Troubled Asset Relief Program: One Year Later, Actions Are Needed to Address Remaining Transparency and Accountability Challenges
Published: 2009-10-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO's eighth report assesses the Troubled Asset Relief Program's (TARP) impact over the last year. Specifically, it addresses (1) the evolution of TARP's strategy and the status of TARP programs as of September 25, 2009; (2) the Department of the Treasury's (Treasury) progress in creating an effective management structure, including hiring for the Office of Financial Stability (OFS), overseeing contractors, and establishing a comprehensive system of internal control; and (3) indicators of TARP's performance that could help Treasury decide whether to extend the program. GAO reviewed relevant documentation and met with officials from OFS, contractors, and financial regulators.
section_title: What GAO Found
paragraphs: Over the last year, TARP in general, and the Capital Purchase Program (CPP) in particular, along with other efforts by the Board of Governors of the Federal Reserve System (Federal Reserve) and Federal Deposit Insurance Corporation (FDIC), have made important contributions to helping stabilize credit markets. TARP is still a work in progress, and many uncertainties and challenges remain. For example, while some CPP participants had repurchased over $70 billion in preferred shares and warrants as of September 25, 2009, whether Treasury will fully recoup TARP assistance to the automobile industry and American International Group Inc., among others, remains uncertain. Moreover, other programs, such as the Public-Private Investment Program and the Home Affordable Modification Program (HAMP) are still in varying stages of implementation. As of September 25, 2009, Treasury had disbursed almost $364 billion in TARP funds; however, Treasury has yet to update its projected use of funds for most programs in light of current market conditions, program participation rates, and repurchases. Without more current estimates about expected uses of the remaining funds, Treasury's ability to plan for and effectively execute the next steps of the program will be limited. Amid concerns about the direction and transparency of TARP, the new administration has attempted to provide a more strategic direction for using the remaining funds. TARP has moved from investment-based initiatives to programs aimed at stabilizing the securitization markets and preserving homeownership, and most recently at providing assistance to community banks and small businesses. While some programs, such as the Term Asset-Backed Securities Loan Facility, appear to have generated market interest, others, such as HAMP, face ongoing implementation and operational challenges. Related to transparency, Treasury has taken a number of steps to improve communication with the public and Congress, including launching a Web site and preparing to hire a communications director for OFS to support these efforts. Treasury has also made significant progress in establishing and staffing OFS; however, it must continue to focus on filling critical leadership positions, including the Chief Homeownership Preservation Officer and Chief Investment Officer, with permanent staff. Treasury's network of contractors and financial agents that support TARP administration and operations has grown from 11 to 52. While Treasury has an appropriate infrastructure in place, it must remain vigilant in managing and monitoring conflicts of interests that may arise with the use of private sector sources.

section_title: Letter
paragraphs: About a year ago, when the Emergency Economic Stabilization Act of 2008  (the act) that authorized the Troubled Asset Relief Program (TARP) was  enacted, the U.S. financial system was facing the most severe financial  crisis since the Great Depression. The crisis, which threatened the  stability of the financial system and the solvency of many financial  institutions, prompted the Department of the Treasury (Treasury) to  request and Congress to authorize Treasury to buy or guarantee up to $700  billion of the “troubled assets” that were deemed to be at the heart of the  crisis, including mortgages and mortgage-based securities, and any other  financial instrument Treasury determined it needed to purchase to help  stabilize the financial system.
When the act was signed on October 3, 2008, financial markets were in  significant turmoil. The dramatic correction in the U.S. housing market  had precipitated a decline in the price of financial assets associated with  housing, in particular mortgage assets based on subprime loans that lost  value as the housing boom ended and the market underwent a dramatic  correction. Some institutions found themselves so exposed that they were  threatened with failure—and some failed—because they were unable to  raise the necessary capital as the value of their portfolios declined. Other  institutions, ranging from government-sponsored enterprises (GSE) such  as Fannie Mae and Freddie Mac to Wall Street firms, were left holding  “toxic” or “legacy” assets that became increasingly difficult to value, were  illiquid, and potentially had little worth. Moreover, investors not only  stopped buying securities backed by mortgages but also became reluctant  to buy securities backed by many other types of assets. Because of  uncertainty about the financial condition and solvency of financial entities,  the prices banks charged each other for funds rose dramatically, and  interbank lending effectively came to a halt. The resulting credit crunch  made the financing on which businesses and individuals depend  increasingly difficult to obtain as cash-strapped banks held on to their  assets. By late summer of 2008, the potential ramifications of the financial  crisis ranged from the continued failure of financial institutions to  increased losses of individual savings and corporate investments and  further tightening of credit that would exacerbate the emerging global  economic slowdown that was beginning to take shape.
The act requires GAO to report at least every 60 days on the status of  TARP. As the act required, our reports have focused on (1) findings  resulting from our oversight of TARP’s performance in meeting the  purposes of the act; (2) the financial condition and internal controls of  TARP, its representatives, and agents; (3) the characteristics of both asset  purchases and the disposition of assets acquired, including any related  commitments that are entered into; (4) TARP’s efficiency in using the  funds appropriated for the program’s operation; (5) TARP’s compliance  with applicable laws and regulations; (6) efforts to prevent, identify, and  minimize conflicts of interest of those involved in TARP’s operations; and  (7) the efficacy of contracting procedures.
This report assesses the program’s impact over the last year. Specifically,  it addresses (1) the evolution of the TARP strategy and the status of TARP  programs as of September 25, 2009; (2) the Department of the Treasury’s  (Treasury) progress in creating an effective management structure,  including hiring for the Office of Financial Stability (OFS), overseeing  contractors, and establishing a comprehensive system of internal control;  and (3) changes in the condition of financial markets as measured by  indicators of TARP’s performance that could help Treasury decide  whether to extend the program.
subsections: section_title: Scope and Methodology
paragraphs: We took several steps to update information on the status of TARP funds,  including disbursements, dividend payments, repurchases, and warrant  liquidations, from October 3, 2008, through September 25, 2009 (unless  otherwise noted), and the status of Treasury’s actions taken in response to  recommendations from our TARP reports, including its progress in  developing a comprehensive system of internal control. We reviewed  documents provided by OFS and conducted interviews with officials from  OFS, including the Chief Financial Officer, Deputy Chief Financial Officer,  Cash Management Officer, Director of Internal Controls, and their  representatives.
For the Capital Purchase Program (CPP), we reviewed documents from  OFS that described the amounts, types, and terms of Treasury’s purchases  of senior preferred stocks, subordinated debt, and warrants under CPP.  We also reviewed documentation and interviewed officials from OFS who  were responsible for approving financial institutions’ participation in CPP  and overseeing the repurchase process for CPP preferred stock and  warrants. Additionally, we contacted officials from the four federal  banking regulators—the Federal Deposit Insurance Corporation (FDIC),  the Office of the Comptroller of the Currency (OCC), the Board of  Governors of the Federal Reserve System and Federal Reserve Banks  (Federal Reserve), and the Office of Thrift Supervision (OTS)—to obtain  information on their processes for reviewing CPP applications, the status  of pending applications, their processes for reviewing preferred stock and  warrant repurchase requests, and their examination processes for  reviewing recipients’ lending activities and compliance with TARP  requirements.
To update the status of the Capital Assistance Program (CAP), we  reviewed relevant documents and interviewed OFS officials about the  program. We also met with Federal Reserve officials to discuss the stress  test methodology and results for the 19 largest U.S. bank holding  companies and reviewed related documents relevant to CAP.
To update our work on the Targeted Investment Program (TIP) and the  Asset Guarantee Program (AGP), we reviewed the Securities Purchase  Agreements that Citigroup Inc. (Citigroup) and Bank of America  Corporation (Bank of America) entered into with Treasury and the Master  Agreement signed by Citigroup, Treasury, FDIC, and the Federal Reserve  Bank of New York (FRBNY). In addition, we interviewed OFS officials,  including the acting Chief Investment Officer and the General Counsel, to  obtain information on the current status of TIP and AGP in terms of new  applicants for the programs, compliance with their requirements, and  possible exit strategies for unwinding the TIP investments.
For the Systemically Significant Failing Institutions (SSFI) program, we  reviewed relevant documents from Treasury, the Federal Reserve, and  American International Group, Inc. (AIG), including securities purchase  agreements, periodic reports provided to Treasury, and other relevant  documentation. We also met with officials from each organization and  relevant state insurance regulators.
To meet the report’s objectives with respect to the Consumer and  Business Lending Initiative, we reviewed announcements and other  publicly available information on the Term Asset-Backed Securities Loan  Facility (TALF) that were available on the FRBNY’s Web site, in OFS  internal reports, and in program design documents from Treasury and  FRBNY. We also interviewed officials from OFS, FRBNY, and the Federal  Reserve, as well as TALF investors, a securitization attorney, three  underwriters, two major credit rating agencies, an academic, a policy  analyst, and TALF issuers for commercial mortgage-backed securities  (CMBS) and asset-backed securities (ABS) backed by credit cards, auto  loans, student loans, and Small Business Administration (SBA) loans.
