F I S C A L 

YEAR 2009

Summ y  f Per o

a nd Fi a cal  

Citizens’ Report

U ni e d t t esDepar m et 

Ofie offi n

On The Troubled Asset Relief Program (Ta
Table of Con

te

s

Table of Contents

Table of Contents

Message from the Assistant Secretary of the Treasury 1

Why TARP? .

What Treasury Did 5

TARP Programs 7

Treasury’s Performance—Management Highlights 9

Challenges/Expectations for 2010 10

About the Office of Financial Stability 11

Where Readers Can Learn More 12
Message fro

m the assistant

Secretary of the

Treasur

Message from the assistant Secretary of the Treasur

Message from the Assistant Secretary

This report summarizes the activities of the Troubled Asset Relief Progr

(TARP), which was established under the Emergency Economic Stabiliz

Act of 2008 as amended (EESA), in October 2008. It also presents valuati

TARP investments as of September 30, 20

The purpose of TARP was to restore the liquidity and stability of the financi

system. While it will never be known for certain what would have happened 

without TARP, there is broad agreement today that because of TARP and 

governmental actions, the United States averted a potentially catastrophic failur

of the financial system. Such a failure would have resulted in an economic downturn far worse than was actually experienced.

The actions taken under ESA have been one of the principal reasons for the improvements we have seen in 

economy over the last several months. These actions have met their goals; we are unwinding them. All of this is

happening faster than we anticipated. As of February 15, 2010, $170 billion of the $240 billion invested in th

banking system under TARP has been repaid. Private capital is replacing public capital in our financial institutions. The taxpayers have received $17.2 billion in income as of December 31, 2009 on TARP investments i

form of dividends, interest, and the proceeds of warrant sales, and more will be realized in the future. 

While ESA provided the Secretary of the Treasury with the authority to purchase or guarantee $700 billi

troubled assets, Treasury expects to spend less than $550 billion of that authority. Most of this will be in the form

of investments that we expect will ultimately be repaid. As a result of improved financial conditions and careful stewardship of the program, losses on TARP investments are likely to be significantly lower than previou

expected. And if the Administration’s proposed Financial Crisis Responsibility Fee is adopted by Congres

American taxpayer will not pay one cent of the cost of TA

Despite this progress, significant challenges remain. Too many American families, homeowners, and small businesse

still face severe financial pressure. Although the economy is recovering, foreclosures are increasing, and unemployment is unacceptably high. Businesses are still cautious given uncertainty about the strength of the recovery, and

many small businesses face very difficult credit conditions. Further, the recovery of our financial system remains

incomplete. Near-term shocks to that system could undermine the economic recovery we have seen to date

For these reasons, our exit strategy for TARP balances the mandateof EESA to address these challenges w

need to exercise fiscal discipline and reduce the burden on current and future taxpayers. There are four broad elements to our strategy. First, we will continue terminating and winding down many of the government programs

put in place during the crisis. Second, we will limit new commitments in 2010 to two areas

•	 Continue to mitigate foreclosures for responsible American homeowners as we take the steps necessary t

stabilize our housing market; 

•	 Provide capital to small and community banks in order to facilitate small business lending. 

Third, beyond these limited new commitments, we will not use remaining ESA funds unless necess

to respond to an immediate and substantial threat to the economy stemming from financial instability. 
Message fro

the assi

ta

Sec

tary of

the Treasur

Message from the assistant Secretary of the Tr

Finally, Treasury will continue to manage our investments in a commercial manner and in a way that ensures

accountability, transparency, and oversight, and seek to dispose of them as soon as practicable. 

Treasury is also committed to keeping taxpayers informed of TARP’s actions, results, investments and cost

through frequent and timely public reports, close communication with oversight bodies, public responses 

to oversight reports, and direct outreach to taxpayers through its websites: FinancialStability.gov and 

MakingHomeAffordable.gov.

While TARP was necessary, it has put the federal government in the undesirable position of owning sizeabl

investments in private sector companies. Treasury has already begun selling warrants it has acquired and, as 

economic and market conditions continue to improve, it will sell other investments as quickly as practicable, in a 

timely and orderly manner consistent with the duty to promote financial stability and protect taxpayers’ interests. 

Sincerely,

Herbert M. Allison J

Assistant Secreta

Office of Financial Stabili
Why Tarp?

