Troubled Asset Relief Program (TARP): Implementation and Status
Released: 2014-08-21T00:00:00

Summary:
The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. 110-343) in October 2008. EESA was enacted to address an ongoing financial crisis that reached near-panic proportions in September 2008. The act granted the Secretary of the Treasury authority to either purchase or insure up to $700 billion in troubled assets owned by financial institutions. This authority was granted for up to two years from the date of enactment and was very broad. In particular, the definitions of both "troubled asset" and "financial institution" allowed the Secretary wide leeway in deciding what assets might be purchased or guaranteed and what might qualify as a financial firm.
The financial crisis grew out of an unprecedented housing boom that turned into a housing bust. Much of the lending for housing during the boom was based on asset-backed securities that used the repayment of housing loans as the basis of these securities. As housing prices fell and mortgage defaults increased, these securities became illiquid and fell sharply in value, causing capital losses for firms holding them. Uncertainty about future losses reduced many firms' access to private liquidity, with the loss in liquidity being catastrophic in some cases. September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of American International Group (AIG), which was saved only by an $85 billion loan from the Federal Reserve. There was widespread lack of trust in the financial markets as participants were unsure which firms might be holding so-called toxic assets that might now be worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. This uncertainty prevented firms from accessing credit markets to meet their liquidity needs.
As EESA moved through Congress, most attention was focused on the idea of the government purchasing mortgage-related toxic assets, thus alleviating the widespread uncertainty and suspicion by cleaning up bank balance sheets. The initial TARP Capital Purchase Program, however, directly added capital onto banks' balance sheets through preferred share purchases rather than removing assets that had become liabilities through purchasing mortgage-related assets. Several other TARP programs followed, including an asset guarantee program; programs designed to spur consumer and business lending; financial support for companies such as AIG, GM, and Chrysler; and programs to aid homeowners at risk of foreclosure. Eventually, the Public-Private Investment Program resulted in the purchase of some mortgage-related assets, but this remained a relatively small part of TARP. Most TARP programs are now closed.
With the immediate crisis subsiding through 2009, congressional attention to financial services turned largely to consider broad regulatory changes. The resulting Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) amended TARP's authority, including (1) reduction of the overall amount to $475 billion; (2) removal of the ability to reuse TARP funds that had been repaid; and (3) removal of the authority to create new TARP programs or initiatives. The original TARP authority to purchase new assets or enter into new contracts expired on October 3, 2010. Outlays under the existing contracts, however, may continue through the life of these contracts. Overall budget-cost estimates for TARP have decreased significantly since the passage of EESA, with the most recent Congressional Budget Office estimates foreseeing $27 billion in costs and Office of Management and Budget estimates foreseeing $39 billion in costs. Most of these costs are from aid for homeowners, for the insurer AIG, and for U.S. automakers. The assistance to banks is generally showing a gain for the government. In the 113th Congress, oversight of TARP has continued, including a hearing held by a subcommittee of the House Committee on Oversight and Government Reform.

subsections: section_title: Introduction
paragraphs: The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. 110-343 ) enacted on October 3, 2008. EESA was passed by Congress and signed by President George W. Bush to address an ongoing financial crisis that reached near-panic proportions in September 2008.
Financial turmoil began in August 2007 when asset-backed securities, particularly those backed by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented housing boom turned to a housing bust. The Federal Reserve (Fed) stepped in with emergency measures to restore liquidity, temporarily calming markets. Losses in mortgage markets, however, continued and spilled into other markets. Financial firms eventually wrote down many of these losses, depleting their capital. Uncertainty about future losses on illiquid and complex assets led to some firms having reduced access to private liquidity, with the loss in liquidity being catastrophic in some cases.
September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of AIG, which was averted with an $85 billion loan from the Fed. There was widespread unwillingness to lend in the financial markets because participants were unsure which firms might be holding so-called toxic assets now worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions.
EESA authorized the Secretary of the Treasury (hereinafter "the Secretary") to either purchase or insure up to $700 billion in troubled assets owned by financial firms. EESA granted this authority for a maximum of two years from the date of enactment, meaning it expired on October 3, 2010. The general concept was that by removing such assets from the financial system, confidence in counterparties could be restored and the system could resume functioning. This authority granted in EESA was very broad. In particular, the definitions of both "troubled assets" and "financial institutions" allowed the Secretary wide latitude in deciding what assets might be purchased or guaranteed and what might qualify as a financial institution. EESA also included a number of oversight mechanisms and reporting requirements. EESA was later amended to strengthen its executive compensation requirements and to reduce the authorized amount to $475 billion.