To meet the report’s objectives with respect to the Public-Private  Investment Program (PPIP), we reviewed PPIP-related announcements,  OFS internal reports, and program operation and design documents  published by Treasury and FDIC. We also interviewed officials from  Treasury and FDIC, as well as a policy analyst and an economist.
To determine the status of TARP assistance provided through the  Automotive Industry Financing Program (AIFP), we reviewed documents  related to the restructuring of General Motors Company (GM) and  Chrysler Group LLC (Chrysler), including the automakers’ bankruptcy  filings, credit agreements between the automakers and the federal  government, and TARP disbursements to the automakers. We also  interviewed Treasury officials, including officials from Treasury’s auto  team, and representatives from GM and Chrysler.
To determine the program status of the Home Affordable Modification  Program (HAMP) and the status of our previous recommendations related  to the program, we reviewed Treasury’s guidelines for each HAMP  component, published reports on servicer performance, and Treasury’s  written response to our July recommendations. In addition, we  interviewed Treasury officials and officials at Fannie Mae and Freddie  Mac—financial agents of Treasury for HAMP—about the status of program  implementation, including a comprehensive system of internal control. We  also reviewed documentation of Treasury’s recent communications with  servicers, such as draft servicer guidelines and letters sent to participating  servicers. Finally, we spoke with representatives of consumer groups,  housing counselors, and servicer associations to obtain their views on the  implementation of HAMP to date.
To determine Treasury’s progress in developing an overall  communications strategy for TARP, we interviewed individuals from OFS  and Treasury’s Office of Public Affairs and Office of Legislative Affairs to  determine what steps Treasury had taken to improve and coordinate  communications with the public and Congress.
To assess Treasury’s progress in hiring permanent staff for OFS, we met  with officials from the Human Resources Office and OFS to discuss hiring  efforts and reviewed various documents that OFS provided to us. In the  interviews, officials discussed their processes for recruiting individuals  with the skill sets and competencies needed to administer TARP, including  steps taken to find permanent replacements to fill key leadership  positions. To examine changes in the composition of staff since the office  was established, we reviewed past GAO reports on TARP and various  documents that OFS provided to us, including OFS’s updated  organizational chart. To gauge OFS’s mix of permanent and temporary  staff and the number of vacancies, we reviewed the totals for each type of  staff over time and within each OFS office.
To assess OFS’s use of contractors and financial agents to support TARP  administration and operations, we obtained information from Treasury on  contracting activity as of September 18, 2009—including task orders and  modifications—for the OFS-support financial agency agreements,  contracts, blanket purchase agreements, and interagency agreements  (IAA). We analyzed this information to identify each contract’s and  agreement’s purpose, period of performance, and potential value. To  assess OFS’s processes for (1) management and oversight of contractors’  and financial agents’ performance, and (2) managing conflicts of interest  of contractors and financial agents supporting TARP administration and  operations, we reviewed applicable documents that had become available  from OFS since our June 2009 report. We also communicated with  Treasury compliance officials and reviewed applicable documentation  concerning OFS’s progress in (1) completing reviews of vendor conflicts- of-interest mitigation plans to conform with applicable TARP requirements  and (2) issuing guidance on OFS requirements and procedures for  documenting and resolving conflicts of interest.
As we noted in our initial report under the mandate, we identified a  preliminary set of indicators on the state of credit and financial markets  that might be suggestive of the performance and effectiveness of TARP.  We consulted Treasury officials and other experts and analyzed available  data sources and the academic literature. We selected a set of indicators  that offered perspectives on different facets of credit and financial  markets, including perceptions of risk, cost of credit, and flows of credit to  businesses and consumers. We assessed the reliability of the data upon  which the indicators were based and found that, despite certain  limitations, they were sufficiently reliable for our purposes. To update the  indicators in this report, we primarily used data from Thomson Reuters  Datastream, a financial statistics database. As these data are widely used,  we conducted only a limited review of the information but ensured that  the trends we found were consistent with other research. We also relied  on data from Inside Mortgage Finance, Treasury, the Federal Reserve, the  Chicago Board Options Exchange, the Securities Industry and Financial  Markets Association, and Global Insight. We have relied on data from  these sources for past reports and determined that, considered together,  they are sufficiently reliable for the purpose of presenting and analyzing  trends in financial markets. The data from Treasury’s survey of lending by  the largest CPP recipients (as of July 31, 2009, the latest available survey)  are based on internal reporting from participating institutions, and the  definitions of loan categories may vary across banks. Because these data  are unique, we are not able to benchmark the origination levels against  historical lending or seasonal patterns at the institutions. Based on  discussions with Treasury and our review, we found that the data were  sufficiently reliable for the purpose of documenting trends in lending.  Lastly, we collected data on loan balances from the Consolidated Financial  Statements for Bank Holding Companies Y-9C Report Forms, the primary  analytical tool that regulators use to monitor financial institutions. We  verified that the input process did not result in data entry errors. Because  the Y-9C is the primary source for balance sheet data and can be  corroborated to some extent by audited financial statements, we  conducted only a limited review of this data.
We conducted this performance audit from July 2009 to October 2009 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Background
subsections: section_title: TARP Is A Key Part of the United States’ Response to the Recent Financial Crisis
paragraphs: Before the act was passed, TARP was expected to be a program to  purchase mortgage-backed securities (MBS) and whole loans from  financial institutions to stabilize the financial system. Within 2 weeks of  enactment, however, following similar action by several foreign  governments and central banks, Treasury—through the newly established  OFS—announced that it would make $250 billion available to U.S.  financial institutions through purchases of preferred stock to provide  additional capital that would help enable the institutions to continue  lending. This effort was coordinated with a number of foreign  governments as part of a global effort to stabilize financial markets. In the  United States, the Federal Reserve and FDIC also announced concurrent  coordinated actions that were intended to increase confidence in the U.S.  financial system. Treasury’s decision to change its strategy raised  questions about TARP’s transparency, and the fact that the funds were  disbursed before a comprehensive system of internal control had been  established raised issues of accountability. Figure 1 provides an overview  of key dates for TARP implementation.
section_title: Overview of GAO Recommendations
paragraphs: In the last year, GAO has made 35 recommendations to Treasury and one  to the Federal Reserve on a number of issues surrounding the  implementation of TARP and the need to improve its operations and  transparency. Some of our recommendations applied to TARP in general,  while others, such as CPP and HAMP, were program specific. Our  recommendations to Treasury generally fell into three broad categ (1) transparency, reporting, and accountability; (2) management  infrastructure; and (3) communication. Other TARP oversight entitie such as the Special Inspector General for TARP (SIGTARP)  and the  Congressional Oversight Panel, have also made numerous  recomm TARP.  endations aimed at improving the implementation and oversight of  Transparency, reporting, and accountability. We made a series of  recommendations aimed at improving the transparency and accountability  of TARP and its programs. Initially, we made a series of recommend ations  aimed at improving the transparency of CPP. As a result, OFS now  requires all CPP participants to participate in some form of monthly  lending survey. We recommended that OFS report publicly the monies,  such as dividends, paid to Treasury by TARP participants, something OF started doing in June 2009. Similarly, Treasury took steps to implement  our recommendations aimed at making the warrant repurchase proc more transparent. Finally, we made a number of recommendations  addressing the basis and design of HAMP’s Home Price Decline Protection  program and the need to routinely review and update the key assumptions  that underlie Treasury’s projection of the number of borrowers likely to be  assisted. Treasury has started to address many of these recommendations.
Management infrastructure. To ensure that OFS established a robust  management structure, comprehensive system of internal control, and assessment process, we made a series of recommendations aimed at  addressing challenges associated with establishing a federal progra short period of time including challenges associated with staffing,  contractor oversight, and internal controls. For example:    We recommended that Treasury expedite its hiring efforts to help ensure  that OFS had the needed personnel throughout the implementation phase of the program and that key OFS leadership positions were filled during  and after the transition to the new administration. In certain areas,  challenges remain, and most recently we recommended that Treasu staff vacant positions in the Homeownership Preservation Office— including filling the position of Chief Homeownership Preservat with a permanent placement—and evaluate staffing levels and  competencies.
We recommended that OFS take a number of actions to ensure an  appropriate oversight infrastructure to manage contractors and addres conflicts of interest, including ensuring that sufficient personnel  were  s  assigned and properly trained to oversee the performance of all  contractors. We recommended that OFS issue regulations on conflicts of  interest involving Treasury’s agents, contractors, and their employees and  related entities as expeditiously as possible. We also recommended issu guidance requiring that key communications and decisions concerning  p otential or actual vendor-related conflicts of interest be documented.