Why Tarp? 

Why TARP?

Mission & Strategic 

EESA was enacted on October 3, 2008, in response to the severe financial crisis facing our coun

established the Office of Financial Stability (OFS) within the Office of Domestic Finance of The Depart

the Treasury to implement TARP. Treasury established the following goals for the TARP and developed a num

of programs to stabilize our financial system and the housing market:

Strategic Goals Treasury

Goal 1: Ensure the overall

stability and liquidity of

the financial system

a. Make capital available

to viable institutions

Treasury provided capital infusions directly to banks and thrifts deemed viable by their regulators (Capital

Purchase Program).

b. Provide targeted

assistance as needed

Treasury provided direct aid to certain institutions in order to mitigate the potential risks to the financial system

and the economy as a whole from the difficulties facing these firms (Targeted Investment Program, Asset

Guarantee Program, AIG Investment Program, Automotive Industry Financing Program).

c. Increase liquidity and

volume in securitization

markets

Treasury developed programs to revitalize asset-backed securities markets critical to restoring the flow of credit

to consumers and small businesses (Term Asset-Backed Securities Loan Facility, Public-Private Investment

Program).

Goal 2: Prevent avoidable

foreclosures and help

preserve homeownership

Treasury created a mortgage modification program that provides incentives to mortgage servicers, investors,

and homeowners to work together to reduce eligible homeowners’ monthly payments to affordable levels based

on the homeowners’ current income (Home Affordable Modification Program).

Goal 3: Protect taxpayer interests Treasury manages TARP investments to minimize costs to taxpayers and receives income on its holdings of

preferred equity and other TARP investments in the form of interest, dividends, and fees. Treasury also takes

steps to ensure that TARP recipients comply with all TARP-related statutory or contractual obligations such as

executive compensation requirements and restrictions on dividend payments.

Goal 4: Promote transparency Treasury provides a variety of regular reports to the Congress and the public, including transaction reports,

monthly reports with detailed information on TARP programs, dividends and interest reports, mortgage

modification data, and monthly lending reports detailing the lending activity of participants in the Capital

Purchase Program.

Background o

the Financial Cri

The financial crisis began to surface in August 2007.

Over the preceding two decades, the financial system

had grown rapidly in an environment of economic 

growth and stability. Ample credit and accommodative

monetary policy around the world fueled an unsustainable housing boom in the first half of the last decade. 

When the housing market inevitably turned down, 

starting in early 2006, the pace of mortgage defaults accelerated at an unprecedented rate. By mid-2007, rising

mortgage defaults were undermining the performance of 

many investments held by major financial institutions. 

Over the summer of 2007 and into 2008, the crisis

gradually increased in intensity and momentum. 

Stresses in U.S. financial markets increased as t

performance of subprime mortgages deteriorated 

significantly, and losses on related securities began to 

climb. With the extent and distribution of losses quite 

uncertain, concerns arose about the financial condition of banks and other financial institutions. Several

major institutions, including Countrywide Financial,

Bear Stearns, and IndyMac collapsed; and Fannie 

and Freddie Mac, the largest players in the mortgage

market, came under severe stress.
Why Tarp?

Why Tarp? 

The Crisis Intensifi

In September 2008, a series of events caused the crisi

to escalate. The Federal Housing Finance Age

placed Fannie Mae and Freddie Mac into conservatorship, using authority and funding provided in Jul

2008 by the Housing and Economic Recovery 

of 2008. Goldman Sachs and Morgan Stanley fac

significant liquidity pressures and both became bank 

holding companies in September 2008.

On September 15, Lehman Brothers filed for bankruptcy protection. What followed was not just trou

for banks, but also a broad scramble for liquidity that 

affected most money and credit markets. Some money

market mutual funds, marketed as very safe investments, 

had begun trading at a discount. The run on these funds, 

in turn, severely disrupted the commercial paper market, 

which was a vital source of funding for many brick and 

mortar businesses. American International Group, I

(AIG), a global insurance company, also experienc

severe liquidity pressures, necessitating assistance from 

the Federal Reserve, with the concurrence of Treasury

on September 16, 2008. These pressures spilled over

to virtually all credit markets. Markets for instruments backed by consumer loans, such as auto loans, 

credit card receivables, and home-equity lines of credit, 

collapsed. In response, banks tightened standards and

sharply curtailed the issuance of new loans. 