This report provides a brief outline of the programs created under TARP, changes made by Congress, and a summary of the current status and estimated costs of the program. It also provides an Appendix that contains detailed discussions of the individual TARP programs. 
section_title: TARP Programs
paragraphs: Treasury reacted quickly after the enactment of EESA, announcing the TARP Capital Purchase Program on October 14, 2008, and several other programs followed. These programs can be broadly broken down into Bank Support Programs, Credit Market Programs, Other Investment Programs, and Housing Programs, with several programs under each heading:
subsections: section_title: Bank Support Programs
paragraphs: Capital Purchase Program (CPP). The CPP did not purchase the mortgage-backed securities that were seen as toxic to the system. Instead, it purchased preferred shares in banks. The resulting addition of capital, it was hoped, would allow banks to overcome the effect of the toxic assets while those assets remained on bank balance sheets. The CPP is now closed with no additional disbursements possible under the current program. Of the approximately $205 billion disbursed, $1.1 billion remains outstanding, $4.9 billion has been written off or recognized as a loss, and $26.95 billion in income has been received. Targeted Investment Program (TIP). This program provided for exceptional preferred share purchases and was used only for Citigroup and Bank of America. TIP is closed, with all $40 billion in disbursed funds repaid and $4.4 billion in income received. Asset Guarantee Program (AGP). The AGP, required by Section 102 of EESA, provided guarantees that were also part of the exceptional assistance to Citigroup and Bank of America. This program is closed, with the $5 billion in extended guarantees canceled, no funds actually disbursed, and $3.4 billion in income received. Community Development Capital Initiative (CDCI ). The CDCI provided for lower dividend rates on preferred share purchases from banks that target their lending to low-income, underserved communities and small businesses. Many participants in the CDCI converted into the program from the CPP. The CDCI is closed with no additional disbursements possible under the current program. Of the $0.57 billion disbursed, $0.47 billion is still outstanding, $0.01 billion has been written off or recognized as a loss, and $0.04 in income has been received.
section_title: Credit Market Programs
paragraphs: Public-Private Investment Program (PPIP). This program provided funds and guarantees for purchases of mortgage-related securities from bank balance sheets. Purchases and management of the securities was done by private investors who have provided capital to invest along with TARP funds. The PPIP is closed with all of the $18.6 billion in disbursed funds having been repaid and $3.85 billion in income received. Term Asset-Backed Securities Loan Facility (TALF). The TALF program was operated by the Federal Reserve to support the asset-backed security market, with TARP funds committed to support the program and absorb initial losses. $0.1 billion in funds were disbursed to cover expenses, but no funds were disbursed to cover losses. While TALF loans extend to 2015, in January 2013 the earnings from the program were deemed sufficient to cover any possible future losses. Thus, the TARP commitment was canceled and the disbursement of $0.1 billion was repaid. Treasury received $0.59 billion in income due to TALF. Section 7(a) Securities Purchase Program . This program supported the Small Business Administration's (SBA's) Section 7(a) loan program through purchases of pooled SBA guaranteed securities to increase credit availability for small businesses. It is now closed with $0.36 billion repaid out of the $0.37 billion in disbursed funds and $0.01 billion in income received.
section_title: Other Programs
paragraphs: AIG Assistance ( Systemically Signific ant Failing Institution Program) . TARP preferred share purchases supplemented and ultimately supplanted assistance to AIG previously provided by the Federal Reserve. The final AIG assistance restructuring occurred in January 2011 with the Treasury's peak disbursement equaling $67.84 billion and the government's ownership totaling 92% of AIG's common equity. Treasury sold its equity over time, with the final equity sold in December 2012. In total, Treasury recognized $13.5 billion in losses from the TARP portion of AIG assistance and received $0.96 billion in income. Automobile Industry Support. This program initially provided loans to support General Motors (GM) and Chrysler and later included preferred share purchases from the auto financing company GMAC (now renamed Ally Financial) and a loan for Chrysler Financial. The program ultimately resulted in majority government ownership of both GM (60.8%) and GMAC/Ally Financial (74%) and minority government ownership of Chrysler (9.9%). The U.S. government's ownership stake in GM was sold to GM itself and to the public between December 2010 and December 2013. The ownership stake in Chrysler was sold to Fiat in May 2011. Most of the stake in GMAC/Ally Financial has been sold over time and currently stands at 16%, with Treasury planning to sell additional shares. The current total outstanding support to the auto industry is $2.1 billion of the $79.7 billion in disbursed funds, with $15.9 billion in recognized losses and $7.0 billion in income received. No new disbursements are possible under the current program.
section_title: Housing Programs14
paragraphs: These programs are unlike the other TARP programs in that they do not result in valuable assets or income in return for TARP funding. All housing programs remain open under the contracts previously agreed to, and substantial funds remain to be disbursed:
Home Affordable Modification Program (HAMP) . HAMP pays mortgage servicers if they modify mortgages to reduce the financial burden on homeowners. A total of $29.8 billion in disbursements is possible under the program, with $8.8 billion disbursed. Hardest Hit Fund (HHF). HHF provides aid to state housing finance agency programs in states that have high unemployment rates or experienced the steepest declines in home prices. Eighteen states and the District of Columbia are participating in HHF. Of a possible $7.6 billion, $4.2 billion has been disbursed. Federal Housing Administration ( FHA ) Short Refinance . This program promotes refinancing of mortgages on "underwater" properties, those on which the mortgage balance is greater than the current value of the house, if lenders agree to forgive some of the principal balance owed on the mortgages. Of a possible $1.0 billion, $0.06 billion has been disbursed.
section_title: Current Status and Future of TARP
paragraphs: As detailed above, until October 3, 2010, the Secretary had the authority to purchase or insure nearly any financial asset under the programs in place on June 25, 2010. While this authority has expired, the legal contracts entered into under the previous authority may still be in force. Thus, TARP funds may still flow from Treasury in the future. The only programs with a significant gap between legal commitments and actual amount disbursed, and the potential to grow in the future, are the housing support programs. Table 1 presents figures reported by Treasury for obligated and actually disbursed TARP funds.