More broadly, we recommended that Treasury continue to develop a  comprehensive system of internal control over TARP, including policies,  procedures, and guidance that were robust enough to protect taxpayer s’  interests and ensure that the program objectives were being met. For  example, we recommended improvements in documenting certain internal control procedures and in updating the guidance available to the public on determining warrant exercise prices so that it was consistent with OFS’s  actual practices. Finally, we recommended that OFS expe a comprehensive system of internal control over HAMP.
We also recommended that Treasury develop a process to monitor status of programs and identify any potential risk that announced  programs would not have adequate funding. Most recently, we also  recommended that OFS develop a means of systematically assess servicers’ capacity to meet HAMP requirements during program  admission.
Communication. In light of the backlash from Congress and other regarding Treasury’s initial shift in the program from purchases of  mortgages and mortgage-backed securities to capitalization of financia institutions, we made a series of recommendations over the past year  aimed at improving OFS’s communication with Congress and the public.  While the theme has been constant, the recommendations have attempte to help ensure that Treasury develops a comprehensive communication  strategy and clearly articulated vision for the program that goes beyon d  just providing information. We have recommended, for instance, that  Treasury develop a communication strategy that includes building an  understanding and support for the various components of the program Treasury continues to take steps to address these recommendations,  including hiring a communications officer, integrating communicatio into TARP operations, scheduling regular and ongoing contact with  congressional committees and members, and attempting to leverage  technology.  .
We made one recommendation that was not directed to Treasury. To help  improve the transparency of CAP—in particular the stress test results —we  recommended that the Director of Supervision and Regulation of th Federal Reserve consider periodically disclosing to the public the  aggregate performance of the 19 bank holding companies against the mo adverse scenario forecast for the duration of the 2-year forecast period  and decide whether the scenario needs to be revised. At a minimum, the  Federal Reserve should provide the aggregate performance data to OFS  program staff for the 19 institutions partic ipating in CAP or CPP. We are  addressing these issues in ongoing work.
section_title: TARP Has Moved from Capitalizin g Institutions Stabilizing Securitization Markets and Preserving Homeown Effective Communication Remains a Challenge
paragraphs: TARP is one of many programs and activities the federal government h put in place over the past year to respond to the financial crisis. As of  September 25, 2009, it had disbursed almost $364 billion to participa institutions. Participating institutions have in turn made billions in  dividends, interest, and principal payments on loans and some have  started to repurchase their preferred shares and warrants. With the  exception of CPP, which has hundreds of participants of various typ sizes, most of the other investment-based programs have provided  substantial amounts of assistance to individual institutions. For exam AIG has received assistance under SSFI and GM and Chrysler have  received support through AIFP. Amid concerns about the direction of the  program and lack of transparency, the new administration has attempted  to provide a more strategic direction for using the remaining funds an created a number of programs aimed at stabilizing the securitization  markets, preserving homeownership, and most recently at providing  assistance to community banks and small businesses. Some programs,  such as TALF—which is operated by FRBNY, with Treasury providing a  backstop against losses—appear to be achieving the intended re a reduced scale. Others, such as HAMP and PPIP, face ongoing  implementation or operational challenges. Finally, over the past year OFS  tegy and  has also started to take steps to formalize its communication stra improve the way it communicates with Congress and the public.
subsections: section_title: Over the Last Year, Treasury Has Disbursed Almost $364 Billion and Had More Than
paragraphs: In the past year, Treasury has implemented a range of TARP progr stabilize the financial system. As of September 25, 2009, OFS had  disbursed almost $364 billion for TARP loans and equity investments  (table 1). Disbursements represent amounts actually paid to make  troubled asset purchases or loans. Participating institutions have al Treasury billions of dollars in repurchases of preferred shares and  warrants, dividend payments, and loan repayments. In general, Treas authority to purchase, commit to purchase, or commit to guarantee  troubled assets will expire on December 31, 2009. However, the Secretar y  of the Treasury, upon submission of a written certification to Congress, may extend these authorities to no later than October 3, 2010—2 years   Based on the total prices of outstanding  from the date of enactment. troubled asset purchases and outstanding commitments to purchase and  the total face amount of outstanding guarantees as of September 25, 2009,  almost $329 billion remains available under the almost $700 billion limit on  Treasury’s authority to purchase or insure troubled assets; however, while Treasury has updated its projected use of funds for AGP and AIFP, it has  not modified any of its estimates for the others despite changes in curre market conditions, program participation rates, and repurchases since  March 2009. For example, when Treasury updated its estimates in March 2009, it estimated that CPP participants’ repurchases would total about  $25 billion but almost three times that amount has been repurchased as of September 25, 2009. Moreover, questions remain about the projected use of funds associated with consumer and business lending initiatives and  PPIP. While Treasury officials acknowledge they are currently review potential changes to the projections for the future, they continue to  believe that these estimates are appropriate program funding allocatio given current market conditions. Without more meaningful estimates  about projected uses of the remaining funds, Treasury’s ability to plan  and effectively execute the next phase of the program will be limited.
As shown in table 1, repurchases of preferred stock and repayments  loan principal have reduced the outstanding balance of the program.  Specifically, 41 institutions, including 10 of the largest bank holding  companies participating in TARP, had repurchased all or a portion preferred stock from Treasury for a total of about $70.7 billion as of  September 25, 2009 (table 2). While the decision to allow an institutio repurchase its preferred shares rests with its primary federal regulator, w continue to believe that Treasury, as administrator of CPP, has a  responsibility to help ensure that institutions are being treated  consistently and that the regulators are applying generally consistent  criteria when reviewing TARP participants’ requests to repurchase their  preferred shares.
A number of participants have also started to repurchase their warrants  and preferred stock obtained through the exercise of warrants. However,  unlike preferred stock, these amounts are deposited in the general fund of  the U.S. Treasury and are not to be used to reduce the outstanding  troubled assets counted against the almost $700 billion limit, as required  by the act (see table 2). Specifically, as of September 25, 2009, 20 financial  institutions had repurchased their warrants, and 3 had repurchased their  warrant preferred stock from Treasury, at an aggregate cost of about $2.9  billion.
While the first warrants repurchased were valued using a valuation  process agreed to by Treasury, some in the industry have suggested that  an auction process may represent the best method for Treasury to realize  the market value of the warrants and provide a more transparent process.  Treasury announced in June 2009 that it would auction certain warrants  but has yet to establish guidelines for how the auction process will work.  Treasury and others have noted that an auction method may not  necessarily yield the best price for the federal government. As of  September 25, 2009, Treasury had not yet auctioned any securities.
As of September 25, 2009, Treasury had received approximately $9.2  billion in dividend payments on shares of preferred stock acquired through  CPP, TIP, AIFP, and AGP (table 3). Treasury’s agreements under these  programs entitled it to receive dividend payments on varying terms and at  varying rates. The dividend payments to Treasury are contingent on each  institution declaring dividends. However, AIG—the sole participant in  SSFI—had not declared dividends and therefore had not made any of its  three scheduled dividend payments as of September 25, 2009.
Treasury borrows funds to finance the gap between the federal  government’s revenues and outlays and is subject to a statutory debt limit.  Because Treasury must borrow the funds disbursed, TARP and other  actions taken to stabilize the financial markets increase the federal debt  and result in related borrowing costs in the form of interest. Because  Treasury manages its cash position and debt issuances from a  governmentwide perspective, it is generally not possible to match TARP  disbursements with specific debt securities issued by Treasury and the  related borrowing costs. Moreover, Treasury typically does not calculate  the federal government’s borrowing cost related to specific disbursements,  including the net disbursements for TARP. However, Treasury provided us  with an unaudited estimate of approximately $2.3 billion in borrowing  costs based on certain assumptions relating to the net disbursements for  TARP from TARP’s inception through September 30, 2009. Using  different assumptions would result in different estimated borrowing costs.  Treasury’s estimation of the federal government’s borrowing costs for  TARP does not represent the ultimate costs of TARP and does not  consider, among other things, the intra-governmental interest that TARP  incurs.
section_title: CPP Is Treasury’s Largest Program for Capitalizing Institutions and Stabilizing the Financial System
paragraphs: Over the past year, CPP—the largest and most widely used program under  Treasury’s TARP authority for stabilizing the financial markets—made  investments in large publicly held financial institutions quickly but faced  challenges and delays in developing standard terms for investing in  smaller, nonpublic institutions. As of September 25, 2009, Treasury had  provided capital to 685 financial institutions through CPP. Treasury has  extended the CPP application deadline for small banks and increased the  amount of investment they can receive to encourage participation, but the  number of CPP disbursements has decreased dramatically. Investments  that are being made are going to relatively small banks. For example, the  average investment size for the 9 institutions funded in August 2009 was  $14.4 million, compared with the average investment size of $121 million  for the 147 institutions funded in January 2009.