In the fall of 2008, for the first time in 80 years, the

collapse of the U.S. financial system was a real possibility. Peoples’ trust and confidence in the stability o

major institutions and the capacity of the government 

to contain the damage was vanishing.

In the wake of the bankruptcy of Lehman Brothe

and the near failure of AIG, spreads on interba

borrowing jumped to a record high as banks sought to 

safeguard their own liquidity and interbank lending 

contracted sharply. In light of the weakening economy,

banks continued to tighten their credit terms and 

standards on loans to their customers. The availability 

of credit shrank and economic activity declined. In

the corporate bond market, borrowing costs increased 

dramatically and the spread of corporate yields to 

comparable maturity Treasury yields rose, reflecting 

financial market stresses and a weakening economic 

outlook. Stock price indexes fell sharply, nearly 15

percent in early October 2008, leaving them down

about 40 percent from the beginning of 2008. 

By January 2009, the nation was in a deep recession.

The economy was contracting at an annual rate of about 

six percent. The financial system was on the verge of 

collapse. Housing prices continued to fall rapidly. Credit

was frozen. Because of the economy’s dependence on

the flow of credit, serious strains on credit providers 

resulted in disproportionately large costs on the broader 

economy in terms of production and employment.

Need for

The Federal Reserve and the FDIC did not have 

tools to resolve this crisis. The Federal Reserve provide

sorely-needed liquidity to many financial institutions, 

which allowed them to meet near-term obligations. But

it did not have the authority to inject capital directly 

into banks and other financial institutions to address 

potential capital shortfalls. The FDIC has a broade

toolset in some respects—including the ability to inject 

capital or to purchase or guarantee liabilities—but these 

tools are only for depository institutions. In the fall of

2008, the crisis spread well beyond traditional banks, 

and threatened to exceed the limitations of the FDIC’

capacity to respond effectively. Investors feared that U.

financial institutions needed, in the aggregate, hundreds 

of billions of dollars to offset potential credit losses. 

To provide the additional resources and authorities 

necessary to address the financial crisis and the dangers 

posed by such problems to consumers, businesses, and 

the broader economy, Congress passed the E

1

which provided Treasury with the authority to purchase 

or guarantee up to $700 billion in troubled assets held 

by financial institutions. Treasury was directed to exercise 

this authority to promote the liquidity and stability of 

the financial system, and this authority became a critical 

component of the coordinated government response to 

the financial crisis. 

1 The Emergency Economic Stabilization Act of 2008 

Pub. L. No. 110-343, 122 Stat.3765 (2008), codified at 12 U.

§§ 5201 et seq.
Wha

t Treasury

Di

What Treasury Did

Budgetary Resou

Treasury used the $700 billion in TARP authority t

make equity investments, loans, and asset guarantees 

in a range of financial institutions. In exchange for this

assistance, Treasury, on behalf of the taxpayer, received 

financial instruments—equity (preferred and common 

stock), debt, warrants, and additional notes—from 

these companies. Treasury expects that most of the 

funding will be repaid.

Table 1 presents a financial summary for TAR

programs. It shows the amount committed for each

program, the amount actually disbursed, repayments to 

Treasury from program participants, the net outstanding balance—the amount on the original investment 

that is due to be repaid to Treasury—and cash inflows 

on the investments for each program, in each case as of 

September 30, 2009. As of that date

•	 Treasury had not used the full $700 billion in 

authority. Treasury entered into commitments 

with a face value of $454 billion in TAR

authority during the fiscal year. 

•	 Of the $454 billion in commitments, Treasury

paid out $364 billion in TARP funds in fisca

2009 to make loans and equity investments.

•	 Treasury received approximately $73 billion of 

repayments on certain investments and loans 

made in fiscal year 2009.

Financial Perfor

Snapsh

Because most of the investments are expected to be repaid in full, Treasury estimated that the net cost of the

$364 billion disbursed in fiscal 2009 would be $41.6 

billion as of September 30, 2009. Of the funds tha

Treasury has used for TARP programs, some T

investments are estimated to result in a cost, but others 

are estimated to produce a net return to taxpayers. 

