Emergency Economic Stabilization Act Programs 

Program Summary by Budget Activity 

(Dollars in Thousands) 

Purchase Cap1 BA Outlays2 

FY 2009 FY 2010 Total Cohort 2009 and 

2010 

Capital Purchase Program $204,617,573 $3,382,427 $208,000,000 - $3,680,719 

Public-Private Investment Program $6,666,667 $23,340,000 $30,006,667 + $314,542 

AIG Investment Program $69,835,000 $0 $69,835,000 + $48,147,456 

Consumer and Business Lending Initiative $20,000,000 $40,000,000 $60,000,000 + $2,194,226 

Home Affordable Modification Program3 $27,065,760 $21,690,240 $48,756,000 + $48,756,000 

Targeted Investment Program $40,000,000 $0 $40,000,000 - $4,083,330 

Automotive Industry Financing Program $81,054,933 $3,790,000 $84,844,933 + $28,208,444 

Asset Guarantee Program4 $5,000,000 $0 $5,000,000 - $3,014,971 

Total $454,239,933 $92,202,667 $546,442,599 + $116,841,648 

1

Amount applied to the Section 115 Purchase Cap (i.e., the portion of the original $700 billion cap expected to be used). 2 Estimated program costs (+) or savings (-) over the life of the program, including interest on reestimates and excluding 

administrative costs.
 3

 Includes $1.2 B reduction in TARP purchase authority from the Helping Families Save Their Homes Act of 2009. 4 Treasury guaranteed up to $5 billion of potential losses incurred on a $301 billion portfolio of loans. 

Explanation of Budget Estimate 

The Emergency Economic Stabilization Act of 

2008 (EESA) established the Office of 

Financial Stability (OFS) within the Office of 

Domestic Finance of the Treasury Department 

to implement the Troubled Assets Relief 

Program (TARP). The OFS budget includes 

funding to carry out the authorities vested to 

the Secretary of Treasury to “purchase, and to 

make and fund commitments to purchase, 

troubled assets from any financial institution, 

on such terms and conditions as are 

determined by the Secretary.” The OFS 

carries out the mission and objectives of the 

EESA: ensuring the overall stability and 

liquidity of the financial system; preventing 

avoidable foreclosures and helping preserve 

homeownership; protecting taxpayer interests, 

and promoting transparency. As a result of 

improved financial conditions and careful 

stewardship of the program, the ultimate cost 

to the taxpayer of TARP investments is likely 

to be significantly lower than expected. In 

the FY 2010 budget total impact of the 

program on the deficit was expected to be 

$306 billion, but it is now expected to total 

only $117 billion (see Program Summary by 

Budget Activity table above). The authority 

for OFS administrative budget funds is 

provided in Section 118 of EESA. In FY 

2011 OFS plans to obligate $298 million and 

use 271 FTE, a decrease of $58 million and 

an increase of 11 FTE from the FY 2010 

estimates. 

Purpose of Program 

Since the passage of EESA in October 2008, 

the OFS has implemented a number of 

programs aimed to stabilize the financial 

system and restore the flow of credit to 

consumers and businesses. Today there is a 

broad agreement that because of TARP and 

other governmental actions, the United States 

averted a potentially catastrophic failure of 

Department of the Treasury - Budget in Brief FY 2011 Page 81
the financial system, at a cost considerably 

less than what was originally projected. 

EESA programs continue to stabilize and 

rehabilitate still fragile markets and 

institutions, while repayments of the 

government’s investments over the past year 

have already begun. 

EESA programs include: 

Capital Purchase Program 

Pursuant to EESA, the Capital Purchase 

Program (CPP) - OFS’ largest and most 

significant program under EESA - was 

launched to bolster the capital position of 

viable institutions and, in doing so, to build 

confidence in these institutions and the 

financial system as a whole. With the 

additional capital, CPP participants were 

better equipped to undertake new lending, 

even while absorbing write downs and chargeoffs on loans that were not performing. 

OFS initially committed over a third of the 

total TARP funding, $250 billion, to the CPP, 

which it eventually lowered to $208 billion. 

Of the initial $250 billion commitment, OFS 

invested $125 billion in eight of the country’s 

largest financial institutions. The remaining 

$125 billion was made available to qualifying 

financial institutions (QFIs) of all sizes and 

types across the country, including banks, 

savings associations, bank holding companies 

and savings and loan holding companies. 