According to Treasury, over 430 institutions have withdrawn their  applications to CPP after receiving approval for funding. Also, federal  banking regulators’ data show that over 1,800 applications have been  withdrawn since the start of the program. The number of approved  institutions withdrawing increased earlier this year, in part because of  uncertainties about program requirements (e.g., changes to executive  compensation). Anecdotally, some of the reasons cited have included  increased confidence in the financial condition of banks and, for smaller  institutions, the relatively high cost of closing CPP transactions. We are  continuing to review the process used to assess applications for CPP  funding to determine the extent to which Treasury consistently applied  established criteria and adequately documented the regulators’  recommendations and its final decisions. The results of this review will be  discussed in a subsequent report.
Over the last year, and consistent with our recommendation that Treasury  bolster its ability to determine whether institutions’ activities are generally  consistent with the act’s purposes, Treasury and federal banking  regulators have made progress in monitoring the activities of CPP  participants. Specifically:    Using its new monthly lending surveys, in February 2009 Treasury began  to publish detailed information for the 20 largest CPP institutions. In April  2009, it added questions addressing their small business lending activity to  the survey. In June Treasury began to publish basic information from all  CPP participating institutions. The monthly surveys are an important step  toward greater transparency and accountability for institutions of all sizes.  In August 2009, Treasury and the bank regulators began publishing a  quarterly analysis of regulatory financial data for CPP and non-CPP  institutions that focuses on three broad categories: on- and off-balance  sheet items, performance ratios, and asset quality measures. Moreover,  the largest CPP institutions that have repurchased their preferred shares  and warrants have agreed to voluntarily provide lending information  through 2009. These data will enable Treasury and others to monitor the  institutions’ lending activities following the repurchase of their shares.
In the past year, the federal banking regulators have taken steps to help  ensure compliance with the CPP agreements and other TARP  requirements, as we recommended. All of the federal banking regulators  have issued or are finalizing examiner guidance and procedures for  assessing institutions’ compliance with CPP and other TARP  requirements. For example, in March 2009 OCC issued a supervisory  memorandum to all examination staff that provided specific forms,  checklists, and guidance for assessing compliance with CPP and TARP  requirements. They plan to examine institutions’ compliance with TARP  requirements on executive compensation, dividend payments, and stock  repurchases as part of routine examinations. Three of the four banking  regulators had conducted 351 examinations as of September 2009, that  included checking for compliance with CPP and TARP requirements.  According to these regulators, the institutions examined were generally in  compliance with the requirements.
Treasury also has hired three asset management firms to provide market  advice about its portfolio of investments in financial institutions  participating in various TARP programs. Consistent with our  recommendation that Treasury increase its oversight of compliance with  terms of the CPP agreements, including limits on dividends and stock  repurchases, these managers are responsible for helping OFS monitor  compliance with these terms. However, Treasury has yet to finalize the  specific guidance and performance measures for the asset managers’  oversight responsibilities or identify the process for monitoring the asset  managers’ performance. We plan to continue monitoring this area.
section_title: The Level of Participation in the Capital Assistance Program Remains Uncertain
paragraphs: As of September 25, 2009, no funds had been expended under CAP. The  Federal Reserve’s stress tests of the 19 largest bank holding companies in  May 2009 identified 10 bank holding companies that needed to raise  approximately $75 billion in additional capital. According to FinSOB, this  result was better than the markets anticipated and helped boost the  markets’ confidence in the largest banks. By September 25, 2009, these 10  institutions had raised about $79 billion in capital, and 9 institutions had  successfully raised the full amount required by the stress test. While the  program is open to other institutions that did not participate in the stress  test, the extent to which these other institutions will choose to participate  in the program appears limited. Treasury extended the CAP application  deadline from May 25, 2009, to November 9, 2009. As of September 25,  2009, Treasury had not received any CAP applications. However,  regulators said that they had begun to receive CAP applications.
section_title: Overseeing Investments in Programs That Targeted Certain Critically Important Institutions Presents Challenges
paragraphs: Early in the implementation of TARP, Treasury announced that it was  providing what it refers to as “exceptional assistance” to three institutions  deemed to be critically important to financial markets and subsequently  created three programs—TIP, SSFI, and AGP—to provide that  assistance. TIP investments in Bank of America and Citigroup, Inc. in  January 2009 and December 2008, respectively, followed the institutions’  participation in CPP. In addition, OFS provided assistance to AIG under  SSFI. Treasury officials said that they did not expect to have to use these  programs again if economic conditions and market stability continued to  improve.
section_title: Programs Aimed at Restarting Secondary Markets Have Had Mixed Success
paragraphs: The Consumer and Business Lending Initiative announced in February as  part of the Financial Stability Plan consists of two programs, including t Federal Reserve’s TALF, operated primarily by FRBNY, and a program to  directly purchase securities backed by SBA-guaranteed small business  loans that has yet to materialize. A separate program, PPIP, which is being implemented in cooperation with the Federal Reserve and FDIC, is  intended to invest in funds that provide a market for the legacy loans and  securities that currently burden the financial system.
TALF participants and market observers also told us that TALF financi terms had become less favorable as credit markets stabilized, making  TALF less appealing.
Small Business Lending. Treasury has yet to begin purchasing securities backed by SBA-guaranteed small business loans as part of the Consumer  and Business Lending Initiative. Initially, Treasury anticipated purchasing  securities backed by SBA section 7(a) guaranteed loans by the end of  March 2009 and securities backed by SBA section 504 loan guarantees by  the end of May 2009; however, no purchases had been made as of  September 21, 2009. Several factors have been cited to explain this delay.  First, a Treasury official told us that some participants in the SBA loan  markets said they did not want to sell SBA-guaranteed securities to  Treasury if doing so would require them to provide warrants to Treasury  and to comply with executive compensation restrictions. Second, some  market participants said that this program might not be as helpful to the  SBA loan market as initiatives by SBA, because SBA efforts included  reductions in fees and increases in guarantees for the 7(a) program that  had been helpful. One major market participant also noted that high  participation in Treasury’s direct purchase program was unlikely, in part  because of the requirements of the act noted above.
Public-Private Investment Program. Treasury announced PPIP in  March 2009 to help add liquidity to the market for legacy assets (both  securities and loans), to allow banks and other financial institutions to  free up capital, and to stimulate the extension of new credit. Treasury  continues to take steps to implement the Legacy Securities Program, and  FDIC has continued to develop the Legacy Loans Program by co pilot sale of receivership assets to test the funding mechanism  contemplated for this program. Some market participants and observers  we spoke with in the summer of 2009 told us that while the problem of  toxic assets remained, there have been delays in launching PPIP. These  individuals, Treasury, and FDIC cited rising investor confidence  the stress test results and successful capital-raising by financial  institutions as one of the main reasons. In addition, banks have had  increasing incentives to hold troubled assets in the short term, rather t selling them and taking losses now, in the hopes that such assets will  han  perform better in the future. Treasury officials also noted the diffic measuring the impact of the program announcement on markets.  Nevertheless, Treasury officials noted the financial market’s positive  reaction when the program was announced and said that they contin believe that the program is important to further bolstering financial  markets. Treasury officials stated that as of October 5, 2009, five of the  nine pre-qualified funds have raised at least the minimum $500 million to  qualify to invest in two legacy securities. The first two legacy securities   PPIP funds closed on September 30, 2009.
section_title: The Automotive Industry Benefited from about $80 Billion in TARP Funding, but the Future Viability of d GM Remains Chrysler an Uncertain
paragraphs: AIFP has provided assistance to Chrysler, GM, auto suppliers, and auto  finance companies in an effort to assist the failing domestic automotiv e  industry. Over the past year, Chrysler and GM underwent bankruptcy  reorganization and streamlined their operations by closing factories and  reducing the number of dealerships. However, whether the reorganized  Chrysler and GM will achieve long-term financial viability remains unclea In addition to funding provided under AIFP, the federal government has  launched other programs to help the automotive industry. In particu lar,  the Department of Transportation’s Car Allowance Rebate System  program (“Cash for Clunkers”) provided nearly $3 billion in reba consumers who purchased more fuel-efficient vehicles, and the  Department of Energy’s Advanced Technology Vehicles Manufacturing  Incentive Program has provided loans for the development of motors and components that use advanced technologies. Automotive and financial  experts we spoke with as part of our ongoing monitoring of AIFP agree  that the federal government-provided funding likely increased Chrysler’s and GM’s odds of attaining financial success but said that other factors   would affect the outcome, including consumer preferences, the strength o the economy, and the success of the companies in continuing to increase  their profitability. We are continuing to evaluate Treasury’s exit strategyr. for AIFP and the impact of the ass istance on pensions and plan to report  on these issues in future reports.
section_title: Home Affordable Modification Program Continues to Face Ongoing Challenges
paragraphs: HAMP faces a significant challenge that centers on uncertainty over the  number of homeowners it will ultimately help. Residential mortgage  defaults and foreclosures are at historic highs, and Treasury officials and  others have identified reducing the number of unnecessary foreclosures as  critical to the current economic recovery. In our July 2009 report, we  noted that Treasury’s estimate that it would likely help 3 to 4 million  homeowners under the HAMP loan modification program may have been  overstated. Further, we and others have raised concerns about the  capacity and consistency of servicers participating in HAMP in offering  loan modifications to qualified homeowners facing potential foreclosure.  Treasury has taken some actions to encourage servicers to increase the  number of modifications made, including sending a letter to participating  HAMP servicers and meeting with them to discuss challenges to making  modifications. However, the ultimate result of Treasury’s actions to  increase the number of HAMP loan modifications and the corresponding  impact on stabilizing the housing market remains to be seen.