Based on investments made and expenses incurred

as of September 30, 2009, Treasury projected that

four programs (the Capital Purchase Program (CPP), 

the Targeted Investment Program (TIP), the Ass

Guarantee Program (AGP), and the Consum

and Business Lending Initiative) will generate a n

return of $19.5 billion on a present value basis.2

Also, as of September 30, 2009, Treasury estimate

that two programs—the IG Investment Prog

and the Automotive Industry Financing Progr

(AIFP)—would cost $60.9 billion. In addition, 

actual administrative expenses for fiscal year 2009 

2 Net present value is a term commonly used when looking at investments and is the sum of the present value (i.e., in today’s dollars

of estimated future cash inflows from an investment minus the 

initial payment made to purchase the investment. In a net present

value calculation, cash flows in the future are put into today’s dollar 

terms using a discount rate; i.e., one dollar paid out today will have 

more value than a dollar received back a year from now.

What Treasury Did 

Table 1: TARP Summary As of September

($ in billions)

Purchase Pric

or Guarantee

Amount

Total $ 

Disburse

Investment

Repayment

Outstanding

Balanc

Cash 

Received from

Investment

Capital Purchase Program $ 204.6 $ 

Targeted Investment Program $ 40.0 $ 

Asset Guarantee Program $ 5.0 

American International Group Investment Program $ 69.8 $ 

Term Asset-Backed Securities Loan Facility $ 20.0 $ 

Public Private Investment Program $ 6.7 

Automotive Industry Financing Program $ 81.1 $ 

Home Affordable Modification Program $ 27.

Totals $  454.3 $ 
Wha

t Treasury

Di

What Treasury Did

of $167 million bring the total estimated net costs 

to $41.6 billion for the period ended September 30,

2009.

Table 2: Net Return (Cost) of TARP O

For the period ended September 30, 

($ in millions

Programs with Estimated Net Positive Return 

Over the Life of the Program

Capital Purchase Program $ 

Targeted Investment Program $ 

Asset Guarantee Program $ 

Consumer and Business Lending Initiative $ 

Net Return (Cost) from Programs Above $ 

Programs with Estimated Net (Cost) 

Over the Life of the Program

American International Group, Inc.

Investment Program $ (30

Automotive Industry Financing Program $ (30

Net (Cost) of Two Programs Above $ (60

Total Net Return (Cost) $ (41

Additional TARP (Costs)

Home Affordable Modification Program $ 

Administrative Costs $ 

Total Net (Costs) of TARP Operations $ (41,573)

The ultimate cost of the TARP will not be know

for some time. Market conditions and the performance of specific financial institutions will be 

critical determinants of the TARP’s final cost. Th

changes in Treasury’s estimates during the period 

ended September 30, 2009, provide a good illustration

of this impact. The estimated net cost of programs 

implemented to that date declined by approximately 

$110 billion as compared to estimates made while 

the programs were being initiated in the heart of the 

financial market crisis last winter, in large part due 

to market stabilization seen to date and actual and 

forecast repayments occurring at a faster rate than 

originally anticipated.

FINANCIAL UPDATE: Since September 30, 2009, Treasury

has received significant repayments of investments made

under the CPP and the TIP in addition to what is shown in

Table 1. The outstanding balance of the CPP is now $75.3

billion and all investments made under TIP have been repaid.

Bank of America, Wells Fargo, and Citigroup repaid a total of

$90 billion in December 2009, and PNC repaid $7.6 billion in

February 2010. The total amount of TARP repayments is now

$173 billion, including more than two-thirds of the total amount

that was invested in banks. This is a much faster recovery

for the taxpayer than was expected when the program was

launched. In addition, the AGP has been terminated without

any disbursements and at a profit to the taxpayer. In December

2009,Treasury also received a $1 billion principal repayment

from GM. Treasury also committed $3.8 billion of new capital to

GMAC, a $1.8 billion reduction from the $5.6 billion originally

estimated to be needed.

EESA called for the $700 billion in authority to expire on

December 31, 2009, but EESA also gave the Secretary of the

Treasury (Secretary) the authority to extend that authority

to no more than 2 years from the date of EESA’s enactment

(October 3, 2008), upon submission of a written certification

to Congress. On December 9, 2009, the Secretary extended

the authority until October 3, 2010 to enable TARP to continue

implementing programs that address the housing market, needs

of small businesses, and to maintain the capacity to respond to

any unforeseen threats. The Secretary also announced that no

more that $550 billion is expected to be disbursed.