QFIs interested in participating in the program 

had to submit an application to their primary 

federal banking regulator. The minimum 

subscription amount available to a 

participating institution was 1 percent of riskweighted assets. The maximum subscription 

amount was the lesser of $25 billion or 3 

percent of risk-weighted assets. 

As of December 31, 2009, the funding 

deadline for CPP ended. OFS provided a total 

of $205 billion in capital to707 institutions in 

48 states, including more than 300 small and 

community banks, helping to enable them to 

absorb losses from bad assets while 

continuing to lend to consumers and 

businesses. 

The Budget reflects that financial institutions 

redeemed $70.7 billion in principal 

repayments and $9.7 billion in dividends, 

interest, warrants and fees as of September 

30, 2009. Furthermore, the Budget reflects 

that financial institutions will redeem an 

additional $59.7 billion in principal 

repayments and receive over $20.1 billion in 

dividends, interest, warrants and fees in 2010. 

American International Group, Inc. (AIG) 

Investment Program 

Since September 2008, the Federal Reserve 

and OFS have taken a series of actions 

related to AIG in order to prevent AIG’s 

disorderly failure and mitigate systemic risks. 

These actions addressed the liquidity and 

capital needs of AIG, helping to stabilize the 

company. OFS provided this assistance by 

purchasing preferred shares in AIG and also 

received warrants to purchase common 

shares in the institution. The assistance 

provided to AIG was deemed “exceptional 

assistance” which means that the recipient is 

subject to greater restrictions under the rules 

relating to executive compensation. 

In November 2008, this assistance was 

restructured so that AIG had more equity and 

less debt. OFS purchased $40 billion in 

cumulative preferred stock from AIG under 

the TARP, the proceeds of which were used 

to repay the Federal Reserve loan in part. In 

April 2009, OFS exchanged the $40 billion in 

cumulative preferred stock for $41.6 billion 

in non-cumulative preferred stock and 

created an equity capital facility, under which 

AIG may draw up to $29.8 billion as needed 

in exchange for issuing additional preferred 

Department of the Treasury - Budget in Brief FY 2011 Page 82
stock to OFS. As of September 30, 2009, AIG 

had drawn approximately $3.2 billion from the 

facility. 

Targeted Investment Program 

OFS established the Targeted Investment 

Program (TIP) under the TARP in December 

2008. The TIP gave the OFS the necessary 

flexibility to provide additional or new 

funding to financial institutions that were 

critical to the functioning of the financial 

system. Through TIP, OFS sought to prevent a 

loss of confidence in critical financial 

institutions, which could result in significant 

financial market disruptions, threaten the 

financial strength of similarly situated 

financial institutions, impair broader financial 

markets, and undermine the overall economy. 

OFS invested $20 billion in each of Bank of 

America (BofA) and Citigroup under the TIP. 

These investments provide for annual 

dividends of 8 percent; and impose greater 

reporting requirements and harsher restrictions 

on the companies than under the CPP terms, 

including restricting dividends to $0.01 per 

share per quarter, restrictions on corporate 

expenses, and other measures. The Budget 

reflects that both Citigroup and Bank of 

America fully redeemed the Government's 

TIP investments in 2010. Furthermore, the 

Budget reflects that Citigroup and Bank of 

America paid $1.8 billion in dividends in 2009 

and an estimated $791 million in additional 

dividend payments in 2010. Assistance under 

the TIP is also considered “exceptional 

assistance”, which means that the recipient is 

also subject to greater restrictions under the 

executive compensation rules. 

Automotive Industry Financing Program 

OFS established the Automotive Industry 

Financing Program (AIFP) on December 19, 

2008, to help prevent a significant disruption 

to the American automotive industry, which 

would have posed a systemic risk to financial 

market stability and had a negative effect on 

the economy. OFS announced a plan to make 

emergency loans available from the TARP 

under the AIFP to General Motors 

Corporation (GM) and Chrysler LLC 

(Chrysler) to provide a path for these 

companies to go potentially through orderly 

restructurings and achieve viability. 