Treasury faces a number of other challenges in implementing HAMP,  including ensuring that decisions to deny or approve a loan modification  are transparent to borrowers and establishing an effective system of  operational controls to oversee the compliance of participating servicers  with HAMP guidelines. In July 2009, we made several recommendations to  Treasury concerning HAMP. Among other things, we recommended  actions to monitor particular program requirements, re-evaluate and  review certain program components and assumptions, and finalize a  comprehensive system of internal control over HAMP. Treasury noted that  it would take various actions in response to our recommendations, such as  exploring options to monitor counseling requirements and working to  refine its internal controls over the program. We plan to continue to  monitor Treasury’s responses to our recommendations as part of our  ongoing work on HAMP.
In our July report, we also noted that Treasury lacked a way to assess,  during the admission process, the capacity of servicers to meet program  requirements. Recently, Treasury reported significant variations across  participating servicers in the number of trial modifications started as a  percent of estimated eligible loans (those delinquent by at least 60 days).  To encourage servicers to increase the number of modifications they were  making, Treasury and the Department of Housing and Urban Development  sent a letter to participating HAMP servicers in July 2009 asking them to  expand their capacity to make modifications. Treasury also subsequently  held a meeting with servicers to discuss challenges to making  modifications and strategies to improve the program’s effectiveness.
section_title: Treasury Has Taken Steps to Improve Communication with the Public and Congress
paragraphs: Since Treasury’s unexpected shift soon after the act was passed toward  making capital investments in financial institutions rather than purchasing  the mortgages and mortgage-related assets on their books, Treasury has  struggled to improve the transparency of the program and effectively  communicate a strategic vision for TARP. Over the last year, Treasury has  posted information on its Web site; announced decisions in press releases,  press conferences, and speeches; and testified at congressional hearings.  But these efforts, although intended to help ensure that TARP programs  and decisions are transparent, have not always been effective in  communicating Treasury’s rationale for certain decisions or in addressing  confusion and concerns about the program. As discussed previously, we  made a series of recommendations aimed at improving the transparency of  TARP, including establishing more effective communication with  Congress and the public and developing a clearly articulated strategy for  the program, among other things.
Over the last several months, Treasury has taken steps to improve its  communication efforts, including releasing the Financial Stability Plan in  February 2009; launching its FinancialStability.gov Web site in March 2009;  and, in August 2009, adding a usability survey on its FinancialStability.gov  Web site to gauge user satisfaction and gather input on the quality of users’  experience navigating the site. Moreover, OFS has formed a working  group to help ensure that Treasury’s communication strategy addresses  both internal and external communications and that appropriate staff are  being hired to support the strategy. Treasury officials told us that key  components of the strategy included (1) coordinating communication  among OFS and Treasury’s Office of Public Affairs and Office of  Legislative Affairs to help ensure that congressional and other external  stakeholders received timely information, (2) continuously improving the  financial stability Web site, and (3) conducting outreach across the  country on the homeownership preservation programs. To support these  efforts, Treasury is planning to hire a communications director for OFS  once it completes a position description of duties and responsibilities.  Treasury has already hired a communications director and four staff  members to support its efforts to communicate with the public and  Congress on the homeownership programs. These ongoing efforts should  help address the concerns about Treasury’s communication on TARP  issues that we noted in earlier reports.
section_title: The Office of Financial Stability Has Made Progress in Developing a Management Infrastructure and a Comprehensive System of Internal Control
paragraphs: As we recommended in our December 2008 report, Treasury has  expeditiously hired OFS staff to administer TARP duties. Over the last  year, the total number of OFS staff has quadrupled, rising from 48 in  November 2008 to 196 as of September 15, 2009 (see fig. 2). Moreover, OFS  has relied increasingly on permanent staff rather than detailees. For  example, OFS increased the number of permanent staff from 5 in  November 2008 to 184 as of September 15, 2009, while the number of  detailees fell from 43 in November 2008 to 12 as of September 15, 2009.
While Treasury has made progress in establishing OFS and filling many  positions, it continues to face hiring challenges. Treasury officials said that  the direct-hire authority authorized by TARP had been helpful in bringing  staff on board expeditiously. OFS has increased its estimate of the number  of full-time staff that it needs based on changes to TARP and currently  estimates that it will need 283 full-time equivalents for fiscal year 2010 to  operate at full capacity. Most of the increase in the estimate of full  capacity is attributable to anticipated needs in the Homeownership  Preservation, Investment, and Compliance offices and staff for the  Director of Internal Review. In addition, the Assistant Secretary for  Financial Stability has continued to develop OFS’s organizational  structure. For example, the Assistant Secretary is considering establishing  a Director of OFS Internal Review who will help oversee internal control  and compliance procedures and liaise with oversight entities.
OFS has experienced challenges finding permanent staff for some of its  key senior positions, specifically the Chief Homeownership Preservation  Officer and the Chief Investment Officer. The Chief Homeownership  Preservation Officer position has been filled by two successive interim  appointments, and the Director of Operations is currently serving as the  acting chief. Similarly, the Director of Investments has been serving as the  acting Chief Investment Officer since the interim chief left in June 2009. In  our July report, we emphasized that the lack of a permanent head of the  Homeownership Preservation Office (along with the number of vacancies  in the office itself) could impact Treasury’s ability to effectively monitor  HAMP and recommended that these staffing needs be given high priority.  Treasury has hired an executive search firm to recruit candidates for these  leadership positions, potentially facilitating the process of identifying  qualified applicants but also adding additional time to the hiring process.  The Assistant Secretary is reassessing the duties of the Chief Operating  Officer and the need for the position, which is currently vacant, to bring  them in line with TARP’s current needs before filling the position.
subsections: section_title: Treasury Has Strengthened Management and Oversight of Contracting and Vendor-Related Conflicts of Interest
paragraphs: After nearly a year, the number of private contracts and financial agency  agreements Treasury uses as part of OFS’s management infrastructure has  grown from 11 to 52. Treasury has primarily used two mechanisms for  engaging private sector firms. First, as of September 18, 2009, Treasury has  exercised its statutory authority to retain seven financial agents to provide  services such as managing TARP’s public assets. Second, Treasury has  entered into contracts and blanket purchase agreements under the Federal  Acquisition Regulation (FAR) for a variety of legal and accounting  services, investment consulting, and other services and supplies. In some  cases, interagency agreements (IAA) are also used in support of OFS’s  administration and operations for TARP to engage vendors that have  existing contracts with other Treasury offices or bureaus or other federal  agencies. As of September 18, 2009, Treasury had 39 contracts and blanket  purchase agreements and six IAAs. Legal services contracts and financial  agency agreements accounted for 57 percent of the service providers  directly supporting OFS’s administration of TARP. For contracts and  agreements in place through August 31, 2009, Treasury reports incurring a  total of $110.2 million in expenses. The potential value of all 52 TARP  support agreements and contracts—some completed and some scheduled  to run until June 2014—totals about $601.6 million.
The share of work by small businesses—including minority- and women- owned businesses—under TARP contracts and financial agency  agreements has grown substantially since November 2008, when only one  of Treasury’s prime contracts was with a small business and only one  minority small business firm was a subcontractor with a large business  contractor. From the outset, Treasury has encouraged small businesses to  pursue procurement opportunities for TARP contracts and financial  agency agreements. As shown in table 4, eight of Treasury’s prime  contracts and financial agency agreements are with small and/or minority-  and women-owned businesses. The majority of these businesses are  subcontractors to TARP prime contractors.
section_title: Treasury’s Processes for Managing and Monitoring Conflicts of Interest among Contractors and Financial Agents Continue to Mature
paragraphs: Treasury’s reliance on private sector resources to assist OFS with  implementing TARP underscores the importance of addressing conflicts- of-interest issues. As required by the act, in January 2009 Treasury issued  an interim regulation on TARP conflicts of interest, which was effective  immediately. With this action, Treasury put in place a set of clear  requirements to address actual or potential conflicts that may arise during  the selection of retained entities seeking a contract or financial agency  agreement with the Treasury, particularly those involved in the  acquisition, valuation, management, and disposition of troubled assets.