The total cost of TARP is expected to be higher than the $41.6

billion which was reported for the funds spent as of September

30, 2009, because additional investments and disbursements

will be made after fiscal year 2009. These include additional

costs for the Home Affordable Modification Program (HAMP),

the Public Private Investment Partnership (PPIP) and the

Consumer and Business Lending Initiative. The President’s

Budget for fiscal year 2011 now estimates total TARP costs

of $117 billion, which includes the estimated costs for those

dollars that were already disbursed in fiscal year 2009 as well

as those dollars estimated to be spent this fiscal year and

through the life of TARP. This number is down significantly from

the $341 billion presented in the President’s budget update in

August 2009.
T

Progr

s

TARP Program

TARP Programs

Capital Purchase Program: Under the CP

Treasury invested in banks and other financial institutions to increase their capital. With the additional 

capital, CPP participants were better equipped to 

undertake new lending, even while absorbing write 

downs and charge-offs on loans that were not performing. This program was closed to new investments 

in the fourth quarter of 2009.

Targeted Investment Program: Treasury establishe

TIP to provide additional assistance on a case-by-case

basis in order to stabilize financial institutions that 

were critical to the functioning of the financial system. 

Through TIP, Treasury purchased $20 billion of preferred stock in each of Bank of America and Citigro

to prevent a loss of confidence that could have resulted 

in significant financial market disruptions, threatened 

the financial strength of similar financial institutions, 

impaired broader financial markets, and undermined 

the overall economy. Both institutions fully repaid

their TIP funding in the fourth quarter of calendar

year 2009. 

American International Group, Inc. (AIG) Inv

Program: Since September 2008, the Federal Res

and Treasury have taken a series of actions to address 

the liquidity and capital needs of AIG, thereby preventing the company’s disorderly failure and mitigating systemic risks. Treasury purchased preferred shar

in IG and received warrants to purchase comm

shares in the company. Treasury also created an equity 

capital facility under which IG may draw up to $29

billion as needed in exchange for issuing additional 

preferred stock to Treasury. As of September 30, 2009

AIG had drawn down approximately $3.2 billion fr

the facility.

Asset Guarantee Program: AGP, like the TIP, 

targeted program aimed at maintaining the stability 

of financial institutions whose failure would have 

harmed the financial system. More specifically, the 

AGP provided protection against the risk of significan

loss on pools of assets held by systemically significant 

financial institutions. By committing to limit an

institution’s exposure to losses on illiquid or distressed 

assets through AGP, Treasury helped the institutio

maintain the confidence of its depositors and other 

funding sources, and continue to meet the credit 

needs of households and businesses. Treasury used 

this program to assist Citigroup and also announced 

a commitment to assist Bank of America (Bof

Citigroup recently terminated the assistance and Bo

terminated the commitment, and both institutions 

paid substantial fees to the government. 

Term Asset-Backed Securities Loan Facilit

part of the Consumer and Business Lending Initiativ

the Federal Reserve and Treasury announced th

creation of the Term Asset-Backed Securities L

Facility (TALF) and launched TALF und

Financial Stability Plan on February 10, 2009. T

TALF’s objective is to stimulate investor demand f

certain types of eligible asset-backed securities (ABS

specifically those backed by loans to consumers and 

small businesses. TALF has reduced the cost a

increased the availability of new credit to consumers 

and businesses. Under the TALF, the Federal Re

can extend up to $200 billion in three- and five-year 

non-recourse loans to investors that agree to purchase 

eligible consumer or small business ABS. Treasu

provides up to $20 billion of TARP funds in credi

protection to the Federal Reserve for losses that ma

arise under TALF loan

Public-Private Investment Program: Treasury,

conjunction with the Federal Reserve and the FD

announced PPIP on March 23, 2009, as a part of the

Financial Stability Plan. Under the PPIP, Treas

provides equity and debt financing to newly-formed 

public-private investment funds (PPIFs) establishe

by fund managers with investors for the purpose of 

purchasing legacy securities from financial institutions. 