Although the total amount of assets held or insured under TARP was initially capped at $700 billion, and the program was widely reported as a "$700 billion bailout," the actual net cost of TARP was never likely to approach $700 billion. Unlike most government programs, where funds are simply expended, TARP funds were generally used in ways that resulted in either the holding of assets by the government or in some form of income accruing to the government. The incoming receipts from TARP outlays have taken several forms, including
funds from the sale of previously purchased assets, repayment of principal from loans, premium payments for insured assets, dividend and interest payments from assets and loans, and proceeds from the sale of warrants issued by companies that sold assets to TARP.
 Table 2 summarizes these incoming revenues from TARP. According to EESA, revenues and proceeds from the sale of troubled assets, or from warrants and senior debt instruments, "shall be paid into the general fund of the Treasury for reduction of the public debt." This statutory language does not specifically address the dividends paid on the preferred stock held by Treasury. Legislation ( H.R. 678 ) to require that dividends fall under EESA requirements was introduced, but not enacted, in the 112 th Congress.
 Table 3 summarizes TARP funds that have been disbursed but not repaid. Most of these funds are classified by Treasury as "outstanding." This does not mean, however, that the recipient of these funds is obligated to repay them, as is typically the case with, for example, a loan that is outstanding from a bank to a borrower. Most of the outstanding TARP funds are embodied in assets, such as common stock, that recipients are not obligated to repay; instead, Treasury is expected to sell these assets at a future date and hopefully recoup the funds that were disbursed. TARP funds that are classified as a recognized loss, or as written off, are typically cases where either the asset sales were not sufficient to repay the initial TARP disbursement or a TARP recipient has failed and thus is unable repay the funds.
section_title: The Costs of TARP
paragraphs: In arriving at an overall cost to the government of TARP, or any similar program, it is important to account for the difference in time between initial outlay of funds and the receipt of any income. Some TARP contracts run for many years, and the difference in value between a dollar in 2008 and 2013, for example, could be significant. To compare dollar values over time, economists use present value calculations that reduce costs or income in the future relative to the present by a discount rate. Present value calculations can be very sensitive to the rate used if the amount of time involved is large. In preparing the budget cost estimates for TARP, the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) are directed by Section 123 of EESA to adjust their estimates by current market borrowing rates, as opposed to the borrowing rate paid by Treasury. Using market rates instead of government borrowing rates increases the net calculated cost of these investments and is meant to better represent the true economic costs of the programs. The cost estimates for TARP have fallen dramatically since the program was started. For example, in March 2009, CBO estimated a $356 billion budgetary cost for TARP. This number fell to $109 billion in March 2010, and the latest CBO estimate is for a total budgetary cost of $21 billion.
The various programs under TARP have had very different estimated costs. In general, the bank support programs and credit market support programs have produced gains for the government. The losses in TARP are primarily accruing from the support for AIG, the automakers, and housing. 
 Table 4 below summarizes recent detailed estimates of TARP's cost from CBO and OMB. The largest difference between the OMB and CBO estimates is in the amounts expected to be disbursed for the housing support programs. The CBO estimates are also made following the OMB estimates and thus use more current market data.
The cost estimates of TARP are sensitive to financial markets and the state of the economy. The program's ultimate cost has depended largely on recouping value from the financial assets held in TARP. The assets resulting from bank support programs, including warrants and both preferred and common shares, have turned out to be relatively valuable. Thus, the estimates show an overall gain from these programs as the increases in asset values outweigh any losses from defaults. In the case of the automaker support, however, the estimates indicate that the assets held by the government through TARP ultimately will not return enough to recoup the TARP funds put into the companies, as was the case with the assistance for AIG.
section_title: The 113th Congress and TARP
paragraphs: In addition to the numerous oversight mechanisms in the original statute, Congress has continued to directly oversee various aspects of TARP through committee hearings, with the House Committee on Oversight and Government Reform creating a subcommittee specifically focused on TARP and financial services during the 112 th Congress. In the 113 th Congress, the House Committee on Oversight and Government Reform's Subcommittee on Economic Growth, Job Creation, and Regulatory Affairs held a hearing on February 26, 2013, entitled "Bailout Rewards: The Treasury Department's Continued Approval of Excessive Pay for Executives at Taxpayer-Funded Companies."
section_title: Ownership of Private Companies
paragraphs: Government ownership of common equity in private companies was not a general goal of EESA although it was expected that the government would be compensated for the assistance given to companies under TARP. In some cases, this compensation has resulted in government holdings of common stock in amounts that typically would result in the government having a controlling interest in these companies. The government, however, has generally exercised little of the ownership control inherent in these large stakes. Common equity in companies has typically been accepted in return for TARP assistance in order to strengthen the companies' capital positions going forward. Such equity also provides a potential financial upside to the taxpayers if firms have a strong recovery, but it has a potential downside if firms do not recover strongly. Outstanding outlays, such as loans, that have been converted to common equity are no longer directly owed by the company to the government.