Since January 2009, OFS’s Chief Risk and Compliance Office has been  actively renegotiating several contracts that predated the TARP conflicts- of-interest rulemaking to enhance specificity and conformity with the  regulations. To date, conflicts-of-interest provisions and approved  mitigation plans have been renegotiated for three of the six contracts, as  shown in table 5. According to Treasury, the complex nature of these  contracts and business relations with other firms means that significant  time is required to develop mitigation plans that appropriately meet the  provisions of the regulations, and as a result these plans are in various  stages of renegotiation.
Since March 2009, and consistent with our recommendation, Treasury has  strengthened guidance and procedures requiring that key communications  and decisions concerning potential or actual vendor-related conflicts of  interest be documented. In an effort to improve the monitoring of  contracts and formally document conflict-of-interest processes, Treasury  has taken several steps. For example, it has developed and implemented  conflicts-of-interest procedures and distributed guidance documents to  Treasury contracting staff and TARP contractors and financial agents that  include detailed workflow charts depicting the standardized processes for  the review and disposition of conflict-of-interest inquiries. Also, Treasury  has finished implementing an improved internal reporting database for  documenting and tracking all conflict-of-interest inquiries and requests for  conflicts-of-interest waivers. Treasury’s guidance was sent to contractors  and financial agents in early July, along with a request that all inquiries  related to conflicts of interest be submitted via email to the “TARP.COI”  mailbox created in April 2009 for contractors and financial agents to  document communications to Treasury. Although Treasury has an  appropriate management infrastructure in place, it must remain vigilant in  managing and monitoring conflicts of interest that may arise with the use  of private sector resources.
section_title: OFS Has Continued Developing a Financial Reporting System and Related Internal Controls
paragraphs: As required by the act, Treasury must annually prepare and submit to  Congress and the public audited fiscal year financial statements for TARP  that are prepared in accordance with generally accepted accounting  principles. Moreover, the act requires Treasury to establish and maintain  an effective system of internal control over TARP that provides reasonable  assurance of achieving three objectives: (1) reliable financial reporting,  including financial statements and other reports for internal and external  use; (2) compliance with applicable laws and regulations; and (3)  effective and efficient operations, including the use of TARP resources.  Accordingly, OFS continues to develop a comprehensive system of  internal control for TARP.
The fiscal year ending September 30, 2009, will be the first period for  which Treasury prepares financial statements for TARP. The act requires  that Treasury assess and report annually on the effectiveness of TARP’s  internal controls over financial reporting. The act also requires GAO to  audit TARP’s financial statements annually in accordance with generally  accepted auditing standards.
We are currently performing an audit of TARP’s financial statements and  the related internal controls. Our objectives are to render opinions on (1)  the financial statements as of and for the period ending September 30,  2009; and (2) internal controls over both financial reporting and  compliance with applicable laws and regulations as of September 30, 2009.  We will also be reporting on the results of our tests of TARP’s compliance  with selected provisions of laws and regulations related to financial  reporting. The results of our financial statement audit will be published in  a separate report.
section_title: Conditions in Credit Markets Have Improved Since TARP Was Implemented, but Treasury Needs to Establish a Basis for Future TARP Actions
paragraphs: Although isolating and estimating the effect of TARP programs remains a  challenging endeavor, the indicators that we have been monitoring over  the last year suggest that there have been broad improvements in credit  markets since the announcement of CPP, the first TARP program.  Specifically, we found that:  the cost of credit and perceptions of risk declined significantly in  interbank, corporate debt, and mortgage markets; the decline in perceptions of risk (as measured by premiums over  Treasury securities) in the interbank market could be attributed in part to  several federal programs aimed at stabilizing markets that were  announced on October 14, 2008, including CPP; and institutions that received CPP funds in the first quarter of 2009 saw more  improvement in their capital positions than banks outside the program.
Acting on GAO’s recommendation that Treasury collect information about  the impact of its investments on participants’ lending activities, Treasury  implemented a monthly survey. Our analysis of the surveys, which cover  October 2008 through July 2009, show that collectively the 21 largest  participants reported extending almost $2.3 trillion in new loans since  receiving $160 billion in CPP capital from the Treasury. Although lending  standards remained tight, new lending by these institutions increased from  $240 billion a month during the fourth quarter of 2008 to roughly $287  billion a month in the second quarter of 2009. Because loan origination  data is not available for most banking institutions—including CPP  recipients outside of the largest institutions—the ability to perform more  rigorous analysis to determine the extent to which the increased lending  could be attributed to TARP is limited. Consistent with the intent of  TALF, asset-backed security issuance has recently shown signs of a slight  recovery. While foreclosures continued to increase, it is too soon to judge  the effects of the HAMP program. Treasury recently released a report that  discusses the next phase of its stabilization and rehabilitation efforts.  Treasury’s report also begins to establish a framework that could provide  a basis for deciding whether any further actions will be necessary to assist  in financial stabilization after its authority to purchase or insure additional  troubled assets expires on December 31, 2009 (unless it is extended  through October 3, 2010). As it decides the future of TARP, Treasury will  need to document and communicate its reasoning to Congress and the  American people in order for its decisions to be viewed as credible.  Continuing to develop its quantitative indicators of market conditions to  benchmark TARP programs and its measures of program effectiveness  would support Treasury in this process.
subsections: section_title: Some Anticipated Effects of TARP on Credit Markets and the Economy Have Materialized, but Not Necessarily Due to TARP Actions Alone
paragraphs: In our reports since December 2008, we have highlighted the intended  effects of several broad-based TARP programs, including CPP, CAP, TALF,  PPIP, and HAMP. Chief among these intended effects was to stabilize and  return confidence to the financial system. We paid particular attention to  developments in the interbank market by monitoring the London  Interbank Offered Rate (LIBOR), which is the cost of interbank credit, and  the TED spread, which captures the risk perceived in interbank markets  and gauges the willingness of banks to lend to other banks (see fig. 3). As  figure 3 shows, LIBOR increased significantly in September 2008, and  more importantly banks began to pay an even higher premium for loans to  compensate for the perceived increase in default risk. After widening  somewhat after the first major subprime mortgage write-down and the  Bear Stearns rescue, the TED spread increased significantly in the days  following the bankruptcy of Lehman Brothers and other adverse events,  exceeding 4.5 percent at its highest point (450 basis points). However,  since the announcement of CPP and other interventions in October 2008,  the 3-month LIBOR and TED spread have fallen by more than 430 basis  points. About 60 basis points of that decline occurred after the  announcement of the stress test results associated with CAP in May 2009.
To examine whether the decline in the TED spread could be attributed in  part to TARP, we conducted additional analysis using a simple  econometric model, which took into account the possibility that the  spread would have narrowed without the intervention. We did not  attempt to account for all the important factors that might influence the  TED spread. Because the TED spread reached extreme values leading up  to the CPP announcement (more than 450 basis points), it could have  declined even in the absence of CPP, simply because extreme values have  a tendency to return to normal levels. Even when we accounted for this  possibility and for other factors that might influence the interbank market,  we found that the October 14, 2008, announcement of the CPP had a  statistically significant impact on changes in the TED spread.  Nevertheless, the associated improvement in the TED spread (or LIBOR)  cannot be attributed solely to TARP because the October 14, 2008,  announcement was a joint announcement that also introduced the Federal  Reserve’s Commercial Paper Funding Facility program and FDIC’s  Temporary Liquidity Guarantee Program.
More broadly, the programs established under TARP, if effective, should  have jointly resulted in improvements in general credit market conditions,  including declining risk premiums and lower borrowing costs for nonbank  businesses and consumers. In the month leading up to the CPP  announcement, market interest rates and spreads reflected a significant  tightening in credit conditions as investors, worried about the health of the  economy, became increasingly risk averse. The indicators that we have  been monitoring illustrate that since mid-October 2008 the cost of credit  and perceptions of risk (measured by premiums over Treasury securities)  have declined significantly, not only in interbank markets but also in  corporate debt and mortgage markets (see table 6). Recent trends in  these measures are consistent with those for other indicators that we and  other researchers have monitored. For example, stock market volatility  has fallen considerably, and the credit default swap index for the banking  sector has declined significantly since TARP actions began. Even taken  collectively, though, changes in these indicators are an imperfect way to  measure TARP’s impact, as they may also be influenced by general market  forces and cannot be exclusively linked to any one program or action.