These securities are commercial mortgage-backed 

securities and non-agency residential mortgage-backed 

securities. 
T

Progr

s

TARP Program

Automotive Industry Financing Program: Treas

established AIFP on December 19, 2008, to he

prevent a significant disruption to the American

automotive industry that would have posed a systemic 

risk to the stability of the financial system and the 

economy. Treasury made emergency loans available 

from the TARP under the AIFP to General M

Corporation (GM) and Chrysler LLC (Chrysler) 

enable those companies to conduct orderly restructurings and achieve viability. In addition to committing

AIFP funds to GM and Chrysler, Treasury determi

that TARP assistance was also needed for the financin

companies affiliated with these manufacturers so that 

credit would remain available to GM’s and Chrysler’s

dealers and customers.

Home Affordable Modification Program: Treasu

announced a comprehensive $75 billion program, the 

Home Affordable Modification Program (HAM

in February 2009 to help distressed homeowners

remain in their homes and thereby prevent avoidable 

foreclosures. Treasury is providing up to $50 billion 

in funding through the TARP, while Fannie Mae a

Freddie Mac agreed to provide up to $25 billion of

additional funding. The program’s objective is to offer 

affordable mortgages to three to four million qualifying 

homeowners by December 31, 2012.
Treasury’s 

Perfo

ma

ce — Manag

me

Highlig

s

Treasury’s Performance — Management Highli

Treasury’s Performance – Management Highlights

Accomplis

Fiscal year 2009 represented the start up period for

Treasury’s unprecedented emergency mission to 

stabilize the nation’s financial system. Treasury met 

extraordinary challenges in launching a wide range of 

TARP programs in a short time while instilling stron

operating and financial controls. The Government

Accountability Office rendered unqualified (“clean”

audit opinions on the FS financial statements f

fiscal year 2009 and opined that FS maintain

effective internal control over financial reporting with 

no material weaknesses.

Since TARP programs began, confidence in t

stability of our financial markets and institutions has 

improved dramatically. Interbank lending rates, which

reflect stress in the banking system, have returned to 

levels associated with more stable market conditions. 

For example, the spread of one-month Libor to th

overnight index swap (another measure of risk in the 

financial system) fell from a peak of about 340 basis 

points3

 in the fall of 2008 to roughly 10 basis points at 

the end of October 2009.

At the same time, borrowing costs have declined for

many businesses, homeowners, and municipalities. 

Investment-grade corporate bond rates have fallen by

over 70 percent since the fall of 2008, and high-yield 

bond rates have fallen by more than half. Fears of

default on these bonds have receded, providing further 

relief on prices. Conventional 30-year mortgage rates 

remain at historic lows—under five percent. 

municipal bond rates are three percent, down from five 

percent in the fall of 2008.

Securitization markets that provide important channels

of credit for consumers and small businesses have also 

improved, in large part because of programs launched 

under the TARP. Issuance f ABS backed by con

3 A basis point is one hundredth of a percentage point or 0.0

percent so 100 basis points equals 1 percent. Basis points are

often used to measure small changes in interest rates or yields on 

financial instruments.

and business loans averaged $14 billion per month 

since the government launched TALF in March 20

through September 30, 2009, compared to about

$1.6 billion per month in the six months prior to the 

program’s launch. Spreads on credit cards and auto

loans fell from a peak of 600 basis points to less than 

100 basis points over their benchmarks during fiscal 

year 2009, the same levels that existed before Lehman

Brothers’ bankruptcy filing in September 200

The incentives offered under the HAMP are helpin

American homeowners and stabilizing the housing

market. Approximately 89 percent of eligible mortgage

debt outstanding is serviced by HAMP participatin

servicers. In the fourth quarter of calendar year 2009,

the volume of active trial and permanent modifications 

rose by more than 75 percent from the third quarter. 

The monthly volume of trial modifications has averaged 100,000 since June 2009 and the total number of 

trial modifications initiated now exceeds one million. 

Homeowners receiving a trial modification have been

saving over $500 per month on average. 

Today, due in large part to aggressive government actions, including those taken under EESA, the financ

system is more stable and the economy is growing 

again. In the final quarter of 2009, the economy grew

more quickly than at any time in the past six years. 

