAO’s analysis of 

Treasury press releases about specific programs indicate that information about 

estimated lifetime costs and income are included only when programs are 

expected to result in lifetime income. For example, Treasury issued a press 

release for its bank investment programs, including CPP, and noted that the 

programs would result in lifetime income, or profit. However, press releases for 

investments in AIG, a program that is anticipated to result in a lifetime cost to 

Treasury, did not include program-specific cost information. Although press 

releases for programs expected to result in a cost to Treasury provide useful 

transaction information, they exclude lifetime, program-specific cost estimates.

Why GAO Did This Study

The Emergency Economic Stabilization 

Act of 2008 authorized the Department 

of the Treasury (Treasury) to create the 

Troubled Asset Relief Program (TARP), 

a $700 billion program designed to 

restore the liquidity and stability of the 

financial system. The act also requires 

that GAO report every 60 days on TARP 

activities. This report examines (1) the 

condition and status of TARP programs; 

(2) Treasury’s management of TARP 

operations, including staffing for the 

Office of Financial Stability (OFS) and 

oversight of contractors and financial 

agents; and (3) what is known about the 

direct and indirect costs of TARP. To do 

this work, GAO analyzed audited 

financial data for various TARP 

programs; reviewed documentation 

such as program terms and internal 

decision memos; analyzed TARP cost 

estimates from the Congressional 

Budget Office (CBO), the Office of 

Management and Budget, and Treasury; 

and interviewed CBO and OFS officials.

What GAO Recommends

Treasury should enhance its programspecific press releases to the public by 

consistently including lifetime cost 

estimates when reporting on program 

activities and results. Treasury agreed 

with our recommendation and plans to 

implement it by including a link to its 

cost reporting in future TARP programspecific press releases.

View GAO-12-229 or key components.

For more information, contact Thomas J. 

McCool at (202) 512-2642 or mccoolt@gao.gov.
Highlights of GAO-12-229 (Continued) 

United States Government Accountability Office

Consistently providing greater transparency about cost 

information for specific TARP programs could help 

reduce potential misunderstanding of TARP’s results.

While Treasury can measure and report direct costs, 

indirect costs associated with the moral hazard created 

by the government’s intervention in the private sector are 

more difficult to measure and assess.

Status of Selected Programs, as of September 30, 2011 

Note: TARP programs with disbursements of less than $600 million are excluded. Outstanding assets are presented at book value.

a

TARP-funded housing programs include a variety of programs to assist homeowners. Unlike the investment programs, TARP-funded housing programs 

do not hold assets to manage and sell; therefore, there are no outstanding assets.

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.
Page i GAO-12-229 Troubled Asset Relief Program 

Letter 1 

Background 3

While Many TARP Programs Continue to Wind Down, Others 

Remain Active 8

Treasury Continues to Address Staffing Needs While Also Relying 

on Financial Agents and Contractors to Support TARP 

Administration and Programs 40

Although Estimated Lifetime TARP Costs Have Decreased 

Significantly, Treasury Could Enhance Its Communication about 

the Costs of TARP 51

Conclusions 57

Recommendation for Executive Action 58

Agency Comments and Our Evaluation 58

Appendix I Scope and Methodology 62

Appendix II Information on Programs Treasury Has Exited 67

Appendix III Comments from the Department of the Treasury 70

Appendix IV GAO Contacts and Staff Acknowledgments 72

Related GAO Products 73

Tables

Table 1: List of Programs Supported by TARP Funding 4

Table 2: Contracts and Financial Agency Agreements in Support of 

TARP, Fiscal Years 2010 through 2011 44

Table 3: Top Five Financial Agency Agreements 45

Table 4: TARP Contracts, Financial Agency Agreements, and 

Subcontracts with Small and Minority- and Women-Owned 

Businesses through Fiscal Years 2010 and 2011 46

Contents
Page ii GAO-12-229 Troubled Asset Relief Program 

Figures

Figure 1: Timeline for TARP Implementation and Unwinding, 

October 3, 2008, through December 30, 2011 6

Figure 2: Status of CPP, as of September 30, 2011 10

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

of September 30, 2011 11

Figure 4: Number of Institutions Missing Scheduled Dividend or 

Interest Payments by Quarter, as of November 30, 2011 13

Figure 5: Status of CDCI, as of September 30, 2011 16

Figure 6: Status of AIFP, as of September 30, 2011 18

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

September 30, 2011, Compared to the IPO Share Price and 

Post-IPO Share Price Needed to Recoup Treasury’s 

Investment 20

Figure 8: Status of AIG Investment Program, as of September 30, 

2011 23

Figure 9: Status of SBA 7(a) Securities Purchase Program, as of 

September 30, 2011 26

Figure 10: Status of TALF, as of September 30, 2011 28

Figure 11: Status of PPIP, as of September 30, 2011 31

Figure 12: TARP-funded Housing Programs, Amounts Obligated 

and Disbursed, and Reported Activity through September 

2011 34

Figure 13: HAMP Modifications Started Monthly from January 2010 

through September 2011 36

Figure 14: OFS Employees and Detailees, November 21, 2008, 

through September 30, 2011 41

Figure 15: Comparison of Treasury’s Lifetime Cost and Income 

Estimates for TARP Programs, September 30, 2010, and 

September 30, 2011 53

Figure 16: Status of the Asset Guarantee Program, as of September 

30, 2011 68

Figure 17: Status of the Targeted Investment Program, as of 

September 30, 2011 69
Page iii GAO-12-229 Troubled Asset Relief Program 

Abbreviations

ABS asset-backed securities

AIFP Automotive Industry Financing Program

AIG American International Group, Inc.

CBO Congressional Budget Office

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

EESA Emergency Economic Stabilization Act

Federal Reserve Board of Governors of the Federal Reserve System

FRBNY Federal Reserve Bank of New York

FHA Federal Housing Administration

GM General Motors

HAMP Home Affordable Modification Program

IPO initial public offering

IRS Internal Revenue Service

MHA Making Home Affordable

Moody’s Moody’s Investors Service, Inc.

OFS Office of Financial Stability

OIR Office of Internal Review

OMB Office of Management and Budget

PPIF public-private investment fund

PPIP Public-Private Investment Program

SBA Small Business Administration

SPV special purpose vehicle

TALF Term Asset-backed Securities Loan Facility

TARP Troubled Asset Relief Program

Treasury Department of the Treasury

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Page 1 GAO-12-229 Troubled Asset Relief Program

United States Government Accountability Office 

Washington, DC 20548

January 9, 2012

Congressional Addressees

The Emergency Economic Stabilization Act (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 with the Dodd-Frank Wall 

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

 TARP 

cost estimates were never projected to reach the authorized amounts and 

over time these projected costs have declined as some banks have 

repaid their assistance and other programs move closer to their 

termination dates.3

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

implementing TARP and its activities have been broad in scope. Treasury 

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

activities, which include injecting capital into key financial institutions, 

However, an increasing number of banks that 

received Capital Purchase Program investments are falling behind on 

paying dividends related to their government assistance, and TARPfunded housing programs continue to struggle 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 of the $700 billion allocated for TARP.

 
Page 2 GAO-12-229 Troubled Asset Relief Program

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, 2011.4

To assess the condition and status of TARP programs, we analyzed 

program-specific data on obligations, disbursements, income, and other 

financial information from our audits of OFS’s financial statements; 

reviewed program documentation such as program terms and internal 

decision memos; and interviewed OFS officials responsible for TARP 

programs and financial reporting.

Specifically, it examines (1) the 

condition and status of TARP programs; (2) Treasury’s management of 

TARP operations, including staffing for OFS and oversight of contractors 

and financial agents; and (3) what is known about the direct and indirect 

costs of TARP.

5 We determined that the financial 

information used in this report is sufficiently reliable to assess the 

condition and status of TARP programs. We also leveraged our past 

reporting on TARP, as well as that of the Congressional Oversight Panel 

and the Special Inspector General for TARP, as appropriate.6

 

4

We have issued a TARP report at least every 60 days as required by EESA in Section 

116, 12 U.S.C. § 5226 (codified at 12 U.S.C. § 5226). Unless otherwise noted, we provide 

information throughout this report as of September 30, 2011.

To 

understand OFS’s progress in staffing and its oversight of contractors and 

financial agents we collected staffing data and trends from 2008 through 

September 30, 2011; analyzed select contracts and financial agreements; 

and interviewed OFS officials. We determined that the staffing data were 

sufficiently reliable for our purposes by corroborating the data with other 

sources. To determine what information was available about the costs of 

5

See GAO, Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) 

Fiscal Years 2011 and 2010 Financial Statements, GAO-12-169 (Washington, D.C.: 

Nov.10, 2011), Financial Audit: Office of Financial Stability (Troubled Asset Relief 

Program) Fiscal Years 2010 and 2009 Financial Statements, GAO-11-174 (Washington, 

D.C.: Nov.15, 2010), and Financial Audit: Office of Financial Stability (Troubled Asset

Relief Program) Fiscal Year 2009 Financial Statements, GAO-10-301 (Washington, D.C.: 

Dec. 9, 2009). 

6

Pursuant to EESA’s requirements, the Congressional Oversight Panel terminated on 

April 3, 2011. 
Page 3 GAO-12-229 Troubled Asset Relief Program

TARP, we analyzed cost data from reports issued by the Congressional 

Budget Office (CBO), the Office of Management and Budget (OMB), and 

Treasury, focusing on Treasury cost estimates for our analyses. We also 

interviewed officials from CBO and Treasury about cost estimate 

methodologies.

We conducted this performance audit from June 2011 to January 2012 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 signed on October 3, 2008, the U.S. financial system 

faced a severe crisis that has 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 depend 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 economy remains vulnerable, with unemployment 

higher than in the recent past. Globally, concerns about the stability of 

European banks and countries, especially Greece, escalated in 2011—

demonstrating that problems remain in the global economy and financial 

markets.

Background
Page 4 GAO-12-229 Troubled Asset Relief Program

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

TARP funding.7

Table 1: List of Programs Supported by TARP Funding

(See table 1.)

Program Program description

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. 

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.

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.

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.

Capital Purchase Program (CPP) As the largest TARP program, CPP was designed to provide capital investments 

to financially viable financial institutions. Treasury received preferred shares and 

subordinated debentures, along with warrants.

Consumer and Business Lending Initiative 

programs

a

• Community Development Capital Initiative (CDCI) provided capital to 

Community Development Financial Institutions (CDFI) by purchasing 

preferred stock and subordinated debentures.

• 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.

 

7

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

first and second year of implementation: GAO, 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-12-229 Troubled Asset Relief Program

Program Program description

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.

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

unemployment and house price declines.

c

• 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. 

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.

Targeted Investment Program (TIP) Sought to foster market stability and strengthen the economy by making case-bycase 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.

Source: GAO.

a

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

or before a specified date. 

b

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

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

c

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

GAO, 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.: Mar. 17, 

2011). 

Some of these programs have begun to unwind.8

 

8

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

Capital Assessment Program, and the Targeted Investment Program are no longer active 

and Treasury no longer holds assets related to these programs that it must manage, as 

we have previously reported. For more information, see appendix II. 

Figure 1 provides an 

overview of key dates for TARP implementation and the unwinding of 

some programs.
Page 6 GAO-12-229 Troubled Asset Relief Program

Figure 1: Timeline for TARP Implementation and Unwinding, October 3, 2008, through December 31, 2011

EESA requires that Treasury, OMB, and CBO report the costs of TARP. 

Section 105 of EESA directed Treasury to provide Congress with regular 

TARP Cost Estimates
Page 7 GAO-12-229 Troubled Asset Relief Program

cost and transaction updates for TARP and section 202 addresses OMB’s 

and CBO’s reporting duties. Specifically, OMB must prepare semiannual 

reports for the President and Congress that include lifetime cost 

estimates for Treasury’s TARP-related purchases and guarantees.9

Treasury provides OMB with the program-specific transaction data and 

cost calculations, which OMB reviews and approves before incorporating 

into its semiannual reports. Section 202 also directed CBO to conduct 

assessments of each OMB report, including the cost of purchases and 

guarantees. These analyses must be included in a separate CBO report 

issued within 45 days of each OMB semiannual report.10

Treasury, OMB, and CBO report lifetime subsidy cost estimates (cost 

estimates) for TARP and its direct loan, equity investment, and other 

credit programs using the credit reform budgetary accounting 

methodology established in the Federal Credit Reform Act of 1990.11

Credit reform accounting requires that agencies develop a “subsidy” cost 

of loans and loan guarantees at disbursement that considers projections 

of future cash flows and the costs of financing. Administrative costs such 

as personnel and travel expenses are not included. The subsidy cost is 

the net present value of all cash flows associated with the transaction 

calculated by discounting all future payments back to the current period at 

one of two specific rates. The Federal Credit Reform Act of 1990 calls for 

the use of an interest rate on comparable Treasury debt while EESA 

requires Treasury to use an interest rate adjusted for market risk. These 

subsidy costs are re-estimated annually to include actual cash flows and 

changes in estimated future performance. According to Treasury, its 

lifetime cost estimates represent the department’s best estimate of what 

TARP and its programs will ultimately cost the taxpayer.12

 

9

Section 123 of EESA requires the use of credit reform accounting established by the 

Federal Credit Reform Act of 1990 to calculate cost estimates for budgetary purposes for 

TARP transactions that include equity investments, loans, and loan guarantees. 