One of the intentions of TARP, and specifically of CPP, was to improve  banks’ balance sheets, enhance lenders’ ability to borrow, raise capital,  and lend to creditworthy borrowers. Capital ratios at institutions that  received CPP capital in the first quarter of 2009 rose more than capital  ratios at non-CPP institutions between December 31, 2008, and March 31,  2009. This difference holds across several measures of capital adequacy  (see table 7). Improved confidence in the interbank market may to some  degree reflect the increased capital ratios at institutions that received CPP  funding, as these ratios are important indicators of solvency—that is, the  higher the ratio, the more solvent the institution. As we have discussed in  previous reports, tension exists between promoting lending and improving  banks’ capital position. We noted that some institutions likely would use  CPP capital to improve their capital ratios by holding the additional capital  as treasuries or other safe assets rather than leveraging it to support  additional lending. Using the capital in this manner could allow  institutions to absorb losses or write down troubled assets.
Recent trends in lending suggest that CPP capital infusions may have  made participating banks somewhat more willing and able to increase  lending to creditworthy businesses and consumers, although lending  standards for consumer and business credit remain tight. Our analysis of  Treasury’s loan surveys showed that these CPP recipients reported an  increase in new lending to consumers and businesses to, on average, $287  billion a month in the second quarter of 2009, up $47 billion from $240  billion a month in the fourth quarter of 2008 (see fig. 4). These findings  are consistent with the trends in aggregate mortgage originations, which  more than doubled between the fourth quarter of 2008 and the end of the  second quarter of 2009 to $550 billion.
Table 8 documents the total amount of new consumer and business  lending for each institution that received CPP funds. Despite tight lending  standards and the usual drop in credit flows during recessions, collectively  the top 21 institutions participating in CPP have reported extending almost  $2.3 trillion in new loans since receiving CPP capital totaling $160 billion.  While lending typically falls during a recession, recent research by the  Federal Reserve concluded that through the first quarter of 2009, the  contraction in commercial mortgages, nonfinancial business credit, and  consumer credit did not appear to be particularly severe relative to  contractions in these types of lending in other downturns. However, the  contraction in residential mortgage lending has exceeded past downturns.
Data limitations may prevent a reliable comparison of lending volumes  across institutions of different sizes and between CPP and non-CPP  participants. For the hundreds of smaller financial institutions receiving  CPP funds, the only lending information provided was based on the value  of loan balances and thus was not comparable to the more detailed data  for large CPP recipients. Similarly, only comparative balance sheet data is  available for non-CPP institutions. Although balance sheet data—which is  available for all banking institutions—could be useful for comparing  capital ratios, our quantitative work suggests that loan balances may not  be a good proxy for lending activity, at least for the third quarter of 2008 to  the first quarter of 2009. Specifically, we found the correlations between  new lending and changes in loan balances to be relatively low over this  period. A number of factors can affect loan balances that are unrelated to  new lending, including merger activity, changes in the value of existing  loans (e.g., realizing losses on a loan portfolio), and loan payoffs as  borrowers attempt to reduce debt burdens. Banks could, for example,  undertake significant origination activity and still see a drop in the total  value of loans that they held. As a result, it is difficult to determine CPP’s  specific impact on lending activity in a more rigorous way.
subsections: section_title: Securitization Markets Have Shown Some Signs of Recovery for TALF-Eligible Securities
paragraphs: The primary goal of TALF, as designed and operated by the Federal  Reserve, is to make credit more readily available to households and small  businesses by increasing liquidity and improving conditions in ABS  markets. Investors requested $51.7 billion in TALF loans between the start  of the program in March of 2009 and September 2009. As figure 5 indicates,  ABS activity has begun to rebound somewhat after reaching zero for  several types of issuances in the fourth quarter of 2008. While aggregate  issuance is still down significantly from 2007, non-mortgage-related ABS  issuance rose to $47.9 billion in the second quarter of 2009 from $3.3  billion in the fourth quarter of 2008. ABS backed by home equity loans,  which are not eligible for TALF assistance, increased to just $71 million  from $17 million over the same period, although whether a significant  increase would be expected given the turmoil in mortgage markets is not  clear.
As we discussed in previous reports, TALF support to securitization  markets should, if effective, increase the availability of new credit to  consumers and businesses, lowering rates on credit card, automobile,  small business, student, commercial mortgage, and other types of loans  traditionally facilitated by securitization. From November 2008 to May  2009, the average rate on automobile loans from finance companies  declined significantly (296 basis points) to 3.5 percent, well below the  bank rate, which fell only 26 basis points to 6.8 percent. While these  declines correlate with the launching of TALF, the federal government’s  support of GM and Chrysler also likely played a role in alleviating liquidity  constraints at finance companies. Because stand-alone auto finance  companies rely more heavily on securitization than commercial banks, the  differences in the trends in their automobile loan rates could partially  reflect the issues in securitization markets that TALF was intended to  address. After initially providing funding to certain holders of AAA-rated  ABS backed by newly and recently originated consumer and small  business loans, TALF has been expanded to other assets, including  commercial MBS. We will continue to monitor ABS activity, interest rates  on consumer and business loans and other TALF-eligible securities, as  well as ABS spreads.
section_title: It Is Too Soon to Expect Results from More Recently Implemented TARP Programs
paragraphs: In future reports, we will address the effectiveness of the more recently  initiated financial stability programs, using indicators and auxiliary  quantitative work. These programs are intended to address rising  foreclosures and the condition of the housing market (HAMP) as well as  the legacy loans and securities that are widely held to be the root cause of  the deteriorating conditions of many financial institutions (PPIP).  Foreclosure data, although also influenced by general market forces such  as falling housing prices and unemployment, should provide an indication  of the effectiveness of HAMP. Although it is too soon to expect any HAMP- related improvements, because HAMP was only recently implemented, we  have monitored foreclosure rates over the past year. While the average  foreclosure rate from 1979 to 2006 was less than 1 percent, the percentage  of loans in foreclosure reached an unprecedented high of 4.3 percent at  the end of the second quarter of 2009, up from 3.3 percent in the fourth  quarter of 2008 (see table 6). Over the same period, the foreclosure rate on  subprime loans rose to 15.1 percent from 13.7 percent (the rate for  adjustable-rate subprime loans is now more than 24 percent).
As discussed in our March 2009 report, Treasury introduced PPIP to  facilitate the purchase of legacy loans and securities. PPIP’s impact will  depend largely on the pricing of the purchased assets. Sufficiently high  prices will allow financial institutions to sell assets, deleverage, and  improve their capital adequacy, but overpaying for these assets could have  negative implications for taxpayers. In addition to providing more  transparent pricing for assets, PPIP—if it is effective—should improve  solvency at participating institutions and others holding those assets,  reduce uncertainty about their balance sheets, and improve investor  confidence. If it does, the institutions will be able to borrow and lend at  lower rates and raise additional capital from the private sector. But PPIP is  in the initial stages of implementation, and it is too early to expect effects  on related markets.
section_title: Challenges to Assessing TARP’s Effect on the Economy Remain
paragraphs: While TARP’s activities could improve market confidence in participating  banks and have other beneficial effects on credit markets, we have also  noted in our previous reports that several factors will complicate efforts to  measure any impact. For example, any changes attributed to TARP could  well be changes that:    would have occurred anyway;    can be attributed to other policy interventions, such as the actions of  FDIC, the Federal Reserve, or other financial regulators; or   were enhanced or counteracted by other market forces, such as the  correction in housing markets and revaluation of mortgage-related assets.
Consideration of market forces is particularly important when using bank  lending as a measure of CPP’s and CAP’s success, because it is not clear  what would have happened in the absence of TARP. Weaknesses in the  balance sheets of financial intermediaries, a decline in the demand for  credit, reduced creditworthiness among borrowers, and other market  fundamentals suggest lower lending activity than would be expected.  Similarly, nonbank financial institutions, which have accounted for a  significant portion of lending activity over the last two decades, have been  constrained due to weak securitization markets. Lastly, because the  extension of credit to less-than-creditworthy borrowers appears to have  been an important factor in the current financial crisis, it is not clear that  lending should return to precrisis levels. Similar difficulties arise in using  foreclosure data as a measure of HAMP’s success, especially given the  rising unemployment rate and the number of homeowners who may have  taken on mortgage-related debt beyond prudent levels.
section_title: Treasury Should Consider a Number of Indicators and Measures to Provide a Basis for Future TARP Actions
paragraphs: While Treasury is beginning to establish a case for exiting from some  emergency programs and maintaining others, it has not fully established a  comprehensive framework that will provide a basis for making transparent  decisions about which TARP-specific actions are necessary or how those  programs will be evaluated. Treasury’s authority to purchase or insure  additional troubled assets will expire on December 31, 2009, unless the  Secretary submits a written certification to Congress explaining why an  extension is necessary and how much it is expected to cost. For this  reason, Treasury will need to make decisions about providing new funding  and maintaining existing funding for TARP programs in the next few  months. It will need to do this in light of current and expected market  conditions, and it will need to communicate its determinations to  Congress and the American people.