In the case of Citigroup, which converted $25 billion of preferred shares into common shares, the outcome for the government was positive as the share price rose after the conversion, resulting in approximately $6.85 billion in capital gains for taxpayers. Ownership of Chrysler and GM equity, however, turned out less positively for the government, with a total of $2.93 billion in realized losses on Chrysler and a realized a loss of $11.16 billion on GM following the final sales of equity holdings. The ownership of AIG equity through TARP resulted in the government realizing a $13.48 billion loss, though this TARP equity loss was offset by a $17.55 billion gain from AIG equity holdings originating with the Federal Reserve. To date, Treasury has realized $1.82 billion in losses from equity holdings in GMAC/Ally Financial, with 16% of the company's equity yet to be sold. In all of these cases, however, the government also recouped funds through other means, such as dividends and interest payments, which offset the losses to varying degrees.
 Table 5 summarizes the current status of government ownership in large financial institutions.
section_title: TARP and the Dodd-Frank Act18
paragraphs: Unlike EESA, which was a temporary response to the immediate financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act; P.L. 111-203 ) was a broad bill that permanently changed many parts of the U.S. financial regulatory system. The act included a relatively short amendment to EESA in Title XIII, entitled the Pay It Back Act. Section 1302 of Dodd-Frank made three primary changes to EESA:
reduced the overall authorization to purchase from nearly $700 billion to $475 billion; removed the implicit authority for the Secretary to reuse TARP funds when TARP assets are sold; and limited the authorities under the act to programs or initiatives initiated prior to June 25, 2010.
As of June 30, 2010, Treasury reported that it planned to spend approximately $537 billion on the various programs, with $491 billion committed under signed contracts and $385 billion actually disbursed. The July 21, 2010, enactment of the $475 billion limit in the Dodd-Frank Act thus required Treasury to reduce the amounts planned for TARP by more than $60 billion and the legal commitments under TARP by more than $16 billion. CBO scored the TARP changes in the Dodd-Frank Act as resulting in a decrease in direct spending of $11 billion in 2010. The TARP changes reported by Treasury following the Dodd-Frank Act appear below in Table 6 .
Under the broad authorities granted by EESA, Treasury could unilaterally change the planned program allocations. Following the Dodd-Frank Act, this authority was limited to the difference between the total of Treasury's plans and the total of the signed contracts, approximately $21 billion as of July 31, 2010.
subsections: section_title: Appendix. Details of TARP Programs
paragraphs: Bank Support Programs
Capital Purchase Program and Capital Assistance Program
Under the Capital Purchase Program (CPP), $125 billion in capital was immediately provided to the nine largest banks (which became eight after a merger), with up to another $125 billion reserved for smaller banks that might wish to apply for funds through their primary federal banking regulator. This capital was provided in the form of preferred share purchases by TARP under contracts between the Treasury and banks. The initial contracts with the largest banks prevented these banks from exiting the program for three years. The contracts included dividend payments to be made on the preferred shares outstanding and the granting of warrants to the government. By the end of 2008, the CPP had 214 participating banks with approximately $172.5 billion in share purchases outstanding.
The Obama Administration and the 111 th Congress implemented changes to the CPP. EESA was amended, placing additional restrictions on participating banks in existing CPP contracts but also allowing for early repayment and withdrawal from the program without financial penalty. With the advent of more stringent executive compensation restrictions for TARP recipients, many banks began to repay, or attempt to repay, TARP funds. According to Treasury reports, by June 30, 2009, $70.1 billion of $203.2 billion CPP funds had been repaid; by December 31, 2009, $121.9 billion of $204.9 billion had been repaid; and by December 31, 2010, $167.93 billion of $204.9 billion had been repaid.
The new Administration also announced a review of the banking system, in which the largest participants were subject to stress tests to assess the adequacy of their capital levels. Satisfactory performance in the stress test was one regulatory requirement for large firms that wished to repay TARP funds. Large firms that appeared too fragile in the stress test would be required to raise additional capital, and the firms would have the option of raising that capital privately or from the government through a new Capital Assistance Program. No funding was provided through the Capital Assistance Program, although GMAC, formerly General Motors' financing arm, received funding to meet stress test requirements through the Automotive Industry Financing Program (see discussion under "U.S. Automakers Assistance" section below). In addition, Citigroup, one of the initial eight large banks receiving TARP funds, agreed with the government to convert its TARP preferred shares into common equity to meet stress test requirements (see discussion of Citigroup below).