10See Sections 105 and 202 of EESA. 

11Other credit programs consist of the Asset Guarantee Program and the FHA Short 

Refinance Program. Federal Credit Reform Act of 1990, Pub. L. No. 101-508, Title XII, 

Subtitle B, § 13201, 104 Stat. 1388, 1388-61 (1990). 

12In some cases, these cost estimates suggest 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. We refer to 

these estimates as “lifetime income” estimates throughout the report. 
Page 8 GAO-12-229 Troubled Asset Relief Program

TARP programs continue to wind down, and some programs have ended. 

Treasury has stated its goals for the exit process for many programs, but 

as we and others have reported, these goals at times conflict.13

• protect taxpayer investment and maximize overall investment returns 

within competing constraints,

Treasury 

has stated that when deciding to sell assets and exit TARP programs, it 

will strive to:

• promote the stability of financial markets and the economy by 

preventing disruptions,

• bolster markets’ confidence to increase private capital investment, 

and

• dispose of the investments as soon as it is practicable.

For example, we previously reported that deciding to unwind some of its 

assistance to 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 they strove to balance 

these competing goals, but have no strict formula for doing so. Rather, 

they ultimately relied on the best available information in deciding when to 

start exiting this program.

Moreover, Treasury’s ability to exercise control over the timing of its exit 

from TARP programs is limited in some cases. For example, Treasury will 

likely decide when to exit AIG based on market conditions but Treasury 

has less control over its exit from PPIP because the program’s exit 

depends on the timing of each public-private investment fund (PPIF) 

selling its investments. Treasury continues to face this tension in its goals 

 

13See 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). 

While Many TARP 

Programs Continue to 

Wind Down, Others 

Remain Active
Page 9 GAO-12-229 Troubled Asset Relief Program

with a number of TARP programs as they continue to unwind. Throughout 

this section we provide the status of each TARP program that remains 

open or still holds assets that need to be managed, including when the 

program will end (or stop acquiring new assets and no longer receive 

funding) and when Treasury will exit the program (or sell assets it 

acquired while the program was open). We also provide information on 

outstanding assets, as applicable—both the book value and the market 

value—as of September 30, 2011.14 Also included are the lifetime 

estimated costs for each program calculated by Treasury. Later in this

report we discuss the reasons for recent changes in several of Treasury’s 

cost estimates between September 2010 and September 2011.

While repayments and income from CPP investments have exceeded the 

original outlays, financial strength will determine when remaining 

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

$204.9 billion to 707 financial institutions nationwide from October 2008 

through December 2009.15

 

14Note that some numbers in our program figures will not total due to rounding. 

As of September 30, 2011, Treasury had 

received $208.1 billion in repayment and income from its CPP 

investments, exceeding the amount originally disbursed by $3.2 billion 

(see fig. 2). The repayment and income amount included $182.4 billion in 

repayments of original CPP investments, as well as $11.2 billion in 

dividends, interest, and fees; $7.6 billion in warrant income; and $6.9 

billion in net proceeds in excess of costs. After accounting for writeoffs 

and realized losses on sales totaling $2.6 billion, CPP had $17.3 billion in 

15GAO-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). 

Many Programs Continue 

to Wind Down, and 

Treasury Faces Trade-offs 

in Determining When to 

Exit

Financial Strength Will

Determine When Remaining 

CPP Institutions Exit Program
Page 10 GAO-12-229 Troubled Asset Relief Program

outstanding investments as of September 30, 2011. Treasury estimates 

lifetime income of $13 billion for CPP as of September 30, 2011.16

Figure 2: Status of CPP, as of September 30, 2011

a

According to data in a Treasury report, nearly half (317) of the 707 

institutions that originally participated in CPP had exited the program as 

of September 30, 2011.

The total amount of repayments includes about $400 million from institutions that transferred to CDCI 

and $2.2 billion from institutions that transferred to the Small Business Lending Fund. 

17

 

16Throughout 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. 

Of the 317 institutions that have exited CPP, 

about 40 percent, or 126 institutions, fully exited by repaying their 

17See Department of the Treasury, Troubled Asset Relief Program (TARP) Monthly 105(a) 

Report-September 2011 (Washington, D.C.: Oct. 11, 2011). 
Page 11 GAO-12-229 Troubled Asset Relief Program

investments.18 Another 52 percent, or 165 institutions, exited CPP by 

exchanging their securities under other federal programs: 28 through 

CDCI and 137 through the Small Business Lending Fund (see fig. 3).19

Figure 3: Status of Institutions that Received CPP Investments, as of September 30, 

2011

Of 

the remaining 8 percent of CPP recipients that exited the program, 13 

went into bankruptcy or receivership, 11 had their securities sold by 

Treasury, and 2 merged with another institution.

 

18Additionally, 12 institutions have made partial repayments but remain in the program.

19CDCI is a TARP program that provides capital to CDFIs that have a federal depository 

institution supervisor. The program is structured like CPP but expands to include credit 

unions and provides more favorable capital terms. The Small Business Lending Fund was 

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

(2010), enacted on September 27, 2010. The Fund is a $30 billion capital support program 

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

to small businesses.
Page 12 GAO-12-229 Troubled Asset Relief Program

Also, according to data in a Treasury report, as of September 30, 2011, 

390 of the original 707 institutions remained in CPP but accounted for 

only 8.4 percent of the original investments. Much of the $17.3 billion in 

outstanding investments was concentrated in a relatively small number of 

institutions. The largest single outstanding investment was $3.5 billion, 

and the top four outstanding investments totaled $6.8 billion. The top 25 

remaining CPP investments accounted for $11.3 billion.

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 164 as of November 30, 2010, to 

226 as of November 30, 2011.20

These 226 institutions had missed a cumulative total of 1,170 payments.

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.

21

 

20Under 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 November 30, 2011, 184 institutions had missed three or more 

payments, and 97 had missed six or more. The total amount of missed 

dividend and interest payments was $429 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 158 in November 2011, or about 42 percent of 

21These 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.
Page 13 GAO-12-229 Troubled Asset Relief Program

institutions still in the program (see fig. 4).22

Figure 4: Number of Institutions Missing Scheduled Dividend or Interest Payments 

by Quarter, as of November 30, 2011

This increase occurred 

despite reduced program participation, and the proportion of those 

missing scheduled payments has risen accordingly. The number of 

institutions missing payments stabilized in recent quarters; however, most 

of these institutions had repeatedly missed payments. In particular, 119 of 

the 158 institutions that missed payments in November 2011 had also 

missed payments in each of the previous three quarters. Moreover, these 

158 institutions had missed an average of 4.8 additional previous 

payments, and only 7 had never missed a previous payment.

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. 

 

22In 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 14 GAO-12-229 Troubled Asset Relief Program

On July 19, 2011, Treasury announced that it had, for the first time, 

exercised its right to elect members to the boards of directors of two of 

the remaining CPP institutions.23 In considering whether to nominate 

directors, Treasury said that it would proceed in two steps. First, after an 

institution misses five dividend or interest payments, Treasury sends OFS 

staff members to observe board meetings. Second, once an institution 

has missed six dividend payments, Treasury decides whether to 

nominate a board member based on a variety of considerations, including 

what it learns from the board meetings, the institution’s financial condition, 

the function of its board of directors, and the size of its investment.24

The financial strength of the participating institutions will largely determine 

the speed at which institutions repay their investments and exit and the 

amount of total lifetime income. 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. The institutions’ 

financial strength will also be a primary factor in their decisions to make 

dividend payments, and institutions that continue to miss payments may 

also have difficulty exiting CPP. Moreover, dividend rates will increase for 

remaining institutions beginning in late 2013, up to 9 percent, which may 

prompt institutions to repay their investments as that dividend increase 

approaches. If broader interest rates are low, especially approaching the 

dividend reset, banks could have further incentive to redeem their 

preferred shares. Treasury will need to balance the goals of protecting 

taxpayer-supported investments while expeditiously unwinding the 

program. Treasury officials told us that Treasury’s practice was generally 

to hold, rather than sell, its CPP investments.25

 

23According to the standard terms of CPP, after participants have missed six dividend 

payments—consecutive or not—Treasury can exercise its right to appoint two members to 

the board of directors for that institution.

As a result, Treasury’s 

ability to exit the program largely depends on the ability of institutions to 

24Treasury reported that it might not nominate directors immediately after an institution 

misses six payments but would develop a pool of candidates screened by executive 

search firms it engaged. Board members whom Treasury nominates cannot be 

government employees and must have the same fiduciary duties and obligations to the 

institution’s shareholders as any other member of the board and receive the same 

compensation from the institution. 

25As noted in figure 3, Treasury has already sold some CPP investments. According to its 

Section 105(a) reports Treasury may sell its holdings or exchange CPP securities “in 

limited cases, in order to protect the taxpayers’ interest in the value of an investment and 

to promote the objectives of EESA.” 
Page 15 GAO-12-229 Troubled Asset Relief Program

repay their investments. However, Treasury officials noted that if 

warranted, Treasury could change its practice in the future and sell its 

investments. In an upcoming report, we plan to describe the financial 

condition of the remaining CPP institutions and compare them with 

institutions that already exited and those that never participated.

Treasury has disbursed $570 million to its 84 CDCI participants, 28 of 

which had previously participated in CPP (see fig. 5).26 As we previously 

reported, CDCI is structured similarly to CPP in that it provides capital to 

financial institutions by purchasing equity and subordinated debt from 

them.27

 

26Institutions 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. While no CDFIs have 

repaid Treasury’s investment as of September 30, 2011, Treasury has 

thus far received $10 million in dividend payments from CDCI 

participants. Lastly, Treasury expects CDCI will cost approximately $182 

million over its lifetime, almost a third of the $570 million obligated to the 

program. Officials stated that CDCI has a cost, while CPP is estimated to 

result in lifetime income, in part because CDCI provides a lower dividend 

rate that increases the financing costs. CDCI also does not require 

warrants of participating institutions, which would otherwise offset 

Treasury’s costs.

27While 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. 

Financial Strength of CDCI 

Participants Will Affect When 

Treasury Exits the Program 
Page 16 GAO-12-229 Troubled Asset Relief Program

Figure 5: Status of CDCI, as of September 30, 2011

a

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

Treasury first announced CDCI in October 2009; however, 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 and Treasury’s ability to exit the program. As of September 30, 

2011, 5 of the 84 CDCI participants had missed at least one dividend or 

interest payment, 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, 

which provides an incentive for some borrowers to repay before that rate 

change occurs. As with CPP, Treasury officials indicated that while 

Treasury’s current practice is to hold its CDCI investments, that strategy 

could change and Treasury could opt to sell its CDCI shares.
Page 17 GAO-12-229 Troubled Asset Relief Program

Treasury has received more than $40 billion for its roughly $80 billion 

AIFP investment, in large part from its participation in GM’s IPO and its 

exit from Chrysler. In November and December 2010, Treasury received 

$13.5 billion from its participation in GM’s IPO and $2.1 billion for selling 

preferred stock in GM. Treasury’s investment in Chrysler ended with the 

repayment of $5.1 billion in loans in May 2011 and the $560 million in 

proceeds that Treasury received from the sale of its remaining equity 

stake to Fiat in July 2011. Treasury received $2.7 billion from its sale of 

Ally Financial trust preferred securities in March 2011.28

Treasury’s timing of its exit from GM and Ally Financial—and ultimate 

return on its investment—will depend on how it balances its competing 

goals of maximizing taxpayer returns and selling its shares as soon as 

practicable. As figure 6 shows, all of the $37.3 billion in outstanding AIFP 

funds is from Treasury’s investments in GM and Ally Financial, including 

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

common stock.29

 

28This amount includes $127 million of proceeds in excess of cost. Ally Financial was 

formerly known as the General Motors Acceptance Corporation, or GMAC.

29If Treasury converted its mandatory convertible preferred securities, its common equity 

in Ally Financial would increase to more than 80 percent.

Treasury’s Balancing of 

Competing Goals and Market 

Conditions for AIFP Will Affect 

the Timing and Outcome of Its 

Future Exit
Page 18 GAO-12-229 Troubled Asset Relief Program

Figure 6: Status of AIFP, as of September 30, 2011

Note: Ally Financial was formerly known as the General Motors Acceptance Corporation, or GMAC. 
Page 19 GAO-12-229 Troubled Asset Relief Program

The timing of Ally Financial’s IPO will be critical to Treasury’s exit 

strategy, but Ally Financial’s mortgage liabilities could hamper the 

company’s efforts to launch an IPO and makes the timing of Treasury’s 

exit from Ally Financial unknown.30

Treasury officials told us that they continue to monitor market conditions 

and other factors in determining a divestment strategy for GM, but share 

prices would have to increase significantly from current levels to fully 

recoup Treasury’s investment in GM. As we previously reported, GM’s 

share price would have to increase by more than 60 percent from the IPO 

share price of $33 to an average of more than $54 for Treasury to fully 

recoup its investment.