OFS initially provided loans of $13.4 billion 

to GM and $4 billion to Chrysler under the 

AIFP to give the companies time to negotiate 

with creditors and other stakeholders in order 

to prevent disorderly bankruptcies. Under 

the terms of the loans, each company was 

required to prepare a restructuring plan that 

included specific actions aimed at assuring: 

(i) the repayment of the loan extended by 

TARP; (ii) the ability of the company to 

comply with applicable federal fuel 

efficiency and emissions requirements and 

commence the domestic manufacturing of 

advanced technology vehicles in accordance 

with federal law; (iii) achievement of a 

positive net present value; (iv) rationalization 

of costs, capitalization, and capacity with 

respect to the manufacturing workforce, 

suppliers and dealerships of the company; 

and (v) a product mix and cost structure that 

is competitive in the U.S. marketplace. 

To date, the OFS has provided approximately 

$85 billion in loans and equity investments to 

GM, Chrysler, and their respective financing 

entities.

 Asset Guarantee Program 

Pursuant to section 102 of EESA, OFS 

established the Asset Guarantee Program 

(AGP) with the same objective as the TIP of 

preserving financial market stability. The 

AGP, like the TIP, is a targeted program 

aimed at maintaining the stability of 

systemically important financial institutions 

Department of the Treasury - Budget in Brief FY 2011 Page 83
and, thereby, reducing the potential for 

problems at such an institution to “spillover” 

to the broader financial system and economy. 

The AGP has been applied with extreme 

discretion and OFS does not anticipate wider 

use of this program. To date, OFS has used 

this program to assist Citigroup and began 

negotiations with Bank of America (BofA) 

under the AGP which BofA subsequently 

terminated. 

On December 22, 2009, Treasury, the Federal 

Reserve, the Federal Deposit Insurance 

Corporation and Citigroup terminated the 

agreement under which the U.S. government 

agreed to share losses on a pool of Citigroup 

assets. The U.S. government parties did not 

pay any losses under the agreement, and will 

keep $5.2 billion of $7.0 billion in trust 

preferred securities as well as warrants for 

common shares that were issued by Citigroup 

as consideration for such guarantee. With this 

termination, the AGP is being terminated at a 

profit to the taxpayer. 

The Consumer and Business Lending 

Initiative (CBLI) 

OFS designed two initiatives to restore 

consumer and business lending, the Term 

Asset-Backed Securities Loan Facility 

(TALF) and the Unlocking Credit for Small 

Business Initiative. 

TALF 

The TALF's objective was to stimulate 

investor demand for certain types of eligible 

Asset Backed Securities (ABS), specifically 

those backed by loans to consumers and small 

businesses, and ultimately, bring down the 

cost and increase the availability of new credit 

to consumers and businesses. Under the 

TALF, the Federal Reserve extends up to 

$200 billion in three- and five-year nonrecourse loans to investors that agree to 

purchase eligible consumer or small business 

ABS. OFS provides up to $20 billion of 

TARP monies in credit protection to the 

Federal Reserve for losses arising under 

TALF loans. 

The TALF was initially designed for newly 

or recently originated AAA-rated ABS 

backed by student loans, auto loans, credit 

card loans, and loans guaranteed by the SBA. 

On March 19, 2009, OFS and the Federal 

Reserve expanded this to include newly or 

recently issued AAA-rated ABS backed by 

four additional types of consumer and 

business loans – mortgage servicing 

advances, loans or leases relating to business 

equipment, leases of vehicle fleets, and floor 

plan loans. 

The Federal Reserve had originally 

authorized using the TALF to make loans 

through December 31, 2009, however, this 

has been extended through March 31, 2010. 

Unlocking Credit for Small Businesses 

Program 

To help restore the confidence needed for 

financial institutions to increase lending to 

small businesses, Treasury announced a 

program to unlock credit for small businesses 

on March 16, 2009. Under the program, 

Treasury announced that it would make up to 

$15 billion in TARP funds available to 

purchase securities backed by the Small 

Business Administration (SBA)-guaranteed 

portions of loans made under the SBA’s 7(a) 

loan program. The SBA’s 7(a) program is the 

SBA’s most basic and widely used loan 

program. 

As of September 30, 2009, no funds had been 

disbursed under the program; however, 

activity on the secondary markets on which 

Department of the Treasury - Budget in Brief FY 2011 Page 84
SBA-backed securities trade improved 

significantly in the wake of the program’s 

announcement, contributing to a significant 

increase in SBA loan volumes. In addition, as 

part of its commitment to take additional steps 

to improve the availability of credit to small 

businesses, Treasury is working with the 

Small Business Administration to develop and 

implement additional TARP efforts that will 

support small banks in increasing lending to 

small businesses in their communities. 