CPP profits stem from dividend payments, warrants received from recipients, and capital gains in limited cases when shares are sold for more than face value (the standard CPP shares are resold at face value). Losses stem from failure to repay in part or full. The ultimate profitability of the program will be determined by the balance between the two.
Another source of CPP profits is the proceeds from the warrants received from the companies. Treasury has not generally exercised warrants to take common stock in CPP recipients. Following the contracts initially agreed upon, Treasury has allowed institutions to purchase their warrants directly upon repayment of preferred shares, as long as both sides can reach an acceptable price. To reach an initial offering price, Treasury is using complex option pricing models to price the warrants that require assumptions to be made about future prices and interest rates. Since these pricing models are by their nature uncertain, some critics urge Treasury to auction the warrants on the open market (allowing the issuing firm to bid as well) to ensure that Treasury receives a fair price for them. Open auctions have been used, but only when an agreement between Treasury and the firms cannot be reached.
CPP earns income from dividends with a rate of 5% for the first five years and 9% thereafter. (For S-Corp banks, the dividend rate is 7.7% for the first five years and 13.8% thereafter.)
Realized losses to date on the CPP preferred shares have been relatively small. As of August 15, 2014, Treasury reported $4.9 billion in write-offs and realized losses from the CPP. The majority of this amount was due to the failure of CIT Group, which had $2.3 billion in TARP shares outstanding when it failed.
 Table A-1 below summarizes the CPP, including current and peak asset holdings, losses or gains, and conditions of the program.
Community Development Capital Initiative
The Community Development Capital Initiative (CDCI) operated somewhat like the CPP in that it purchased preferred shares from financial institutions; in some cases institutions were permitted to convert previous CPP preferred shares to CDCI preferred shares. The program was specifically focused on institutions that serve low-income, underserved communities and small businesses. Treasury purchased preferred shares from institutions that qualified for the CDCI up to an amount equal to 5% of the institutions' risk-weighted assets for banks and thrifts or 3.5% of total assets for credit unions. These preferred shares pay an initial dividend rate of 2%, which will increase to 9% after eight years. Unlike the CPP, no warrants in the financial institutions were included. Purchases under the program were completed in September of 2010 with approximately $210 million new shares purchased. In addition, approximately $360 million of shares were converted from CPP shares.
Targeted Investment Program and Asset Guarantee Program
The Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP) were only used as part of a package to aid two large banks, Citigroup and Bank of America, which were also large recipients of CPP funds. The combined assistance for these banks is addressed below.
Citigroup (CPP/TIP/AGP)
On November, 23, 2008, the Treasury, Federal Reserve, and FDIC announced a joint intervention in Citigroup, which had previously been a recipient of $25 billion in TARP Capital Purchase Program funding, to "[support] financial stability." This exceptional intervention consisted of an additional $20 billion purchase of preferred shares through the TIP and a government guarantee for a pool of $306 billion in Citigroup assets (reduced to $301 billion when the guarantee was finalized on January 16, 2009) through the AGP, the FDIC, and the Federal Reserve. Citigroup paid the federal government a fee for the guarantee in the form of $4 billion in trust preferred securities paying an 8% dividend rate. Treasury also received warrants in both of these transactions.
On February 27, 2009, Citigroup and Treasury officials agreed that the Treasury Department would convert $25 billion of its TARP CPP investment in Citigroup preferred stock into Citigroup common stock and cancel the warrants taken by Treasury under the CPP. After this conversion, the U.S. government owned approximately 33.6% (7.7 million shares) of Citigroup common stock. The conversion of preferred shares to common stock worsened the government's priority on Citigroup's assets in the event of liquidation but improved certain capital ratios for the company and relieved it of the obligation to pay dividends to the government, as it had previously with the preferred shares. The conversion exposed the government to more potential risk as well as to potential reward. The government's preferred shares could only be redeemed at par value, regardless of the performance of the company, while the government's holdings of common stock rose and fell in value based on the market valuation of the company.
In December 2009, Citigroup and Treasury reached an agreement to repay the outstanding $20 billion in preferred securities and to cancel the asset guarantee. As part of this agreement, Treasury agreed to cancel $1.8 billion worth of the $4 billion in trust preferred securities originally paid as a fee for the guarantee. Citigroup repurchased the outstanding AGP trust preferred securities on September 30, 2009. While the asset guarantee was in place, no losses were claimed and no federal funds were paid out. 
In April 2010, Treasury began selling its common share holdings in Citigroup. The shares were sold in tranches through 2010, with a total of 4.1 million shares being sold by the end of September 2010. Treasury announced the completion of the sales early in December 2010. The average sales price for the Treasury shares was $4.14 per share compared with an initial conversion price of $3.25 per share. The gain from the common stock sales was approximately $6.9 billion, along with approximately $2.2 billion from the sales of the remaining trust preferred securities granted as a fee from the AGP, $2.9 billion in interest and dividends, and $54 million from the sale of warrants for a total nominal gain (i.e., not discounted for market risk) from the Citigroup intervention of $12.1 billion.