Credit is starting to flow again to consumers and businesses. Housing markets have shown signs of stabilization, and home prices have ticked up in recent months,

after three straight years of declines.
Challenges/Exp

a

tions for 201

Challenges/Expectations for 20

Treasury will continue to protect the taxpayer through 

careful management and disposition of all TAR

investments. Treasury seeks to sell investments as soon 

as practicable, subject to approval of regulators where 

required, in order to eliminate or further minimize risks 

to taxpayers. Repayments of TARP funds reduce t

federal debt. Treasury encourages recipients of TAR

funds to replace the federal government’s investment 

with private capital. Where Treasury holds voting shares 

in a company, its role as a shareholder is to manage the 

government’s investment. Treasury will not engage in the 

day-to-day management decisions of a company in which 

it is an investor.

Treasury’s strategy for TARP balances the mandate o

EESA —promoting financial stability—with the 

to exercise fiscal discipline and reduce the burden on 

current and future taxpayers. Treasury’s strategy has 

four broad elements:

1. Treasury will continue terminating and winding 

down many of the government programs put in 

place last fall. For example, Treasury’s investments

in banks are now confined almost entirely to small 

and mid-sized banks with assets of less than $10 

billion each. 

2. In 2010, the Obama Administration will foc

the TARP program on two main activities

•	 the Making Home Affordable Program t

mitigate preventable foreclosures for responsible American homeowners as necessary steps

are taken to stabilize our housing market, and

•	 the newly announced programs to promote 

lending to small businesses by providing 

capital to small and community banks 

and Community Development Financial

Institutions

3. Beyond these limited new commitments,

Treasury will not use remaining ESA fu

unless necessary to respond to an immediate 

and substantial threat to the economy stemming 

from financial instability, and Treasury will 

consult with the President and Chairman of the 

Federal Reserve Board before doing tha

4. Treasury will continue to manage its investments in a commercial manner and in a way 

that ensures accountability, transparency and 

oversight, and seek to dispose of them as soon as 

practicable.

Challenges/Expectations for 2010
Abo

the

Off

ce of Fin

cial Stab

y

About the Office of Financial St

To administer the programs under TARP, the Secreta

of the Treasury established OFS, an office with

Treasury. As of September 30, 2009, the staff o

had grown to 198 full-time employees (101 career civil 

servants, 85 term appointments, and 12 detailees) who 

support the TARP.The fiscal year 2009 Administrati

budget obligations totaled $248 million split between 

salaries and benefits of approximately $14 million and 

non-personnel services, generally contracts, of approximately $234 million. The total staff of FS w

219 at January 31, 2010. The recent increase in staff has 

been concentrated in areas engaged in operations and 

internal controls.

The Assistant Secretary of Financial Stability he

the FS which has six program divisions to carry o

all FS responsibilities: the Chief Investment Off

the Office of the Chief Financial Officer, the Office

the Chief of Homeownership Preservation, the Offic

of the Chief Administrative Officer, the Office of t

Chief Counsel, and the Office of Internal Review. T

OFS is also supported by dedicated personnel in oth

areas of Treasury.

AsOFS is designed to be temporary in natu

uses private sector expertise to the maximum extent 

possible and appropriate in implementing TAR

programs. Asset managers were hired to serve as

financial agents in managing the portfolio of assets 

associated with several TARP programs. The balanc

of the private sector firms assist with the significant 

volume of work associated with the TARP in the area

of accounting and internal controls, administrative 

support, facilities, legal advisory, financial advisory, and 

information technology. 

About the Office of Financial Stability
Where 

Readers Can Learn Mo

Where Readers Can Learn More

Treasury’s website that details financial stability programs in a simplified format:

http://www.FinancialStability.gov/

Comprehensive information on mortgage modification efforts aimed at stabilizing the housing market:

http://www.MakingHomeAffordable.gov

The Office of Financial Stability’s Agency Financial Report (AFR), including the TARP financial s

Management’s Discussion and Analysis of the results and the Government Accountability Office audit opin

http://www.treas.gov/press/releases/OSF%20AFR%2009.pdf

In addition, four different government entities have oversight responsibilities for TARP and produce detail

reports available to the public:

•	 Government Accountability Office

http://gao.gov/docsearch/featured/financialmarketsandhousing.html

•	 Office of the Special Inspector General for the Troubled Asset Relief Progra

http://www.sigtarp.gov/

•	 Congressional Oversight Panel (CO

http://cop.senate.gov/

•	 Financial Stability Oversight Boar

http://www.financialstability.gov/about/oversight.html

Where Readers Can Learn More