On March 31, 2011, Ally Financial filed 

a registration statement with the Securities and Exchange Commission 

for a proposed IPO but a date has yet to be announced for the IPO. 

Additionally, after six straight quarterly profits, including growing asset 

balances for its auto loan business, the company posted a loss of $210 

million in the third quarter of 2011, dropping from a profit of about $270 

million in the third quarter of 2010, primarily due to losses in its mortgage 

business. The company attributed these losses to the negative impact of 

the mortgage servicing rights valuation, resulting from a decline in interest 

rates and market volatility. Additionally, Ally Financial has $12 billion in 

debt coming due in 2012.

31

 

30Treasury has reported that given that it holds 74 percent of Ally Financial’s common 

equity, it is likely to take 1 to 2 years following the IPO for the Treasury to dispose of its 

ownership stake. Additionally, Treasury officials have not ruled out the possible sale of its 

equity but noted that only a small number of institutions could digest an acquisition the 

size of Ally Financial. Therefore, this course of action appears to be less feasible than an 

IPO exit strategy. 

However, over roughly the past year, GM’s 

shares have traded far below the IPO share price—with shares closing 

above $33 only twice since March 2011, and as of September 30, 2011, 

the shares closed at $20.18 (fig. 7).

31GAO-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 20 GAO-12-229 Troubled Asset Relief Program

Figure 7: GM’s Share Price from November 18, 2010, through September 30, 2011, Compared to the IPO Share Price and PostIPO Share Price Needed to Recoup Treasury’s Investment

The recent decline in the value of Ally Financial and reductions in the 

share prices of common stock holdings in GM highlight how market 

conditions contribute to the risk of AIFP. The projected lifetime cost of 

AIFP was $23.6 billion as of September 30, 2011, an increase from the 

$14.7 billion estimate as of September 30, 2010. This change is largely 

due to the decrease in the trading price of GM’s common stock and the 

decrease in the estimated value of Ally Financial. As Treasury balances 

its goals of exiting as soon as practicable and maximizing taxpayer 

returns, it will need to time its divestiture of GM and Ally Financial shares 

to help recover as much as possible of its investment. Treasury faces the 

tension of holding shares long enough to potentially recoup its 

investment, or divesting sooner, likely at a loss.

In September 2008, prior to TARP, AIG received government 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 created by FRBNY. These preferred shares were 

later converted to common stock and transferred to Treasury. In addition 

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

November 2008 by purchasing preferred shares that were also later 

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

Treasury’s Plans to Sell AIG 

Shares Are Driven by Market 

Conditions
Page 21 GAO-12-229 Troubled Asset Relief Program

recapitalization of AIG, Treasury owned 1.655 billion TARP and nonTARP common shares in AIG.32

Treasury began taking steps in January 2011 to unwind its interest in AIG 

by conducting the first underwritten offering of its AIG common shares. As 

we previously reported, Treasury sold 200 million TARP and non-TARP 

shares in May 2011.33 Overall, Treasury officials said that Treasury 

realized a gain because the 200 million shares were sold at $29 per 

share, which was more than Treasury’s overall cost basis of $28.7269 per 

share.34

 

32Specifically, in September 2008, a trust created by FRBNY received 100,000 shares of 

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

exchange for FRBNY providing AIG a revolving loan. This transaction predated TARP. In 

November 2008, using TARP funds, Treasury purchased $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, also using TARP funds, 

Treasury received 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 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. 

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 (giving Treasury a total of 1.655 billion common 

shares in AIG (or approximately 92 percent of the company). We refer to these shares as 

“non-TARP shares.” 

Treasury’s 1.455 billion remaining shares after the sale consist of 

33The sale included about 132 million TARP AIG common shares on which Treasury had 

a realized loss and about 68 million non-TARP AIG common shares on which Treasury 

had a realized gain. 

34See 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 to be $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 22 GAO-12-229 Troubled Asset Relief Program

960 million TARP and 495 million non-TARP shares. (AIG also sold 100 

million shares of common stock during this offering.) The costs for 

underwriting, Treasury’s financial advisors, and Treasury’s legal counsel 

were paid by, and will continue to be paid by, AIG. Treasury, however, 

pays the costs for assistance it receives from FRBNY. Based on the 

September 30, 2011, market price of AIG common stock, in selling all of 

its AIG common shares, Treasury expects to incur a lifetime cost of $24.3 

billion for its TARP shares and receive income of $12.8 billion for its nonTARP shares, giving it a lower than expected net estimated cost of $11.5 

billion for assistance to AIG (see fig. 8).35

 

35For example, in March 2010, CBO estimated that the cost of Treasury’s approximately 

$70 billion in TARP assistance (the exchanged Series D/E and F stock mentioned in 

footnote 34) to AIG would be about $36 billion. Unlike the other lifetime estimates reported 

here, the lifetime income estimate of $12.8 billion for Treasury’s non-TARP shares has not 

been audited by GAO, although it has been audited. The audited estimate was obtained 

from the Department of the Treasury, Agency Financial Report (Washington, D.C.: Nov. 

15, 2011).
Page 23 GAO-12-229 Troubled Asset Relief Program

Figure 8: Status of AIG Investment Program, as of September 30, 2011

a

When AIG was recapitalized in January 2011, Treasury exchanged all of its Series E preferred stock 

and some of its Series F preferred stock into common stock (the remainder of the Series F preferred 

stock was exchanged for preferred stock in AIA Aurora LLC and American Life Insurance Company 

Holdings LLC, two special purpose vehicles wholly owned by AIG). As a result of these exchanges, 

subsequent stock sale, and repayments on the special purpose vehicle preferred stock, Treasury now 

holds approximately 1.455 billion shares of AIG TARP common stock and about $8.858 billion in AIG 

TARP preferred interest (the AIA Aurora LLC special purpose vehicle). 

b

AIG originally issued $16 billion of preferred shares in a special purpose 

vehicle (SPV) called AIA Aurora LLC (or AIA), an SPV created by FRBNY 

to hold shares of certain portions of AIG’s foreign life insurance 

businesses. Likewise, AIG issued $9 billion of preferred shares in an SPV 

called American Life Insurance Company (ALICO) Holdings LLC, which 

was created to hold AIG’s ALICO holdings. AIG issued the shares to 

FRBNY in December 2009 in exchange for a $25 billion reduction in 

FRBNY’s revolving loan to AIG. As part of the recapitalization plan 

executed on January 14, 2011, AIG redeemed FRBNY’s preferred shares 

During the AIG recapitalization, Treasury also exchanged its Series C shares of non-TARP preferred 

stock into common stock. Currently, Treasury holds 495 million shares of non-TARP common stock. 
Page 24 GAO-12-229 Troubled Asset Relief Program

by drawing down the Series F equity facility and selling assets. In turn, 

FRBNY transferred to Treasury the proceeds, along with a cross 

collateralization agreement against certain other AIG businesses, held for 

sale. Since the recapitalization, AIG has used the additional sales 

proceeds to reduce the remaining liquidation preferences of Treasury’s 

preferred interests in the AIA and ALICO SPVs.

Treasury has not announced any time frames for selling its AIG 

investments, but as it exits this assistance it needs to balance selling its 

AIG stock as soon as practicable based on market conditions with 

protecting taxpayers’ interests. Treasury officials said that the agency 

would work to avoid economic losses during this exit. To that end, 

Treasury officials said that the agency had waited to proceed with its first 

underwritten offering of AIG common stock until (1) it reacquainted the 

investment community with AIG and (2) AIG executed and closed other 

transactions, such as the March 2011 sale of MetLife equity securities 

and a subsequent March transaction that reduced the preferred interests 

in the AIA SPV by approximately $5.6 billion.36 The first underwritten 

offering of Treasury’s AIG common shares occurred in May 2011. 

Treasury expects to use underwritten offerings to sell most of its common 

stock in AIG, with assistance from AIG. While Treasury generally prefers 

to sell the common stock that it holds through underwritten offerings, it 

could also decide to sell stock through other mechanisms, including more 

frequent at-the-market offerings.37

To sell its AIG stock, officials said that the agency planned to regularly 

conduct analyses, consider market challenges, and rely on AIG to 

facilitate Treasury’s offerings. Treasury officials have said that they would 

continue to conduct analyses using factors such as AIG’s share price, 

investor interest in AIG stock, and possible future restructuring. Treasury 

officials also expect to face several challenges when disposing AIG stock. 

First, because Treasury owns a significant amount of AIG stock—both as 

a percentage of total company stock and in absolute terms—the amount 

of shares the market can absorb may be limited. Second, continued price 

 

36An “underwritten offering” is a method of issuing shares that targets one or more 

underwriters, who buy them for their own account and then attempt to sell them to other 

investors. 

37An “at-the-market offering” is the sale of securities by an issuer into the public markets 

at prevailing market prices.
Page 25 GAO-12-229 Troubled Asset Relief Program

volatility in the domestic and global insurance markets could impede 

growth in these insurance markets. Third, the continued low interest rate 

environment could likely lead to lower investment incomes and overall 

profits for AIG, which in turn could affect Treasury’s opportunities to sell 

its AIG shares. According to Treasury officials, Treasury expects to rely 

on AIG to prepare and file certain paperwork with the Securities and 

Exchange Commission and provide other assistance when Treasury sells 

its remaining AIG shares.38

Treasury purchased 31 SBA 7(a) securities between March and 

September 2010 in an attempt to alleviate liquidity strains in secondary 

markets for SBA 7(a) loans.

Given the decline in AIG’s stock price since 

January 2011 and the recent volatility in the stock market, when 

Treasury’s exit will be completed is unknown. Treasury will also need to 

balance the tension of its competing goals by deciding whether it should 

exit even if the stock value is below Treasury’s break-even amount.

39

 

38This information is included in the registration rights portion of the December 2010 

recapitalization plan. 

Treasury announced in June 2011 that it 

intended to sell these securities and has sold nearly three-quarters of the 

portfolio. As of October 2011, Treasury has sold 23 securities. Treasury 

has eight securities remaining to be sold and projects lifetime income of 

$3.9 million (see fig. 9).

39The SBA 7(a) program is SBA’s primary program for assisting small businesses to 

obtain access to credit when they cannot obtain it from private lending institutions. The 

program provides credit for working capital and other business needs. 

Treasury Continues Selling SBA 

7(a) Securities to Expeditiously 

Exit Markets
Page 26 GAO-12-229 Troubled Asset Relief Program

Figure 9: Status of SBA 7(a) Securities Purchase Program, as of September 30, 

2011

Note: This figure represents financial information as of September 30, 2011. It does not include 

information about securities sold after that date. 

a

The program’s first activity was in March 2010, although it was first announced in March 2009. 

b

Treasury officials took into account market effects when they considered 

exiting Treasury’s portfolio of SBA 7(a) securities. For example, Treasury 

analyzed SBA lending and securitization volumes, which had recovered 

to precrisis levels.

The program’s funding ended in September 2010, though some purchases that were previously 

committed to prior to September were fulfilled after that date. 

40

 

40Our previous reporting on SBA 7(a) lending and securitization volumes demonstrated 

declines during the onset of the financial crisis in 2008, though they recovered from their 

lows in fiscal year 2010 based on SBA data. See 

According to Treasury officials, Treasury also 

consulted with its external advisor, EARNEST Partners, to understand the 

potential effect of its sales on the markets. According to Treasury officials, 

EARNEST Partners advised Treasury that its portfolio was small enough 

not to affect liquidity in the $15 billion market for SBA 7(a) securities. 

Moreover, the firm advised Treasury that it had received significant 

GAO-11-74. 
Page 27 GAO-12-229 Troubled Asset Relief Program

market interest in the securities after Treasury announced its intention to 

sell them. Treasury officials concluded that it was an opportune time to 

begin selling these securities without negatively affecting markets.

Treasury officials stated that they considered several tradeoffs in deciding 

to sell the securities this year, rather than holding them for longer. Exiting 

quickly appears to be the main consideration, although Treasury officials 

stated that they balanced this with promoting financial stability and 

protecting the taxpayer. To determine what prices are reasonable to 

accept as it continues to sell these securities, Treasury requested market 

price estimates from two companies for each security it held and 

compared that to a break-even price and a reserve price, below which it 

would require additional approvals to proceed with the sale. While 

Treasury might have maximized taxpayer returns by holding the securities 

longer, according to Treasury officials, it faced prepayment risk that could 

have reduced the securities’ long-term earning potential.41

The Federal Reserve established TALF to reopen the securitization 

markets in an effort to improve access to credit for consumers and 

businesses.42

 

41Prepayment risk is the risk associated with the early, unscheduled return of principal. 