 Table A-3 summarizes the assistance for Citigroup through the CPP, TIP, and AGP, including current and peak asset holdings, losses or gains, and conditions of the program.
Bank of America (CPP/TIP/AGP)
On January 16, 2009, the Treasury, Federal Reserve, and FDIC announced a joint intervention in Bank of America, which had previously been a recipient of $25 billion in TARP Capital Purchase Program funds, "as part of its commitment to support financial market stability." This exceptional assistance included the purchase of an additional $20 billion of Bank of America preferred shares through the TARP Targeted Investment Program and a joint guarantee on a pool of up to $118 billion of Bank of America's assets (largely acquired through its merger with Merrill Lynch) through the TARP Asset Guarantee Program, the FDIC, and the Federal Reserve. Bank of America was to pay the federal government a fee for the guarantee in the form of $4 billion in preferred stock with an 8% dividend rate and warrants to purchase common stock worth $2.4 billion at the time of the agreement.
Although the asset guarantee was announced in January 2009, a final agreement was never signed. On September 21, 2009, Bank of America announced that it had negotiated a $425 million termination fee that allowed it to withdraw from the AGP, canceling the warrants and preferred shares issued for the program.
On December 9, 2009, Treasury announced that Bank of America had repurchased the $45 billion in preferred stock previously purchased under TARP. The warrants issued under the CPP and the TIP were sold at auction by the government in March 2010 for approximately $1.6 billion. No government assistance to Bank of America remains outstanding.
 Table A-4 summarizes the support for Bank of America through the CPP, TIP, and AGP, including current and peak asset holdings, losses or gains, and conditions of the support.
Credit Market Programs
Public Private Investment Program
On March 23, 2009, Treasury announced the Public Private Investment Program (PPIP). PPIP as envisioned consisted of two asset purchase programs designed to leverage private funds with government funds to remove troubled assets from bank balance sheets. Perhaps closer to the original conception of TARP than other TARP programs, PPIP dedicated TARP resources as equity to (1) acquire troubled loans in a fund partially guaranteed by the FDIC and (2) acquire troubled securities in a fund designed to be used with loans from the Federal Reserve's TALF program or TARP. Both funds would match TARP money with private investment, and profits or losses would be shared between the government and the private investors. Unlike the original conception of TARP, private investors would choose the assets to purchase and manage the funds and the day-to-day disposition of assets. The legacy loan portion of PPIP never advanced past a single pilot sale reported by the FDIC on September 30, 2009. Treasury originally envisioned assets purchases through PPIP would be as high as $1 trillion (using as much as $200 billion in TARP funds), but a maximum of $22.4 billion was committed to the legacy securities portion of the program.
The PPIP Legacy Securities Program was designed to deal with existing mortgage-related securities on bank balance sheets. Private investment fund managers applied to Treasury to pre-qualify to raise funds to participate in the program. Approved fund managers that raised private equity capital received matching Treasury capital and an additional loan to the fund that matched the private capital (thus, for example, a fund that raised $100 had a total of $300 available to invest). In addition to this basic transaction, Treasury had the discretion to allow another matching loan so that a fund raising $100 could have made a total of $400 available for investment. The funds were to be used to invest in non-agency MBS that were originally rated AAA. (Agency MBS refers to loans issued by GSEs, such as Fannie Mae and Freddie Mac, and non-agency MBS refers to mortgage-related securities issued by private financial institutions, such as investment banks.)
Nine funds were prequalified by Treasury in June 2009. In early January 2010, however, one of the funds reached a liquidation agreement with Treasury and was wound down. By March 31, 2013, another five of the funds had been effectively wound down and all $18.6 billion of the disbursed funds had been returned. 
Term Asset-Backed Securities Loan Facility
The Term Asset-Backed Securities Loan Facility (TALF) is a Fed program to assist the asset-backed security market, with TARP acting as a backstop in case of any losses. TALF was designed so that income accrues to the Fed with possible losses and some expenses accruing to Treasury. Initial obligation of TARP funds to support TALF was $4.0 billion, with $0.1 billion disbursed. The TARP commitment was reduced to $1.4 billion in June 2012 and canceled in January 2013 because the fees that had accrued from the program at that time were greater than the amount of TALF loans still outstanding. The initial $0.1 billion in disbursements from TARP have been repaid.
Section 7(a) Securities Purchase Program
This program supported the Small Business Administration's (SBA's) Section 7(a) loan program through purchasing pooled SBA guaranteed securities backed by private loans to small businesses. Beginning in March 2010, Treasury purchased a total of $368 million in securities guaranteed by the SBA. Purchases ended in October 2010 with the expiration of the TARP authority, and all securities have been sold or matured.