Home Affordable Modification Program 

To mitigate foreclosures and help ensure 

homeownership preservation, Treasury 

announced a comprehensive $75 billion 

program, the Home Affordable Modification 

Program (HAMP), in February 2009. OFS 

will provide up to $50 billion in funding 

through the TARP, while Fannie Mae and 

Freddie Mac agreed to provide up to $25 

billion of additional funding. HAMP focuses 

on creating sustainably affordable mortgage 

payments for responsible home owners who 

are making a good faith effort to make their 

mortgage payments, while mitigating the 

spillover effects of preventable foreclosures 

on neighborhoods, communities, the financial 

system and the economy. 

HAMP is built around three core concepts. 

First, the program focuses on affordability. 

Second, the HAMP's pay-for-success structure 

aligns the interests of servicers, investors and 

borrowers in ways that encourage loan 

modifications that will be both affordable for 

borrowers over the long term and costeffective for investors and taxpayers. Third, 

the HAMP establishes detailed guidelines for 

the industry to use in making loan 

modifications with the goal of encouraging the 

mortgage industry to adopt a sustainably 

affordable standard, both within and outside of 

the HAMP. 

Public-Private Investment Fund 

Treasury, in conjunction with the Federal 

Reserve and the FDIC, announced the PublicPrivate Investment Program (PPIP) on March 

23, 2009, as a part of the Financial Stability 

Plan to help restart the market and provide 

liquidity for legacy assets, enabling financial 

institutions to make new loans available to 

households and businesses. The PPIP is 

designed to improve the condition of 

financial institutions by facilitating the 

removal of legacy assets from their balance 

sheets. Legacy assets include both real estate 

loans held on banks’ balance sheets (legacy 

loans) as well as securities backed by 

residential and commercial real estate loans 

(legacy securities). 

OFS initially announced that it would 

provide up to $100 billion for the PPIP. 

Because of improvements in the market, this 

amount was reduced to $30 billion. Under 

the PPIP, OFS provides equity and debt 

financing to newly-formed public-private 

investment funds (PPIFs) established by 

private fund managers with private investors 

for the purpose of purchasing legacy 

securities. These securities are commercial 

mortgage-backed securities and non-agency 

residential mortgage-backed securities. To 

qualify for purchase by a Legacy Securities 

PPIP (S-PPIP), these securities must have 

been issued prior to 2009 and have originally 

been rated AAA – or an equivalent rating by 

two or more nationally recognized statistical 

rating organizations – without ratings 

enhancement and must be secured directly by 

the actual mortgage loans, leases, or other 

assets. 

As of November 30, 2009, nine PPIFs have 

signed agreements with OFS. Following 

signature of these agreements, each fund 

manager has up to six months to raise 

additional private capital to receive the full 

Department of the Treasury - Budget in Brief FY 2011 Page 85
allocation of the $3.3 billion in matching 

equity and debt capital from OFS. Assuming 

that each of the nine fund managers raises 

enough private capital to receive the full 

allocation from OFS, the total purchasing 

power of the PPIFs will be $40 billion, 

including $10 billion in private capital and the 

$30 billion OFS commitment. As of 

September 30, 2009, no fund managers had 

made any investments and OFS had not 

disbursed any funds. 

Program Evaluation 

During FY 2011, OFS is proposing to fund a 

project to enhance the HAMP’s existing 

standardized set of procedures that servicers 

must follow to modify loans in order to 

increase the conversion of offered to modified 

loans. 

This would be completed by facilitating and 

evaluating pilot programs, which some 

servicers have already implemented on their 

own book, that are structured differently from 

the standard loan modifications under 

HAMP. By assisting these servicers to 

develop and design statistically sound pilot 

programs, these successful programs can then 

be launched on a national scale. 

Legislative Proposals 

OFS does not have any legislative proposals. 

Performance Measures 

OFS has established the following 

Performance Measures: 

1) Ensure the Overall Stability and Liquidity 

of the Financial System, 

2) Prevent Avoidable Foreclosures and 

Preserve Homeownership, 

3) Protect Taxpayer Interests, and 

4) Promote Transparency 

Department of the Treasury - Budget in Brief FY 2011 Page 86