Because Treasury paid a premium to purchase these securities, any prepayments would 

result in losses for the amount that Treasury paid in excess of par.

Treasury agreed to contribute as much as $4.3 billion to 

provide credit protection to FRBNY for TALF loans should borrowers 

neglect to repay and subsequently surrender the asset-backed securities 

(ABS) or commercial mortgage-backed securities (CMBS) pledged as 

42TALF 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 by which similar debt instruments—such as loans, leases, or receivables—are 

aggregated into pools, and interest-bearing securities backed by such pools are then sold 

to investors. These asset-backed securities (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. Commercial mortgage-backed 

securities (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). 

Treasury Expects Lifetime 

Income from TALF and to Exit 

the Program by 2015 
Page 28 GAO-12-229 Troubled Asset Relief Program

collateral.43

Figure 10: Status of TALF, as of September 30, 2011

To date, Treasury has disbursed $100 million for start up 

costs related to the TALF SPV, TALF LLC (see fig. 10). This SPV 

receives a portion of the interest income earned on TALF loans that can 

be used to purchase any borrower-surrendered collateral from FRBNY, 

referred to as excess interest.

a

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

in March 2009. 

b

FRBNY stopped issuing new TALF loans in 2010.

The book value of Treasury’s outstanding investments is the same as the $100 million contributed by 

Treasury to the TALF SPV. The market value of Treasury’s outstanding investments is the net book 

value for the $100 million TALF contribution calculated using Credit Reform Accounting. 

44

 

43Initially, Treasury was responsible for 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.

Treasury officials 

report that FRBNY TALF loan balances have fallen from $29.7 billion in 

September 2010 to $11.3 billion as of September 30, 2011. Agency 

44TALF 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. 
Page 29 GAO-12-229 Troubled Asset Relief Program

officials also indicated that all TALF loans are current and borrowers 

continue to pay down their loans.

The excess interest in TALF LLC grew by more than 30 percent between 

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

As a result, if the TALF LLC balance 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, given 

that it will receive 90 percent of funds remaining in TALF LLC after loans 

are repaid and the program ends. In addition, the equity that borrowers 

hold in TALF collateral has grown since TALF loans were first issued.45

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 due in 2015. However, should any assets be 

surrendered to TALF LLC, Treasury could be involved in TALF beyond 

that date as it may be required to lend to TALF LLC to purchase and 

manage assets until they are sold or reach maturity.

As of September 30, 2011, Treasury expects that TALF will result in 

lifetime income of $421 million. Despite these positive trends, FRBNY and 

Treasury staff continue to monitor market conditions and credit rating 

agency actions that could affect TALF assets. Moreover, as we have 

previously reported, market value fluctuations could affect future results. 

In particular, continued volatility in global markets could be reflected in 

CMBS pricing because, according to Treasury officials, CMBS has 

exhibited greater correlation with investor sentiment and broad volatility in 

other risk assets versus other types of ABS.

 

45The FRBNY establishes 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 sub 

sector. 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 more likely to pay off the loan and keep the pledged collateral. 

See GAO-10-25 for more details. 
Page 30 GAO-12-229 Troubled Asset Relief Program

Treasury created PPIP, partnering with private funds, to purchase 

troubled mortgage-related assets from financial institutions. PPIFs are in 

their 3-year investment period, which starts at a fund’s inception date. 

There were nine PPIFs established through PPIP.46 The investment 

period ends for each of the remaining PPIFs between October and 

December 2012, at which time the PPIFs can no longer draw money from 

Treasury or make new investments.47

According to Treasury, PPIFs have accessed about 80 percent of the 

equity and debt available through Treasury and private investors as of 

September 30, 2011, and have repaid a total of $1.2 billion in debt 

financing as of September 30, 2011. Treasury estimates that PPIP will 

ultimately result in lifetime income of about $2.4 billion (see fig. 11). 

However, the ultimate results will depend on a variety of factors, including 

when PPIFs choose to divest and the performance of the assets they 

hold.

Once the investment period ends, 

PPIFs must begin the process of unwinding their positions and must 

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

this period for up to two additional years for each PPIF. One fund notified 

Treasury in September 2011 that it terminated its investment period and 

therefore will no longer actively invest. Therefore, this fund has begun to 

unwind.

 

46One PPIF liquidated in the first quarter of 2010. 

47PPIFs received an approximately equal share of equity from Treasury and private 

investors. PPIFs also received access to credit from Treasury. PPIFs draw on these funds 

to invest in eligible RMBS and CMBS. 

Remaining PPIP Funds 

Continue to Invest, 

Although One Fund Is 

Unwinding Prior to 

Expected End Date
Page 31 GAO-12-229 Troubled Asset Relief Program

Figure 11: Status of PPIP, as of September 30, 2011

a

PPIFs began their investment periods in 2009. Active PPIFs will continue to invest until the 

investment period ends in 2012. The program was first announced in March 2009. 

b

While PPIFs are in the investment period, Treasury officials said that their 

role is to follow the progress of each PPIF’s investment strategy, the risks 

being taken in each portfolio, and the target returns for each portfolio. In 

this role, Treasury staff and contractors monitor compliance with PPIP 

terms. Also, Treasury has hired a contractor to provide investment fund 

consulting and analysis of PPIF portfolios.

The stipulated exit date is 2017, though the program could be extended through 2019. 
Page 32 GAO-12-229 Troubled Asset Relief Program

Current PPIP terms stipulate an exit by 2017.48 Unlike some other TARP 

programs, Treasury officials do not face the same consideration of 

competing goals in exiting the program, given that the terms of the 

program dictate when the PPIFs must wind down. However, Treasury 

officials noted that PPIFs can liquidate at any time. Given that one PPIF 

has chosen to end its investments as of September 30, 2011, it is 

possible that if others follow the program could end sooner than 

estimated. Such action by PPIFs would affect Treasury’s estimates for 

future income from the program when it ends. Officials also noted that the 

program was designed to encourage firms to deleverage after the 

investment period, at which time PPIFs would no longer have access to 

debt financing from Treasury. Once the investment period concludes, the 

PPIFs can no longer access funds from Treasury and must pay down the 

Treasury loan and make distributions to the partners as RMBS and 

CMBS are sold. Officials noted that this program structure creates an 

incentive for PPIFs to sell their assets promptly once their access to 

Treasury credit ends. Treasury officials noted that they were not 

concerned about the effect of PPIP’s eventual wind down on markets, as 

the 5-year period for unwinding would likely mitigate any potential impact.

 

48While PPIP is scheduled to end in 2017, which is 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 33 GAO-12-229 Troubled Asset Relief Program

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

preserving homeownership, Treasury has allocated $45.6 billion in TARP 

funds to three programs: Making Home Affordable (MHA), which has 

several components; Hardest Hit Fund (HHF); and the Department of 

Housing and Urban Development’s Federal Housing Administration (FHA) 

Short Refinance Program (see fig. 12). Treasury could potentially 

disburse TARP funds under these three programs for several more 

years—until September 2020 in the case of the FHA Short Refinance 

program. Unlike other TARP-funded programs, the expenditures under 

these three housing programs are direct outlays of funds with no 

provision for repayment. Given these characteristics, Treasury does not 

face the same tension between exiting programs as soon as practicable 

and maximizing taxpayer returns as it does with some other TARP 

programs.

Unlike Most Other 

Programs, TARP-Funded 

Housing Programs Remain 

Ongoing and Represent 

Direct Outlays of TARP 

Funds
Page 34 GAO-12-229 Troubled Asset Relief Program

Figure 12: TARP-funded Housing Programs, Amounts Obligated and Disbursed, 

and Reported Activity through September 2011

a

Borrowers have until December 31, 2012, to accept their trial period plan for HAMP by making a 

timely first trial payment. Trial modifications must be successful for at least 3 months before 

borrowers can convert into a permanent modification. Incentive payments can be made for up to 5 

years after the date of conversion from a trial modification. Additionally, servicers can take several 

months before submitting loan data for incentive payments. As a result, Treasury officials estimated 

that the last HAMP incentive payment would likely occur sometime in mid-2018. 

b

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

help eligible borrowers facing financial distress avoid foreclosure by 

Treasury’s estimated lifetime cost estimates reflect the actual outlay of funds to the housing 

programs and do not utilize the same credit reform accounting as the other program-specific lifetime 

cost estimates. 
Page 35 GAO-12-229 Troubled Asset Relief Program

reducing their monthly first lien mortgage payments to more affordable 

levels (31 percent of their monthly income).49 Treasury announced HAMP 

on February 18, 2009. Borrowers have until December 31, 2012, to 

accept an offered trial period plan by making a timely first trial period 

payment. Under HAMP, Treasury shares the cost of lowering borrowers’ 

monthly payments from 38 to 31 percent of monthly income for a 5-year 

period with the mortgage holder or investors. Treasury also provides a 

series of incentive payments to servicers, investors, and borrowers if 

specific program conditions are met. Treasury originally announced that 

up to 3 to 4 million borrowers would be helped under HAMP.50 Through 

September 2011, Treasury reported that 856,974 permanent 

modifications had been started and, as shown in figure 13, monthly 

activity to date peaked during the early part of 2010.51

 

49To be eligible for HAMP: (1) the property must be owner occupied and the borrower’s 

primary residence; (2) the property must be a single-family property (one to four units) with 

a maximum unpaid principal balance on the unmodified first lien mortgage that is equal to 

or less than $729,750 for a one-unit property; (3) the loan must have been originated on or 

before January 1, 2009; and (4) the monthly first lien mortgage payment must be more 

than 31 percent of the homeowner’s gross monthly income.

These results likely 

reflect Treasury’s decision to require all servicers starting on June 1, 

2010, to perform full verification of borrower’s eligibility for HAMP before 

initiating a trial modification (previously servicers were allowed to offer 

trial modifications using unverified information provided by the borrower). 

Monthly trial modification starts during September 2011 were the lowest 

reported since January 2010. Treasury recently announced that it had 

launched a nationwide advertisement campaign to increase awareness of 

the MHA program among eligible homeowners.

50We have made a number of recommendations to Treasury regarding its efforts to 

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

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

16, 2011). 

51Under HAMP, borrowers must successfully complete a trial modification of at least 3 

months (90 days) before receiving a permanent modification.
Page 36 GAO-12-229 Troubled Asset Relief Program

Figure 13: HAMP Modifications Started Monthly from January 2010 through September 2011

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:52

• 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 2011, servicers reported completing 18,043 short sales 

and 514 deeds-in-lieu under the program.

 

52Treasury’s MHA program also has the Home Affordable Unemployment Program that 

does not entail the use of TARP or other federal program funds. The Unemployment 

Program provides temporary forbearance to homeowners who are unemployed and 

requires servicers participating in MHA to grant qualified unemployed borrowers a 

forbearance period during which their mortgage payments are temporarily reduced or 

suspended for a minimum of 12 months while they look for new jobs. Borrowers can apply 

for a HAMP modification upon finding employment or prior to the expiration of the 

forbearance period. Treasury reported that 14,996 Unemployment Program forbearance 

plans had been started through August 2011. 
Page 37 GAO-12-229 Troubled Asset Relief Program

• Home Price Decline Protection Incentives. Home Price Decline 

Protection Incentives provides investors with additional incentives for 

HAMP modifications of loans on properties located in areas where 

home prices have recently declined and where investors are 

concerned that price declines may persist. Through September 2011, 

Treasury has paid about $135 million to investors in program 

incentives to support the HAMP modification of 83,028 loans.

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

nongovernment sponsored enterprise loans to evaluate the benefit of 

principal reduction for mortgages with a loan-to-value ratio of 115 

percent or greater when evaluating a homeowner for a HAMP first lien 

modification. While servicers are required to evaluate homeowners for 

PRA, they are not required to reduce principal as part of the 

modification. PRA can be a component of a HAMP trial or permanent 

modification. Through September 2011, servicers reported having 

started 29,342 permanent modifications that had the principal reduced 

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 

modified under HAMP, participating program servicers must offer to 

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

protocol.53

• Government loans (FHA- and RD-HAMP). FHA and the Department 

of Agriculture’s Rural Housing Services (RHS) have implemented 

programs to modify FHA-insured or RHS-guaranteed first lien 

mortgage loans in a manner complementary to HAMP. Each of these 

programs provides a borrower with an affordable monthly mortgage 

payment equal to 31 percent of his or her monthly gross income and 

This assistance can result in a modification or even full or 

partial extinguishment of the second lien. Through September 2011, 

servicers reported starting 45,705 second lien modifications, of which 

6,332 had the second lien fully extinguished.