U.S. Automaker Assistance
In addition to financial firms, nonfinancial firms also sought support under TARP, most notably U.S. automobile manufacturers. While EESA specifically authorized the Secretary of the Treasury to purchase troubled assets from "financial firms," the legislative definition of this term did not mention manufacturing companies. After specific legislation for the automakers failed to clear Congress, the Bush Administration turned to TARP for funding.
On December 19, 2008, the Bush Administration announced it was providing support through TARP to General Motors and Chrysler under the Automotive Industry Financing Program (AIFP). The initial package included up to $13.4 billion in a secured loan to GM and $4 billion in a secured loan to Chrysler. In addition, $884 million was lent to GM for its participation in a rights offering by GMAC as GM's former financing arm was becoming a bank holding company. On December 29, 2008, Treasury announced that GMAC also was to receive a $5 billion capital injection through preferred share purchases.
After January 21, 2009, the Obama Administration continued assistance for the automakers, including support for the automaker warranties under the AIFP (so that consumers would not be discouraged from purchasing cars during the restructuring) and for third-party suppliers to the automakers (the Automotive Supplier Support Program). Additional loans for GM and Chrysler were made before and during the two companies' bankruptcies, and GMAC received additional capital through preferred share purchases as well. At the end of 2009, GM had received approximately $50.2 billion in direct loans and indirect support; Chrysler had received $10.9 billion in loans and indirect support; GMAC had received $17.2 billion in preferred equity purchases and loans; and Chrysler Financial had received $1.5 billion in loans. Some of this assistance is still owed by the companies, some has been repaid, and some has been converted into common equity in the company receiving assistance.
As of August 15, 2014, TARP support for the auto industry totaled approximately $79.7 billion disbursed, with $61.7 billion repaid and $7.0 billion in income. Approximately $15.9 billion has been written off or taken as a realized loss and $2.1 billion of assistance is outstanding. The assistance outstanding takes the form of government ownership of 16% of the common equity in Ally Financial (formerly GMAC). All other assistance has either been repaid or recognized as lost.
The most recent OMB cost estimates of assistance to the auto industry made with November 2013 data are for a lifetime cost of $14 billion; CBO also estimated the cost to be $14 billion as of March 2014.
 Table A-8 summarizes the support for the automakers, including current and peak asset holdings or loan amounts, losses or gains, and conditions of the assistance.
American International Group
In the fall of 2008, American International Group (AIG) was a federally chartered thrift holding company regulated by the Office of Thrift Supervision (OTS) at the holding company level, with a broad range of businesses, primarily insurance subsidiaries, which are state-chartered and state-regulated. Facing losses on various operations, AIG experienced a significant decline in its stock price and downgrades from the major credit rating agencies. These downgrades led to immediate demands for significant amounts of collateral (approximately $14 billion to $15 billion in collateral payments, according to contemporary press reports). As financial demands on the company mounted, bankruptcy appeared a possibility, as had occurred with Lehman Brothers on September 15, 2008. Many feared that AIG was "too big to fail" due to the potential for widespread disruption to financial markets resulting from such a failure.
On September 16, 2008 (prior to the existence of TARP), the Fed announced that it was taking action to support AIG in the form of a secured two-year line of credit with a value of up to $85 billion and a high interest rate. In addition, the government received warrants to purchase up to 79.9% of the equity in AIG. On October 8, 2008, the Fed announced that it would lend AIG up to an additional $37.8 billion against securities held by its insurance subsidiaries. In October 2008, AIG also announced that it had applied to the Fed's general Commercial Paper Funding Facility (CPFF) and was approved to borrow up to $20.9 billion at the facility's standard terms.
In early November 2008 (following the creation of TARP), financial support for AIG was restructured. The restructured financial support consisted of (1) reducing the size of the Fed loan to up to $60 billion, with the term lengthened to five years and the interest rate reduced by 5.5%; (2) purchasing of $40 billion in preferred shares through TARP; and (3) replacing the $37.8 billion loan with up to $52.5 billion total in asset purchases by the Fed through two Limited Liability Corporations (LLCs) known as Maiden Lane II and Maiden Lane III. The 79.9% equity position of the government in AIG remained essentially unchanged after the restructuring of the intervention.
In March 2009, the assistance was restructured further through (1) a partial payback of the Fed loan through a swap of debt for equity in two AIG subsidiaries worth approximately $25 billion, reducing the maximum to $35 billion; and (2) commitments for additional future TARP purchases of up to $29.8 billion in preferred shares at AIG's discretion and the conversion of existing shares into shares with optional dividend payments. The Maiden Lane LLCs continued operating under the previous terms, with the actual loans extended to the LLCs totaling $43.9 billion of the possible $52.5 billion at their peak. AIG's access to the CPFF had been reduced to $15.9 billion in January 2009 due to a ratings agency downgrade. AIG continued to access this facility until it expired in February 2010.