 

53In order to be eligible for a Second Lien Modification Program modification, the loan 

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

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

premodification monthly payment greater than $100; and can be modified only once under 

the program.
Page 38 GAO-12-229 Troubled Asset Relief Program

requires the borrower to complete a trial payment plan before the loan 

is permanently modified. If the modified FHA-insured or RHSguaranteed mortgage loan meets Treasury’s eligibility criteria, the 

borrower and servicer can receive TARP-funded incentive payments 

from Treasury. Treasury reported that there were 4,671 permanent 

FHA-HAMP modifications that had been started through September 

2011. According to Treasury officials, servicers have not reported any 

activity for the Rural Development (RD)-HAMP program as of 

September 30, 2011.

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

Treasury will provide incentive payments to servicers and investors if 

they partially or fully extinguish second liens associated with an FHA 

Short Refinance. According to Treasury officials, no second liens have 

been extinguished, and no incentive payments have been made 

under the Treasury/FHA Second Lien Program as of September 30, 

2011.

To facilitate this refinance opportunity, Treasury will provide incentives 

under its TARP-funded FHA2LP to servicers and investors that 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 officials, servicers have reported no activity under FHA2LP as of 

September 30, 2011.

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

TARP funds for the Hardest Hit Fund (HHF), which seeks to help 

homeowners in the 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 have experienced 

either steep home price declines or high levels of unemployment in the 

economic downturn. 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). According to Treasury, it 

paid approximately $700 million to the states for the HHF program as of 
Page 39 GAO-12-229 Troubled Asset Relief Program

the end of September 2011 and the states reported having helped about 

19,025 homeowners during this approximate time period.

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 to qualify 

for an FHA Short Refinance loan provided that 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 losses, if any, associated with 

providing FHA Short Refinance loans originated on or before December 

31, 2012. Treasury’s commitment extends until September 2020, and to 

the extent that FHA experiences losses on those refinanced mortgage 

loans, Treasury will pay claims up to the predetermined percentage after 

the 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. Treasury has 

estimated that the letter of credit fee will be $55 million over the life of the 

program. As of August 31, 2011, FHA had guaranteed 334 loans with a 

total face value of $73 million under the refinance program. No defaults 

had occurred on these guarantees to date. As of August 31, 2011, 

Treasury has paid a total of $4.9 million to Citibank ($1.9 million during 

fiscal year 2011) in fees as the letter of credit issuer.
Page 40 GAO-12-229 Troubled Asset Relief Program

As we have identified in previous reports, Treasury still faces staffing 

challenges, including recent turnover stemming from the departure of 

term-appointed staff, but it has been addressing these challenges. Overall 

staffing numbers steadily increased from 2008 through 2010 but began 

declining for the first time in 2011 (see fig. 14).

Treasury Continues to 

Address Staffing 

Needs While Also 

Relying on Financial 

Agents and 

Contractors to 

Support TARP 

Administration and 

Programs 

OFS Staffing Declined 

Slightly for the First Time 

and Treasury Is Addressing 

Turnover-Related Staffing 

Issues
Page 41 GAO-12-229 Troubled Asset Relief Program

Figure 14: OFS Employees and Detailees, November 21, 2008, through September 

30, 2011

Also, as we previously reported in September 2011, OFS no longer has 

detailees from other federal agencies. When OFS was first organized, it 

relied on a significant number of staff from other agencies to start up new 

TARP programs. With most TARP programs winding down, OFS officials 

stated that OFS has begun to detail OFS staff to other Treasury 

programs, such as the Small Business Lending Fund (SBLF), and other 

federal agencies, such as the Bureau of Consumer Financial Protection. 

From September 2010 through September 2011, about 65 staff left OFS, 

according to Treasury officials.

As overall staffing numbers have declined, staffing levels within individual 

OFS offices have fluctuated depending on staffing needs. In some offices, 

for instance, staff levels have decreased. For example, in the Chief 

Investment Office—which includes staff working on various TARP 

programs, such as CPP—more than half of the staff departed from June 

2010 to September 2011 (a decrease of 20 staff from 2010). Though 

some Chief Investment Office staff were replaced with staff in other OFS 
Page 42 GAO-12-229 Troubled Asset Relief Program

offices and staff that were new to Treasury, many were not replaced 

because their skill sets were no longer needed given the wind-down 

phase of investment programs. Conversely, staff have increased in 

certain OFS offices where OFS management had identified specific 

needs. For example, the number of staff in the Office of Internal Review 

(OIR), which identifies risks and develops procedures for complying with 

EESA, increased from June 2010 to September 2011. Treasury had been 

seeking new staff with the skill set needed for this work, as we previously 

reported, and officials stated that the increase reflected a need to 

continue monitoring compliance among Treasury financial agents and 

contractors. Treasury filled these positions in part by streamlining the 

hiring process and better targeting its job announcements. Treasury 

officials anticipate that staffing levels in most OFS offices will decrease 

over time, though it will continue to seek talent for OIR, the Chief 

Financial Office, and the TARP housing programs that remain active.

In addition to changes in staff numbers and office composition, OFS has 

had a number of its leadership team depart since 2010. As we previously 

reported, the Assistant Secretary of Financial Stability resigned on 

September 30, 2010. His replacement is OFS’s former Chief Counsel, 

who was sworn in as Assistant Secretary in July 2011. An acting Chief 

Counsel has assumed the Assistant Secretary’s former role. Other staff in 

leadership positions have resigned since we last reported in January 

2011. The Chief Investment Officer and the Chief of Operations both left 

OFS and were replaced internally by OFS staff members. Both of these 

departing staff were in 3-year term senior executive service positions that 

were set to expire, according to Treasury officials. The Chief of 

Operations position is now held by a permanent staff member in an acting 

capacity, while the Chief Investment Officer position remains a term 

position. Program leadership has also changed for Treasury’s first and 

largest program, CPP. Its director left Treasury in 2011 and was replaced 

with another staff member from the Chief Investment Office.

Though OFS has experienced staff turnover and still faces staffing 

challenges, OFS has been addressing these and other staffing issues. 

For example:

• As we previously reported, we recommended that OFS finalize its 

staffing plan. Treasury has implemented this recommendation, which 

should help OFS better ensure that it recognizes and addresses its 
Page 43 GAO-12-229 Troubled Asset Relief Program

staffing challenges, given that many staff still remain in term 

appointments.54

• OFS now hires predominantly term-appointed staff for a maximum of 

2 years, according to Treasury officials. Previously, it hired staff for 

“permanent” positions as well as term-appointed positions with a 

maximum of 4 years. Treasury officials noted that they made this 

change in recognition of the fact that most of its programs are winding 

down. Additionally, limiting new hires to shorter-term appointments 

reduces the number of staff that Treasury will need to absorb when 

OFS closes.

As a result of this plan, OFS produced information on 

critical positions that should remain or be filled and successors for all 

of the chiefs and those in critical management positions directly below 

the chief level. OFS also plans to conduct succession planning for 

other staff below the management level.

• OFS has also filled or removed a number of vacancies to recognize 

that it is in a period of winding down. Specifically, OFS vacancies 

decreased from 61 in 2010 to 29 as of September 30, 2011.

In addition, OFS continues to address employee morale concerns. As we 

previously reported, an employee survey in 2010 identified 

communication and staff development as two areas for improvement. 

According to Treasury officials, OFS took steps to address 

communication concerns through a monthly newsletter; “lunch and learn” 

sessions on a variety of topics; and briefings attended by senior Treasury 

officials, such as the Secretary of the Treasury. To address concerns 

about staff development, OFS officials said that they increased training 

offerings and provided the opportunity to complete professional 

development plans. Treasury has also been assisting term-appointed 

staff. For example, Treasury officials stated that they have continued to 

provide information sessions for those staff on term appointments that are 

seeking permanent positions in the federal government. Officials also 

noted that they have briefings on helping staff in term appointments 

understand the terms of the appointment and to find opportunities for 

detail positions to other agencies.

 

54See GAO-11-906R for more information. 
Page 44 GAO-12-229 Troubled Asset Relief Program

Treasury continues to rely heavily on financial agents to support TARP 

programs. According to OFS procedures, financial agency agreements 

are used for services that cannot be provided with existing Treasury or 

contractor resources and generally involve inherently governmental 

functions. Since the start of TARP, 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 programs. Through fiscal year 2011, 

Treasury awarded 17 financial agency agreements, of which 14 remain 

active. As shown in table 2, the total obligated value of financial agency 

agreements increased from about $327 million to about $547 million, or 

67 percent, from the end of fiscal year 2010 to the end of fiscal year 2011. 

Treasury awarded two new financial agency agreements in fiscal year 

2011 for transaction structuring and disposition services.

Table 2: Contracts and Financial Agency Agreements in Support of TARP, Fiscal Years 2010 through 2011

Obligated value 

through 

fiscal year 2010

Obligated valuea

through fiscal year 2011

Increase from fiscal years 2010 

through 2011

Financial agency 

agreements $327,355,188 $547,487,042 $220,131,854 67%

Contracts 108,907,207 154,934,812 46,027,605 42

Total $436,262,395 $702,421,854 $266,159,459 61%

Source: GAO analysis of Treasury data.

a

As shown in table 3, five financial agency agreements accounted for 87 

percent of the total obligated value through fiscal year 2011—about $476 

million out of about $547 million. The vast majority of these obligations, 

approximately $383 million, went to Fannie Mae and Freddie Mac, which 

provide administrative and compliance services, respectively, for HAMP.

Obligated value generally includes obligations from the beginning of TARP through the end of the 

fiscal year, according to agency officials. 

55

 

55Congress established Fannie Mae and Freddie Mac as for-profit, shareholder-owned 

corporations to stabilize and assist the U.S. secondary mortgage market and facilitate the

flow of mortgage credit. 

Treasury Increased Its Use 

of Financial Agents and 

Contractors
Page 45 GAO-12-229 Troubled Asset Relief Program

Table 3: Top Five Financial Agency Agreements

Financial agent (award datecompletion date including 

options to extend agreement)

TARP investment 

program

Obligated value

through fiscal year 

2010

Obligated value

through fiscal year 

2011

Percent increase 

from fiscal year 

2010

Fannie Mae 

(2/18/2009-2/17/2019)

HAMP $126,712,000 $239,870,429 89%

Freddie Mac

(2/18/2009-2/17/2019)

HAMP 88,850,000 143,060,025 61

Bank of New York Mellon

(10/14/2008-10/14/2015) 

All programs 28,495,411 42,108,749 48

AllianceBernstein

(4/21/2009-4/20/2018)

• CPP

• AIFP 

• AIG Investments

22,399,943 33,213,445 48

FSI Group

(4/21/2009-4/20/2018)

• CPP

• Asset Guarantee 

Program

11,102,500 18,041,838 63

Total $277,559,854 $476,294,486 72% 

Source: GAO analysis of Treasury data.

Treasury also heavily relies on contractors to help administer TARP 

programs. Treasury uses TARP contracts for a variety of legal, 

investment consulting, accounting, and other services and supplies. 

Through fiscal year 2011, Treasury had awarded or used 116 contracts 

and blanket purchase agreements, up from 81 last year, and about half of 

them remain active.56

From the outset, Treasury encouraged small and minority- and womenowned businesses to pursue opportunities for TARP contracts and 

financial agency agreements. The number of contracts and financial 

agency agreements that went to small and minority-owned businesses 

increased since 2010 from 16 to 31 (as shown in table 4). Also, 6 of the 

As shown in table 2, the total obligated value of 

these contracts has increased 42 percent since 2010, from $109 million to 

$155 million. About 75 percent of the contracts and blanket purchase 

agreements are relatively small (less than $1 million each). The two 

largest contracts are $33 million (with PricewaterhouseCoopers, LLP for 

internal control services) and $17 million (with Cadwalader, Wickersham 

& Taft, LLP for legal services).

 

56The 116 contracts and blanket purchase agreements include 6 contractual 

arrangements in which OFS is engaging vendors that have existing contracts with other 

Treasury offices or bureaus or with other federal agencies.
Page 46 GAO-12-229 Troubled Asset Relief Program

17 total financial agency agreements and 25 of the 116 total contracts 

were with these businesses through 2011. In addition, 73 subcontracts 

under financial agency agreements and prime contracts went to small 

and/or minority- and women-owned businesses. As in previous years, the 

majority of these businesses participating in TARP are subcontractors.

Table 4: TARP Contracts, Financial Agency Agreements, and Subcontracts with Small and Minority- and Women-Owned 

Businesses through Fiscal Years 2010 and 2011

Fiscal year

2010 2011 2010 2011 2010 2011 2010 2011

Business 

category Prime contractsa Financial agency 

agreementsa

Subcontracts under 

prime contracts and 

contracts under 

financial agency 

agreementsb

Total participation 

by small 

businesses

Minority-ownedc 0 0 5 5 16 16 21 21

Woman-owned 2 5 1 1 14 20 17 26

Other smalld 8 20 0 0 19 37 27 57

Total 10 25 6 6 49 73 65 104

Source: GAO analysis of Treasury data.

a

Data as of September 30, 2011. GAO’s analysis does not include task orders. 

b

As of September 30, 2011, TARP financial agents and prime contractors had awarded 130 

subcontracts. 

c

Includes both small and nonsmall minority-owned businesses and minority woman-owned 

businesses. 

d

Includes small businesses, service-disabled veteran-owned small businesses, and small 

disadvantaged businesses. 

As we have reported, when Treasury began to quickly implement TARP 

initiatives in 2008, OFS had not finalized its procurement oversight 

procedures and lacked comprehensive internal controls for contractors 

and financial agents. Further, it did not have a comprehensive compliance 

system to monitor and fully address vendor-related conflicts of interest. 

Last year we reported that OFS had put in place an appropriate 

infrastructure to manage and monitor its network of financial agents and 

contractors. Specifically, by the end of fiscal year 2010, OFS had:

• defined organizational roles and responsibilities and established 

written policies and procedures for the management and oversight of 

TARP financial agents;

Treasury Has Continued to 

Strengthen Management 

and Oversight of Financial 

Agents and Contractors 

and Conflicts-of-Interest 

Requirements
Page 47 GAO-12-229 Troubled Asset Relief Program

• taken action to ensure that sufficient personnel were assigned and 

properly trained to oversee the performance of financial agents and 

contractors;

• issued written procedures on measuring the performance of financial 

agents and installed qualitative and quantitative performance 

measures for several of its financial agents; and

• issued regulations on conflicts of interest, established an internal 

reporting system for tracking all vendor conflict-of-interest 

certifications, inquiries, and requests for waivers, and completed 

renegotiations of three contracts that predated the regulations.

In fiscal year 2011, Treasury continued to strengthen its policies and 

procedures for managing financial agents and contractors and conflicts of 

interest. For example, contract administration personnel made 

improvements to OFS’s contract record system, including controls and 

clear deadlines for validating and certifying the completeness and 

accuracy of the information.57 According to an OFS official responsible for 

contracting, contract administration personnel audited most of the items in 

the record system by tracing the items back to source documents, and 

found some areas that needed to be improved. Data fields that were used 

for informational purposes only, such as the contract specialist’s 

telephone number, were not selected for audit. Fields selected included 

date of award, contractor, potential contract value, and socioeconomic 

status. Contract actions were matched against data in the Federal 

Procurement Data System-Next Generation before deciding whether the 

items needed to be traced back to source documents.58

The Office of Financial Agents (OFA) also expanded its implementation of 

performance assessments of financial agents by issuing performance 

According to the 

official, new controls were established for adding new contract information 

to the system and documentation procedures were developed to improve 

data consistency.

 

57OFS’s contract record system is an Excel spreadsheet that contains the award date; 

performance end date; obligations to date; socioeconomic category; description of 

services; and other information related to its contracts, financial agency agreements, and 

interagency agreements.

58The Federal Procurement Data System-Next Generation is the federal government’s 

primary data system for tracking information on contracting actions.
Page 48 GAO-12-229 Troubled Asset Relief Program

measures and initiating assessments for five additional financial agents, 

including Fannie Mae. Quarterly performance assessments are now 

conducted for all of the active financial agents. OFA establishes 

qualitative and quantitative performance measures, with input from the 

financial agent, based on the core functions and responsibilities described 

in each financial agency agreement. OFA staff review financial agents’ 

performance against the qualitative and quantitative measures and 

prepare an overall performance assessment. The OFA reviews have 

identified areas in which a financial agent is performing above 

expectations or needs improvement. According to an OFA official, the 

performance reviews have been an important management tool and 

helped improve compliance through active communication and dialog with 

the financial agents. For those financial agents eligible to receive 

incentive payments, the performance reviews can affect the amount of 

payment.59

The OIR took several actions to strengthen oversight of conflicts-ofinterest requirements over the last year. Specifically, we found the 

following:

OFA may revise the performance measures annually to 

ensure continued alignment with the financial agents’ scope of work and 

OFS priorities.

• OIR began conducting on-site compliance reviews to determine 

whether financial agents’ internal controls and procedures are 

working. According to Treasury officials, six reviews were conducted 

in fiscal year 2011. Treasury found that five of the financial agents 

reviewed had reasonable internal controls in place. There were no 

significant findings, although OIR made some recommendations. The 

review of the remaining financial agent identified significant 

weaknesses in its controls and in organizational management and 

oversight. As a result of the review, the relationship with the financial 

agent was terminated. Thus far, the on-site compliance reviews have 

been of financial agents, but OIR plans to begin reviewing contractors 

in the near future.

 

59According to Treasury officials, incentive payments for exceeding performance 

measures are not available for Freddie Mac, Fannie Mae, Lazard Frères, EARNEST 

Partners, Morgan Stanley, Greenhill and Co., and Perella Weinberg Partners based on the 

terms of the agreements.
Page 49 GAO-12-229 Troubled Asset Relief Program

• In 2011, OIR began preparing a quarterly conflicts-of-interest 

feedback report for contractors. The report is shared with the 

Contracting Officer’s Technical Representatives and included in the 

contractor performance metrics that are incorporated into Contract 

and Agreement Review Board reports.60

• In 2011, according to OFS’s Compliance Officer, OIR put in place a 

requirement that all new contractors and financial agents, as well as 

Contracting Officer’s Technical Representatives and OFA personnel 

with similar responsibilities, receive conflict-of-interest training. The 

training materials used are similar to those used before 2011, but the 

information presented is more consistent across all the training 

materials than it was before the formalization of the requirement.

OIR’s reports describe and 

rate contractors’ performance during the quarter in identifying, 

mitigating, and disclosing conflicts of interest to the Treasury; 

submitting adequate conflicts-of-interest certifications in a timely 

manner; and expeditiously responding to requests for additional 

information, among other things.

• OIR continued to review a large number of inquiries from financial 

agents and contractors about potential conflicts of interest. The total 

reviewed as of September 30, 2011, was about 1,300, compared to 

about 655 through fiscal year 2010. Reasons given by OIR for the 

increase in inquiries in fiscal year 2011 compared with prior fiscal 

years include the addition of several new contractors and financial 

agents in fiscal year 2011 and the initiation of new processes, such as 

on-site reviews of entities’ conflicts-of-interest controls. Forty-five of 

the 1,300 inquiries have resulted in waivers, including 8 waivers 

during fiscal year 2011. According to OFS’s Compliance Officer, 

examples of waivers include permitting contractors and financial 

agents to utilize Office of Government Ethics Form 450 in place of the 

Form 278 and allowing contractors and financial agents to use their 

own entertainment and gift policies in place of those in Treasury’s 

 

60OFS’s Contract and Agreement Review Board, which is composed of program and

procurement executives, oversees OFS’s acquisition decisions. The Board centralizes 

decisions regarding the office’s contracting and financial agency requirements, serving as 

the deliberative body for determining whether to perform a function in house or to 

outsource it. This formalized process was established in March 2009, after the urgency of 

the initial stages of the financial crisis had subsided. Contracting Officer’s Technical 

Representatives perform critical acquisition and technical functions, and contracting 

officers rely on them to ensure that contracts are managed properly to meet mission 

needs.
Page 50 GAO-12-229 Troubled Asset Relief Program

conflicts-of-interest regulation. OIR has never waived an actual or 

potential conflict of interest.

Staffing related to management and oversight of financial agents, 

contractors, and conflicts of interest has remained stable. However, a 

temporary loss of contract administration positions occurred when the 

Procurement Services Division transitioned to the Internal Revenue 

Service (IRS) in fiscal year 2011 as part of a Treasury-wide consolidation 

to improve departmental offices’ procurement.61 Treasury hopes to realize 

cost savings from the consolidation, improve internal controls and risk 

management, and enhance employee career development. According to 

an OFS contract administration official, several procurement positions 

were lost in the transition to IRS because staff did not want to move to the 

IRS facility in Oxon Hill, Maryland. IRS has agreed to staff a dedicated 

team of ten individuals to support OFS, the same level as before the 

move, and the team is currently being staffed by three federal employees 

and two contractors, with plans to expand to six federal employees and 

four contractors. According to the official, the procurement work is a 

partnership between OFS and IRS, with OFS identifying vendors in 

conjunction with IRS, IRS awarding the contracts, and OFS and IRS 

sharing post-award duties, such as managing vendors, invoicing, and 

keeping records.62

 

61The former Procurement Services Division supported Treasury Departmental Offices 

(DO) procurement, including domestic finance, economic policy, and general counsel, and 

OFS was one of its customers. According to a Treasury acquisition procedures update in 

August 2011, the IRS Procurement Office now supports DO as a result of transition of the 

DO Procurement Services Division to the IRS Procurement Office. According to the 

update, effective and efficient use of Treasury’s procurement resources is imperative to 

responsible execution of the department’s procurement authority.

62In addition to OFS’s staffing, contracting, and financial agent agreement management, 

we have also reviewed other elements of Treasury’s implementation of TARP. Since 

2009, we have audited and issued an opinion on OFS’s financial statements and its 

internal control over financial reporting. Our most recent financial statement audit 

concluded that although certain internal controls could be improved, OFS maintained in all 

material respects effective internal control over financial reporting as of September 30, 

2011, that provided reasonable assurance that misstatements, losses, or noncompliance 

material in relation to the financial statements would be prevented or detected and 

corrected in a timely manner. See GAO-12-169. 
Page 51 GAO-12-229 Troubled Asset Relief Program

While lifetime cost estimates for TARP have decreased since the 

government first provided assistance in 2008, the lifetime cost and 

income estimates for specific TARP programs have fluctuated with 

changes in program activity and the market value of Treasury’s TARP 

investments. Although Treasury issues several reports on the costs of 

TARP, its communications about TARP costs in press releases is 

inconsistent and could be enhanced. Moreover, indirect costs such as 

moral hazard are also associated with TARP and remain a concern.

As of September 30, 2011, Treasury has incurred net costs of $28 billion, 

while recent federal lifetime cost projections for TARP—which include 

both realized and future cash flows—have decreased. In 2009, the 

Congressional Budget Office (CBO) estimated that TARP could cost $356 

billion.63 However, CBO’s most recent estimate, using November 2011 

data, is approximately $34 billion.64

 

63For more information on the cost estimate calculation, see Congressional Budget Office, 

The Troubled Asset Relief Program: Report on Transactions through June 17, 2009 

(Washington, D.C.: June 2009). 

Treasury’s fiscal year 2011 financial 

statement, audited by GAO, reported that TARP would cost around $70 

billion as of September 30, 2011, a decrease from about $78 billion

estimated as of September 2010. In general, the variation in CBO and 

Treasury cost estimates is attributable to their timing—that is, market 

conditions and program activities differed when the estimates were 

developed. However, program participation assumptions for TARPfunded housing programs explain the large difference between the CBO 

and Treasury cost estimates. Treasury assumed that all of the $45.6 

billion allocated to TARP housing programs would be utilized and, as a 

result, estimated that they would cost $45.6 billion. Conversely, CBO 

expected lower participation rates for the housing programs, resulting in a 

cost estimate of $13 billion as of November 2011. While these differences 

exist, CBO officials noted that as TARP continues to wind down, 

Treasury’s and CBO’s lifetime cost estimates should be more similar. This 

convergence of cost estimates is likely to occur as program costs become 

clearer and more recipients repay their assistance—reducing the number 

64For CBO’s recent cost estimate, see Congressional Budget Office, Report on the 

Troubled Asset Relief Program—December 2011 (Washington, D.C.: Dec. 16, 2011).

Although Estimated 

Lifetime TARP Costs 

Have Decreased 

Significantly, Treasury 

Could Enhance Its 

Communication about 

the Costs of TARP

Estimated Direct TARP 

Costs Have Decreased 

Significantly
Page 52 GAO-12-229 Troubled Asset Relief Program

of outstanding TARP assets and the related uncertainty about how 

market risks will affect the future value of these investments.

In our review of Treasury’s lifetime cost estimates for TARP’s equity 

investment programs, we found that the estimates for some programs 

changed only slightly, if at all, between September 2010 and September 

2011, while others changed by a notable margin. For example, Treasury 

estimated that CPP would result in lifetime income of $11.2 billion as of 

September 2010 and its recent estimate as of September 2011 was 

slightly higher at $13 billion (see fig. 15). This increase in CPP’s 

estimated lifetime income was the result of proceeds in excess of costs 

from the sale of Citigroup common stock offset by a decline in the 

estimated market value of Treasury’s remaining CPP investments. 

Additionally, Treasury’s lifetime cost estimate of $45.6 billion for TARPfunded housing programs remained unchanged between September 

2010 and September 2011 because Treasury continues to assume that 

all of the $45.6 billion allocated to the housing programs will be utilized.