In September 2010, AIG and the government announced another restructuring of the government's assistance. This restructuring closed on January 14, 2011. The expressed goal was to simplify the government's interest in AIG and provide for a path for the divestment of the government's stake in the company. The plan called for (1) ending the Fed's involvement with AIG through loan repayment and transfer of the Fed's equity interests to the Treasury and (2) converting the government's $49.1 billion in existing preferred shares into common shares, which could then be sold to the public over time. The specific steps involved several interlocking transactions, including the initial public offering (IPO) of a large AIG subsidiary, the sale of several other AIG subsidiaries, and the use of up to approximately $20 billion in TARP funds to transfer equity interests from the Fed to Treasury. Once these transactions closed, Treasury held 92% of AIG's common equity (1.66 billion shares) and equity interests in AIG's subsidiaries worth approximately $20.3 billion.
Treasury sold the AIG equity over time and completed the sales in December 2012. All of the Federal Reserve loans have been repaid, and the assets held in the Maiden Lane LLCs have been sold. The last government-held assets relating to the AIG intervention were TARP warrants that were sold in January 2013.
 Table A-9 summarizes the support received by AIG from both TARP and the Fed, including current and peak asset holdings, losses or gains, and conditions of the support.
TARP Housing Assistance Programs
One criticism leveled at TARP in the program's early stages related to its focus on assisting financial institutions, thus providing only indirect assistance to individual homeowners facing foreclosure. Sections 103, 109, and 110 of EESA specifically embody congressional intent that homeowners be aided under TARP. Treasury ultimately created several programs addressing this criticism. Unlike other TARP programs that have resulted in asset purchases that may eventually return some funds to the government, the housing assistance programs have no mechanism for returning funds. Some $50 billion of TARP funding was initially planned for housing assistance efforts. Expected outlays under these programs have been counted as 100% spending with no expected financial return to the government. The amount of spending on these programs, however, has been relatively low, and the programs have been further criticized as ineffective at helping homeowners.
Home Affordable Modification Program
In March 2009, the TARP Home Affordable Modification Program (HAMP) was announced. Through HAMP, the government provides financial incentives to participating mortgage servicers that provide loan modifications to eligible troubled borrowers to reduce the borrowers' monthly mortgage payments to no more than 31% of their monthly income. Servicers receive an upfront incentive payment for each successful permanent loan modification and a "pay-for-success" payment for up to three years if the borrower remains current after the modification. The borrower can also receive a "pay-for-success" incentive payment (in the form of principal reduction) for up to five years if he or she remains current after the modification is finalized. Investors receive a payment cost-share incentive (that is, the government will pay half the cost of reducing the monthly mortgage payment from 38% to 31% of monthly income), and can receive incentive payments for loans modified before a borrower becomes delinquent. Mortgage modifications can be made under HAMP until December 31, 2016.
The Administration originally estimated that HAMP would cost $75 billion. Of this amount, $50 billion was to come from TARP funds and $25 billion was to come from Fannie Mae and Freddie Mac for the costs of modifying mortgages that those entities owned or guaranteed. Over time, Treasury has revised downward its estimate of the amount of TARP funds that will be used for HAMP, with some of these funds used for the other TARP housing assistance programs. As of August 15, 2014, a total of $29.8 billion is obligated for HAMP, with $8.8 billion disbursed.
Hardest Hit Fund
On February 19, 2010, the Obama Administration announced that it would make funding available to the housing finance agencies (HFAs) of five states that had experienced the greatest declines in home prices. The states could use these funds to create their own foreclosure prevention programs based on local conditions, as long as the programs they created met the TARP objectives and were approved by Treasury. This program is known as the Hardest Hit Fund (HHF), and several additional rounds of funding, with different criteria for choosing the states, have been announced since its inception, bringing the total number of states receiving funds to 18 plus the District of Columbia. State HFAs must expend the funds by December 31, 2017. The funding comes from the TARP funds that Treasury initially set aside for HAMP. After all of the rounds of funding, the total amount of funding allocated to HHF is $7.6 billion. Of this amount, $4.2 billion had been disbursed as of August 15, 2014.
FHA Short Refinance Program
On March 26, 2010, the Administration announced a new Federal Housing Administration Short Refinance Program for homeowners who owe more than their homes are worth. Detailed program guidance was released on August 6, 2010. Under the program, certain homeowners who are current on their mortgages but owe more than their homes are worth may be able to refinance into new, FHA-insured mortgages for an amount lower than the home's current value. The original lender will accept the proceeds of the new loan as payment in full on the original mortgage; the new lender will have FHA insurance on the new loan; and the homeowner will have a first mortgage balance that is below the current value of the home, thereby providing some equity in the home. Homeowners must be current on their mortgages to qualify for this program. Further, the balance on the first mortgage loan must be reduced by at least 10%. This program is voluntary for lenders and borrowers, and borrowers with mortgages already insured by FHA are not eligible. 
The FHA Short Refinance Program began on September 7, 2010, and is to be available until December 31, 2014. As of August 15, 2014, Treasury has obligated $1.03 billion of the TARP funds originally set aside for HAMP to help pay for the cost of this program, a reduction from the original amount of $8.1 billion. Of this $1.03 billion, $0.06 billion has been disbursed.