On the other hand, Treasury’s recent cost estimates for AIFP and 

assistance to AIG changed markedly when compared to estimates as of 

September 2010. Specifically, Treasury estimated a lifetime cost of $14.7 

billion for AIFP as of September 2010 but that estimate increased to 

$23.6 billion using September 2011 data due to a decline in the value of 

Treasury’s equity investments in GM and Ally Financial. Additionally, 

Treasury’s estimate for assistance to AIG decreased from $36.9 billion to 

$24.3 billion between September 2010 and September 2011 as a result of 

improvements in the financial condition of AIG since Treasury first 

provided assistance and the restructuring of Treasury’s AIG investment to 

common stock. However, as we have seen, the ultimate cost of the 

assistance to AIG could be about $11.5 billion after factoring in the 

estimated lifetime income of $12.8 billion from Treasury’s non-TARP 

assistance to AIG.65

 

65Treasury estimates lifetime income of approximately $12.8 billion from the sale of its 

non-TARP AIG shares which could offset the estimated lifetime cost of $24.3 billion 

associated with its TARP shares in AIG. See figure 8 in the AIG section for more details.

As shown, lifetime cost estimates are likely to 

fluctuate, particularly for investment programs like AIFP and the AIG 

Investment Program, because future results rely heavily on the market 

price of common stock.
Page 53 GAO-12-229 Troubled Asset Relief Program

Figure 15: Comparison of Treasury’s Lifetime Cost and Income Estimates for TARP 

Programs, September 30, 2010, and September 30, 2011

a

Although Treasury’s cost estimate for its AIG TARP common stock is $24.3 billion, the overall cost of 

AIG, including the income expected from the AIG non-TARP common stock, could be approximately 

$11.5 billion based on recent cost estimates (see AIG-related discussion earlier in this report). 

Although Treasury regularly reports on the cost of TARP and its 

programs, it could improve the clarity and consistency of its 

communications on TARP costs, specifically in its press releases about 

specific programs. Treasury issues several reports—including the Agency 

Financial Report, Monthly 105(a) Reports, and Transaction Reports—that 

provide updates on the funds obligated and disbursed, repayments and 

income, and gains and losses. Compared to Treasury’s past reporting 

practices, recent versions of the Agency Financial Report and the Monthly 

105(a) Reports clearly present Treasury’s lifetime cost estimates for 

TARP and its programs.66

 

66For examples of Treasury’s lifetime subsidy cost estimates for TARP programs see 

Department of the Treasury, Office of Financial Stability, Troubled Asset Relief Program 

Agency Financial Report Fiscal Year 2010 (Washington, D.C.: 2010), and Department of 

the Treasury, Troubled Asset Relief Program Monthly 105(a) Report—December 2010

(Washington, D.C.: Jan. 10, 2011).

However, Treasury’s press releases do not 

Treasury’s Press Releases 

Inconsistently Include 

Cost Information
Page 54 GAO-12-229 Troubled Asset Relief Program

consistently include these cost estimates. Rather, Treasury’s press 

releases on specific TARP programs typically only include transactionoriented updates, such as disbursements and returns on Treasury’s 

investments from repayments, dividends, and the sale of its assets. While 

the transaction-oriented updates in Treasury’s press releases are 

important, they do not provide the general public with the greater 

context—the lifetime cost associated with individual programs.67

Furthermore, it appears that over the last 2 years Treasury has included 

lifetime cost estimates in some of its program-specific press releases for 

programs expected to result in a lifetime income, while excluding these 

estimates for programs expected to result in a cost for taxpayers. For 

instance, a press release from April 2011 indicated that Treasury’s bank 

programs were expected to result in a lifetime positive return of 

approximately $20 billion. Other press releases for TARP banking 

programs also include this reference to expected lifetime income. 

However, during the same period Treasury did not include lifetime cost 

estimates in its press releases for TARP programs that projected a cost to 

the government, such as SBA 7(a), AIG, and AIFP. For example, 

Treasury issued a press release in June 2011 that described its sale of 

several SBA 7(a) securities. Treasury stated that the sale resulted in 

overall gains and income. The content of this press release implied that 

the program had earned a significant amount of money but did not 

provide the more comprehensive lifetime cost estimate for the program, 

which was $1 million at that time. In addition, over the last 2 years none of 

Treasury’s press releases for AIG and AIFP (programs expected to cost 

approximately $24.3 billion and $23.6 billion respectively, as of 

September 30, 2011) have included the lifetime cost estimates associated 

with the programs.68

 

67For additional information on the lifetime cost calculation required by the Federal Credit 

Reform Act of 1990 see Treasury, Troubled Asset Relief Program Agency Financial 

Report Fiscal Year 2010. 

Rather, they have generally discussed Treasury’s 

investment in the programs and revenues received. This inconsistent 

disclosure of lifetime cost estimates raises concerns about the 

consistency and transparency of Treasury’s press releases and suggests 

a selective approach that focuses on reporting program lifetime income 

and not lifetime costs.

68As noted earlier in this report, the $24.3 billion is associated with TARP-related 

assistance. Factoring in income of $12.8 billion for its non-TARP shares could result in a 

net estimated cost of $11.5 billion. 
Page 55 GAO-12-229 Troubled Asset Relief Program

As we have previously reported, transparency is important in the context 

of TARP and the unprecedented government assistance it provided to the 

financial sector. In discussing our questions about the press releases with 

Treasury officials, they noted that they provide cost information in other 

public reports. However, by improving the clarity of its communication on 

the costs of TARP through consistently incorporating lifetime cost 

estimates into its program press releases, Treasury could reduce 

potential confusion and misunderstanding of TARP’s results. Treasury 

would also be setting a precedent for cost reporting associated with any 

future government interventions.

Though direct costs for TARP—including potential lifetime income—can 

be estimated and quantified, certain indirect costs connected to the 

government’s assistance are less easily measured. For example, as we 

have previously reported, when the government provides assistance to 

the private sector, it may increase moral hazard that would then need to 

be mitigated.69

EESA and the amendments made by the American Recovery and 

Reinvestment Act of 2009 established a number of measures to mitigate 

the moral hazard of TARP by requiring that participating institutions follow 

certain requirements. These include providing Treasury with warrants in 

exchange for TARP funds to allow taxpayers to benefit from any 

appreciation of the company’s stock, and limiting certain bonuses and 

golden parachute payments for certain highly compensated employees 

and senior executive officers, as such payments can encourage 

excessive risk-taking. Even with such requirements in place, however, 

government intervention in the private sector can encourage market 

participants to expect similar emergency actions. This belief diminishes 

market discipline as it can weaken private or market-based incentives to 

That is, in the face of government assistance, private firms 

are motivated to take risks they might not take in the absence of such 

assistance, or creditors may not price into their extensions of credit the 

full risk assumed by the firm, believing that the government would provide 

assistance should the firm become distressed.

 

69See GAO, Financial Assistance: Ongoing Challenges and Guiding Principles Related to 

Government Assistance For Private Sector Companies, GAO-10-719 (Washington, D.C.: 

Aug. 3, 2010). 

Despite Estimated 

Decreases in TARP Costs, 

Government Interventions 

Such as TARP Can 

Exacerbate Moral Hazard
Page 56 GAO-12-229 Troubled Asset Relief Program

properly manage risks and can in particular contribute to the perception 

that some firms are “too big to fail.”70

Government interventions can also have consequences for the banking 

industry as a whole, including institutions that do not receive bailout 

funds. For instance, investors may perceive the debt associated with 

institutions that received government assistance as being less risky 

because of the potential for future government bailouts. This perception 

could lead them to choose to invest in such assisted institutions instead of 

those that did not receive assistance. However, such effects may be 

temporary, as evidenced by the recent downgrade by Moody’s Investors 

Service, Inc. (Moody’s) of the long-term credit ratings of Bank of America 

Corp. and Wells Fargo & Co. after the Dodd-Frank Act’s new regulatory 

provisions were enacted into law, which aim to avoid or at least limit 

future government bailouts to financial institutions. Moody’s stated that it 

downgraded these credit ratings because it believes the government is 

less likely to rescue these financial institutions now than it was during the 

financial crisis. This rating change could affect their ability to access

financing with as favorable terms.

The Dodd-Frank Act included a number of provisions intended to address 

the problem of “too big to fail” by strengthening oversight of financial 

institutions. For example, the Dodd-Frank Act required the Federal 

Reserve to implement enhanced prudential standards for bank holding 

companies that are deemed systemically important and increased 

oversight of certain nonbank financial companies. Specifically, the 

Federal Reserve has been given supervisory authority over any nonbank 

financial company that the Financial Stability Oversight Council 

 

70The term “too big too fail” can also include “too interconnected to fail” and other terms 

that signify that a failure of a particular institution would have a significant negative effect 

on the broader financial system or economy.
Page 57 GAO-12-229 Troubled Asset Relief Program

determines could pose a threat to the financial stability of the country.71

Also, the Dodd-Frank Act provided new reporting and resolution 

authorities to the Federal Deposit Insurance Corporation for certain large, 

systemic financial institutions, and requires those institutions to write 

plans for their unwinding.72 However, if these new provisions fail to 

address the too big to fail phenomenon, future financial crises could 

emerge that may be similar or worse than the financial meltdown that 

escalated with the failures of Bear Stearns and Lehman Brothers in 2008. 

That is, some firms may see the government assistance that was 

provided during the last crisis as a promise of similar aid in the future and 

therefore have an incentive to continue engaging in risky activities. 

Ultimately, any moral hazard effects of the Dodd-Frank Act changes will 

not be known until financial institutions face another period of financial 

stress.

As Treasury continues to unwind most TARP programs, the estimated 

costs of TARP have decreased significantly from when Treasury first 

announced TARP. Treasury’s latest estimate of approximately $70 billion 

as of September 30, 2011, includes a large projection of lifetime income 

from CPP, and the cost estimates for assistance to AIG and the auto 

 

71The purpose of the Financial Stability Oversight Council is to (1) identify risks to the 

financial stability of the U.S. from the financial distress, failure, or activities of large 

interconnected bank holding companies or nonbank financial companies; (2) promote 

market discipline by eliminating expectations that the government will shield shareholders, 

creditors, and other counterparties from losses in the event of failure; and (3) respond to 

emerging threats to the stability of the U.S. financial system. The Council is made up of 

the following voting members: the Secretary of the Treasury, the Chairman of the Federal 

Reserve, the Comptroller of the Currency, the Director of the Bureau of Consumer 

Financial Protection, the Chairman of the Securities and Exchange Commission, the 

Chairperson of the Federal Deposit Insurance Corporation, the Chairperson of the 

Commodity Futures Trading Commission, the Director of the Federal Housing Finance 

Agency, the Chairman of the National Credit Union Administration Board, and an 

independent member appointed by the President who is approved by the Senate and has 

insurance expertise. The Council’s nonvoting members include the Director of the Office 

of Financial Research, the Director of the Federal Insurance Office, a state insurance 

commissioner, state securities commissioner, and state banking supervisor. 

72On November 1, 2011, the Federal Deposit Insurance Corporation and the Federal 

Reserve published in the Federal Register a final rule implementing the resolution plan 

requirements for large bank holding companies and nonbank financial companies 

supervised by the Federal Reserve. The final rule is effective November 30, 2011. The 

Federal Deposit Insurance Corporation also issued a complementary interim final rule, 

published in September 2011 that is effective in January 2012. 

Conclusions
Page 58 GAO-12-229 Troubled Asset Relief Program

companies continue to fluctuate, demonstrating that such estimates are 

subject to price movements in the market, among other factors, and could 

change in the future. We found that Treasury enhanced some of its cost 

reporting in the past year, although its press releases require 

improvements. Such communications about specific programs include 

information about estimated lifetime costs and income only when 

programs are expected to result in lifetime income and not when they are 

expected to result in a lifetime cost. This practice does not represent a 

consistent approach to reporting to the public through press releases on 

the costs of individual programs. As we have indicated in many past 

reports on TARP, transparency remains a critical element to the 

government’s unprecedented assistance to the financial sector. Such 

transparency helps clarify to the public the costs of TARP assistance and 

to understand how the government intervened in various markets. 

Enhancing the transparency and clarity of these press releases will also 

set a precedent for any future government interventions, should they ever 

be needed.

To enhance transparency about the costs of TARP programs as Treasury 

unwinds its involvement, we recommend that the Secretary of the 

Treasury enhance Treasury’s communications with the public, in 

particular Treasury’s press releases, about TARP programs and costs by 

consistently including information on estimated lifetime costs, especially 

when reporting on program results. For example, Treasury should 

consider including lifetime cost estimates, or references to Treasury 

reports that include such information, in its press releases about specific 

programs.

We provided a draft of this report to Treasury for its review and comment. 

Treasury provided written comments that we have reprinted in appendix 

III. Treasury also provided technical comments that we have incorporated 

as appropriate.

In its written comments, Treasury agreed with our recommendation that it 

could further enhance its communications about the costs of TARP 

programs in its program-specific press releases, also noting that it has 

established comprehensive accountability and transparency regarding 

TARP. Treasury stated that it will implement our recommendation by 

including a link to its Monthly 105(a) Report, which contains cost

estimates for each TARP program, in its future program-specific press 

releases. Implementation of our recommendation through this practice 

Recommendation for 

Executive Action

Agency Comments 

and Our Evaluation
Page 59 GAO-12-229 Troubled Asset Relief Program

would provide a good opportunity for Treasury to clearly and fully 

communicate TARP program costs to the public.

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 

Orice Williams Brown at (202) 512-8678 or williamso@gao.gov, A. Nicole 

Clowers at (202) 512-8678 or clowersa@gao.gov, or Thomas J. McCool 

at (202) 512-2642 or mccoolt@gao.gov. 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 IV.

Thomas J. McCool

Director

Center for Economics, Applied Research and Methods
Page 60 GAO-12-229 Troubled Asset Relief Program

List of Addressees

The Honorable Daniel K. Inouye

Chairman

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 Kent Conrad

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 Norm Dicks

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 61 GAO-12-229 Troubled Asset Relief Program

The Honorable Spencer Bachus

Chairman

The Honorable Barney Frank

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 Representative 
Page 62 GAO-12-229 Troubled Asset Relief Program

To assess the condition and status of all programs initiated under the 

Troubled Asset Relief Program (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, 

2011. As noted in the report, 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 and reviewed 

Congressional Budget Office (CBO) cost estimates from publicly available 

CBO reports. In addition, we tested OFS’s internal controls over financial 

reporting as it relates 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, and 2011 financial statements for 

TARP.1

We also examined Treasury documentation such as program terms, 

decision memos, 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 reports and publications from the Special Inspector 

General for TARP and the Congressional Oversight Panel, as 

appropriate. In addition:

 

1

See GAO-12-169, GAO-11-174, and GAO-10-301. 

Appendix I: Scope and Methodology
Page 63 GAO-12-229 Troubled Asset Relief Program

• For the Capital Purchase Program, we used OFS’ reports to describe 

the status of the program, including amount of investments 

outstanding, the number of institutions that had repaid their 

investments, and the amount of dividends paid, among other things. 

In addition, we reviewed Treasury’s press releases on the program. 

We also relied on information that we have collected as part of our 

ongoing review of the financial condition of Capital Purchase Program 

institutions.

• For the Community Development Capital Initiative, we interviewed 

program officials to determine how the program is managed and what 

repayment or exit concerns Treasury has for the program.

• To update the status of the Automotive Industry Financing Program 

(AIFP) and Treasury’s plans for managing its investment in the 

companies, we leveraged our past work; reviewed information on 

Treasury’s exit from Chrysler, including Chrysler and Treasury press 

releases; reviewed information on Treasury’s plans for overseeing its 

remaining financial interests in General Motors (GM) and Ally 

Financial, including Administration and 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.

• 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 105(a) reports provided periodically to Congress by 

Treasury, as well as reports produced by the Board of Governors of 

the Federal Reserve System, and 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 each of these agencies and AIG.

• For the Small Business Administration (SBA) 7(a) Securities Purchase 

Program, we analyzed data on Treasury purchases and dispositions 

of SBA 7(a) securities collected during our financial audit. We also 

reviewed decision memos on the disposition of the SBA 7(a) portfolio. 

In addition, we reviewed press releases about the program’s sales 

activity and income. We reviewed SBA 7(a) loan volume data 
Page 64 GAO-12-229 Troubled Asset Relief Program

provided by Treasury and compared that to trends in our past reports 

related to SBA 7(a) lending and we also interviewed program staff 

about the status of the programs and plans for future sales.

• 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. We also researched trends 

in the values of commercial mortgage-backed securities. 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 

interviewed OFS staff responsible for the program to determine the 

status of the program while it remains in active investment status.

• 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, documentation on projected 

cost estimates and disbursements for each of the programs, and 

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 housing 

programs, including numbers of borrowers helped and the actions 

Treasury had taken to address our prior recommendations.

• To obtain the final status for three programs that Treasury exited and 

for which Treasury no longer holds assets that it must manage—the 

Asset Guarantee Program, Capital Assistance Program, and Targeted 

Investment Program—we reviewed Treasury’s recent reports and 

leveraged our past work.

To determine the proportion of permanent, term, and detailee staff in 

OFS, we reviewed program data showing changes in the number of staff 

over time and in each OFS office. We assessed this staffing data for 

reliability by comparing it to organizational directories to ensure that the 

changes were generally equivalent. We determined that the staffing data 

was sufficiently reliable to show trends in OFS staffing. We also 

interviewed agency officials to gain insight into the trends. Additionally, 

we obtained program-specific staffing information from agency officials 

during interviews to inform our discussion of the staffing needs of each 

TARP program and any succession planning undertaken by OFS. Also, 
Page 65 GAO-12-229 Troubled Asset Relief Program

we reviewed OFS documentation, such as the organizational directories, 

to analyze any changes in leadership positions in OFS. To assess the 

staffing challenges of OFS as TARP continues to wind down, we 

reviewed past GAO reports and recommendations and the OFS staffing 

and development plan, and we interviewed agency officials.

To assess OFS’s use of financial agents and contractors since TARP was 

established in October 2008, we reviewed information on financial agents 

and contractors from OFS’s contract record system and interviewed 

Treasury contract officials about financial agency agreements, contracts, 

and blanket purchase agreements as of September 30, 2011, that 

support TARP administration and programs. We analyzed information 

from the contract record system to update key details on the status of 

TARP financial agents and contractors, such as total number of 

agreements and contracts, type of services being performed, obligated 

values, periods of performance, and share of work by small businesses. 

Through discussions with Treasury officials responsible for the contract 

record system and inquiries we made about selected data items, as well 

as matching OFS’s contract list against data we obtained from the 

Federal Procurement Data System-Next Generation, we determined that 

data in the record system were sufficiently reliable for our purposes. To 

assess OFS’s progress in strengthening its infrastructure for managing 

and overseeing the performance of TARP financial agents and 

contractors and addressing conflicts of interest that could arise with the 

use of private sector firms, we reviewed various documents and 

interviewed OFS officials about changes in fiscal year 2011 to its policies 

and procedures regarding (1) management and oversight of TARP 

financial agents and contractors and (2) monitoring and oversight 

activities by the OFS team responsible for financial agent and contractor 

compliance with TARP conflicts-of-interest requirements. We did not 

review financial agents’ performance assessments or incentive payments.

To ascertain what is known about TARP costs, we reviewed the cost

reporting of CBO, the Office of Management and Budget (OMB), and 

Treasury, including the credit reform accounting methods used to develop 

cost estimates for TARP programs. For our analysis we focused on 

Treasury’s cost estimates for the following reasons: (1) Treasury’s recent 

financial statements and cost projections have been audited by GAO and 

(2) estimates reported by OMB are based on numbers provided by 
Page 66 GAO-12-229 Troubled Asset Relief Program

Treasury.2

We conducted this performance audit from June 2011 to January 2012 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.

We interviewed officials from CBO and Treasury on the 

methods used to calculate TARP costs and the reasons for any significant 

differences among the cost estimates calculated by each agency. We 

utilized data from our financial audit and leveraged other internal 

resources related to credit reform accounting and the modeling of TARP 

costs. We also reviewed Treasury’s press releases on the costs of TARP. 

For our review of the moral hazards of TARP, we reviewed pertinent 

legislation such as the Emergency Economic Stabilization Act and the 

Dodd-Frank Wall Street Reform and Consumer Protection Act and utilized 

previous GAO reports and Congressional Oversight Panel publications.

 

2

Although Treasury provides OMB with TARP transaction and cost estimate data, OMB 

may include different estimates in its reports than those reported by Treasury. For 

instance, Treasury typically reports lifetime cost estimates for TARP programs that include 

the interest on re-estimates whereas OMB often reports program lifetime cost estimates 

that do not include the interest on re-estimates. For more details about the interest on reestimates, see Office of Management and Budget, Circular No. A-11, Part 5, Section 185 

Federal Credit (Washington, D.C.: June 2008).
Page 67 GAO-12-229 Troubled Asset Relief Program

This appendix includes information about TARP programs that Treasury 

has exited and for which Treasury no longer holds assets to manage. We 

provide an overview of the purpose of these programs, when they started 

and ended, the status of funding, and the final lifetime costs or income of 

the programs, as applicable.

The Asset Guarantee Program was established as the Treasury 

insurance program, which provided federal government assurances for 

assets held by financial institutions that were deemed critical to the 

functioning of the U.S. financial system. Citigroup and Bank of America 

were the only two institutions that participated in this program before it 

was terminated. As previously reported, Bank of America paid Treasury 

and others a fee for terminating the term sheet before any assets were 

segregated.1

 

1

For additional details on the Asset Guarantee Program, Capital Assistance Program, and 

Targeted Investment Program, see 

Treasury sold the remaining assets that it held related to this 

program in January 2011 with the sale of Citigroup warrants, though it 

could receive future monies from trust preferred stock held by the Federal 

Deposit Insurance Corporation. Treasury reports that lifetime income from 

terminating the Bank of America agreement and exiting Citigroup-related 

assets is $3.7 billion (see fig. 16).

GAO-11-74 and GAO-10-16. 

Appendix II: Information on Programs 

Treasury Has Exited

Asset Guarantee 

Program 
Page 68 GAO-12-229 Troubled Asset Relief Program

Figure 16: Status of the Asset Guarantee Program, as of September 30, 2011

a

Treasury first announced assistance under this program in November 2008. 

b

Treasury no longer holds assets for this program that it needs to manage, though the Federal 

Deposit Insurance Corporation still holds Citigroup trust preferred stock and Treasury could receive 

income when these assets are sold. 

The Targeted Investment Program was designed to foster market stability 

and thereby strengthen the economy by investing in institutions on a 

case-by-case basis that Treasury deemed critical to the functioning of the 

financial system. Only two institutions—Bank of America and Citigroup—

participated in this program, and each received $20 billion in capital 

investment, which both repaid in December 2009. Treasury auctioned the 

Bank of America warrant that it received under the Targeted Investment 

Program in March 2010. Treasury auctioned the Citigroup warrant in

January 2011. Treasury reports that lifetime income for this program 

totals $4 billion (see fig. 17).

Targeted Investment 

Program 
Page 69 GAO-12-229 Troubled Asset Relief Program

Figure 17: Status of the Targeted Investment Program, as of September 30, 2011

a

Treasury first announced assistance under this program in November 2008. 

The Capital Assistance Program was designed to further improve 

confidence in the banking system by helping ensure that the largest 19 

U.S. bank holding companies had sufficient capital to cushion themselves 

against larger than expected future losses, as determined by the 

Supervisory Capital Assessment Program—or “stress test”—conducted 

by the federal banking regulators. The Capital Assistance Program was 

announced in February 2009 and ended in November 2009. It was never 

utilized. 

Capital Assistance 

Program 
Appendix III: Comments from the Department 

of the Treasury

Page 70 GAO-12-229 Troubled Asset Relief Program

Appendix III: Comments from the 

Department of the Treasury 
Appendix III: Comments from the Department 

of the Treasury

Page 71 GAO-12-229 Troubled Asset Relief Program
Appendix IV: GAO Contacts and Staff 

Acknowledgments

Page 72 GAO-12-229 Troubled Asset Relief Program

Orice Williams Brown, (202) 512-8678 or williamso@gao.gov

A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov

Thomas J. McCool, (202) 512-2642 or mccoolt@gao.gov

In addition to the contacts named above, Gary Engel, Mathew J. Scirè, 

and William T. Woods (lead Directors); Marcia Carlsen, Lawrance Evans, 

Jr., Dan Garcia-Diaz, Lynda Downing, Kay Kuhlman, Harry Medina, 

Joseph O’Neill, John Oppenheim, Raymond Sendejas, and Karen 

Tremba (lead Assistant Directors); Emily Chalmers; Rachel DeMarcus; 

John Forrester; Christopher Forys; Heather Krause; Robert Lee; Aaron 

Livernois; Dragan Matic; Emily Owens; Erin Schoening; and Mel Thomas 

have made significant contributions to this report.

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts

Staff 

Acknowledgments
Related GAO Products

Page 73 GAO-12-229 Troubled Asset Relief Program

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.

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.

Related GAO Products
Related GAO Products

Page 74 GAO-12-229 Troubled Asset Relief Program

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.

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.
Related GAO Products

Page 75 GAO-12-229 Troubled Asset Relief Program

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.

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: One Year Later, Actions Are Needed to 

Address Remaining Transparency and Accountability Challenges.

GAO-10-16. Washington, D.C.: October 8, 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.

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.
Related GAO Products

Page 76 GAO-12-229 Troubled Asset Relief Program

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.

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: June 2009 Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-658. Washington, D.C.: 

June 17, 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.

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.
Related GAO Products

Page 77 GAO-12-229 Troubled Asset Relief Program

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.

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.
Related GAO Products

Page 78 GAO-12-229 Troubled Asset Relief Program

Troubled Asset Relief Program: Additional Actions Needed to Better 

Ensure Integrity, Accountability, and Transparency. GAO-09-161. 

Washington, D.C.: December 2, 2008.

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