Treasury has recently released a report that begins to discuss the next  phase of its stabilization and rehabilitation efforts—a discussion that may  be a starting point for deciding whether any further actions are necessary  to stabilize financial markets and the first step in establishing a framework  for such actions. The report describes the drop in utilization of some  programs as financial conditions normalize and confidence in financial  markets improves and identifies a number of financial market indicators.  Treasury also notes that it will need to ensure the continuation of some  policies and programs that it believes are needed for financial and  economic recovery. However, Treasury has yet to take all the steps needed  to provide a basis for deciding whether or not to provide new funding for  TARP. For example, while some rationale is provided for continued HAMP  and TALF action, none is provided for PPIP. Without a robust analytic  framework, Treasury may be challenged in effectively carrying out the  next phase of its programs.
For the decision-making process to be viewed as credible, Treasury will  need to document and communicate the basis for its decisions. Although  qualitative factors should be given serious consideration, to the extent that  Treasury can relate its decision making to a set of quantitative measures or  indicators, its case can be more convincing. In addition, Treasury would  add further credibility to the process by announcing ahead of time the  indicators or measures it plans to use. Doing so would help to disarm  potential criticism that it had selectively chosen indicators or measures to  justify its decisions after the fact. While indicators of credit market  conditions can suggest the extent to which, for example, credit costs and  lending have returned to levels consistent with the stability of financial  markets, measures of program effectiveness can offer insight into the  potential benefits of additional TARP expenditures. The Office of  Management and Budget (OMB) guidance for cost-benefit and regulatory  analyses suggests, among other things, making assumptions explicit,  characterizing the uncertainties involved, varying assumptions to  determine the sensitivity of estimated outcomes (sensitivity analysis), and  considering alternative approaches. If Treasury adopts a more formal  cost-benefit framework, additional principles may also be applicable,  including the use of net present value measures, an enumeration of  benefits and costs, and the quantifying of benefits and costs whenever  possible.
section_title: Conclusions and Recommendations
paragraphs: In establishing this new program, Treasury faced a number of operational  challenges. Not only did it have to implement the program in the midst of  the greatest financial crisis since the Great Depression, but Treasury also  had to adjust the program as events continued to unfold. As TARP’s focus  shifted from making a number of capital purchases as investments in  individual institutions to one geared toward restarting securitization  markets and preserving homeownership, its management infrastructure  had to change as well.
While progress has been made in establishing TARP, much remains  uncertain about the program, including whether it will pay for itself or  prove to be a cost to the taxpayers. The reasons for the uncertainty  include the following:    Some programs remain in their infancy, while others are winding down.
Therefore, determining the overall impact and costs of the programs will  take time.
TARP funds were invested in a variety of institutions, some of which were  less risky than others.
Some TARP programs may generate some returns for Treasury through  interest and dividend payments and sales of warrants, while others—such  as HAMP—are expenditure programs aimed at helping homeowners  modify their mortgages.
To help Treasury meet the challenges associated with implementing a  program while concurrently establishing a comprehensive system of  internal control, we have made 35 recommendations to Treasury aimed at  improving the accountability, integrity, and transparency of TARP. As  discussed in appendix I, Treasury has taken action to address most of  them. And while much important progress has been made, a number of  areas warrant ongoing attention as Treasury moves into the next phase of  the program and contemplates a possible extension.
First, we continue to believe that Treasury should work with the Chairmen  of the FDIC and Federal Reserve, the Comptroller of the Currency, and the  Acting Director of OTS to help ensure that the primary federal regulators  use generally consistent criteria when considering repurchase decisions  under TARP. While we understand that the final repurchase decision rests  with a participant’s primary federal regulator, Treasury has a responsibility  to ensure that these regulators are applying generally consistent criteria  when reviewing TARP participants’ requests to repurchase their preferred  shares.
Second, Treasury has yet to finalize its implementation of an oversight  program for asset managers covering CPP and the other capital-based  programs, such as TIP and AGP. While Treasury now has asset managers  to help manage its equity investments, it must also ensure that the federal  government’s interests are protected and that the asset managers are  performing as agreed.
Third, Treasury has yet to implement our recommendation aimed at  strengthening its efforts to help preserve homeownership and protect  home values. As we previously recommended, Treasury should routinely  update projections of the number of homeowners who can be helped  under HAMP by reviewing key assumptions about the housing market and  the behavior of mortgage holders, borrowers, and servicers. In addition,  Treasury should develop a means of systematically assessing servicers’  capacity to make HAMP modifications and meet program requirements, so  that Treasury can understand and address any risks associated with  individual servicers’ ability to fulfill program requirements.
Fourth, in the area of management infrastructure, OFS has continued to  make progress in establishing a management infrastructure to administer  TARP and oversee contractors and financial agents, but some challenges  remain. Though OFS now has close to 200 staff, some key senior positions  have not been permanently filled, such as the Chief Homeownership  Preservation Officer and Chief Investment Officer. Bringing on board  permanent staff for these key positions is important in helping Treasury  effectively administer TARP activities and ensuring accountability for  program outcomes. Treasury has strengthened its management and  oversight of contractors as its reliance on them to support TARP has  grown over the past year. OFS continues to make progress in developing a  comprehensive system of internal control. As we complete our first audit  of OFS’s annual financial statements for TARP, we will be able to provide  a more definitive view of TARP’s internal controls over financial reporting.
Fifth, in the area of communication, the program has evolved and  continues to evolve. Treasury viewed its initial shift toward capital  investments in the first weeks of the program as a more effective way to  stabilize fragile financial markets. This shift in strategy, however, caught  Congress and the public by surprise, and has created long-term challenges  for the program, and, some would argue, ultimately impacted the  effectiveness of the program. Concerns about this shift in structure  highlight the communication challenges that continue to confront the  program. And as Treasury continues to improve its communication efforts  and formalize its communication strategy, Treasury must ensure that its  ongoing efforts include keeping Congress adequately informed about  TARP and its strategy, including its exit strategy for the various programs  created under TARP. Furthermore, formalizing the communication  strategy and hiring a communications director will help ensure that  communication is given sufficient attention on an ongoing basis.
Finally, because TARP has been part of a broader effort that has included  the Federal Reserve and FDIC, measuring the effectiveness of TARP’s  programs has been an ongoing challenge. We developed a set of indicators  that we used to track conditions of financial markets over the past year.  These indicators show that a number of the anticipated effects of TARP  have materialized. However, changes in these metrics are an imperfect  way to measure TARP’s impact, as they may also be influenced by general  market forces and cannot be exclusively linked to any one program or  action. As a result, isolating and assessing TARP’s effect on the economy  remains a challenging endeavor.
Treasury has not fully established a comprehensive analytic framework for  assessing the need for additional actions and evaluating program results in  a transparent manner. In a recent report on the next phase of the federal  government’s stabilization efforts, Treasury began to lay the foundation for  an analytic framework for determining whether to extend TARP and also  provided a number of financial indicators. Although TARP expires on  December 31, 2009, the Secretary of the Treasury may extend the program  to October 3, 2010, and Treasury will need to make a determination  regarding such an extension. As Treasury considers whether to extend the  program, the Secretary’s determination must be made in light of actions  taken and planned by the Federal Reserve and FDIC and their winding  down of certain programs and continuation of others that were also  established to help stabilize markets. In addition, any continued action  under TARP should be based in part on quantitative measures of program  effectiveness, such as performance indicators, in order to weigh the  benefits of TARP programs against the cost of using additional taxpayer  resources. However, Treasury has not fully established a comprehensive  analytic framework for assessing the future direction of the programs or  determining whether additional actions are warranted. Moreover, as it  finalizes the next phase of the program, Treasury will need to document its  decision-making process and communicate its reasoning to Congress and  the American people in order for its decisions to be viewed as credible.
Finally, with the exception of AGP and AIFP, Treasury has not updated its  projected use of funds for the TARP programs in light of current market  conditions and program participation rates since March 2009. Based on  changes in the markets, repurchases, participation levels in certain  programs, and the implementation status of others, a thorough review of  Treasury’s existing estimates of its projected use of TARP funds is  warranted in light of the need to make a determination about whether to  extend the program. Without more current and meaningful estimates  about projected uses of the remaining funds, Treasury’s ability to plan for  and effectively execute the next phase of the program will be limited.
section_title: New Recommendations for Executive Action
paragraphs: As it enters the next phase of the program, Treasury will likely face  ongoing challenges. Building on our prior recommendations, we are  making three new recommendations aimed at improving Treasury’s ability  to effectively manage the next phase of the program. Specifically, we  recommend that the Secretary of the Treasury    Consider TARP in a broad market context and as part of determining  whether to extend TARP, work with the Chairmen of the Federal Reserve  and FDIC to develop a coordinated framework and analytical basis to  determine whether an extension is needed. If it is, the Secretary should  clearly spell out what the objectives and measures of any extended  programs would be, along with anticipated costs and safeguards;   Document its analytical decision-making process and clearly communicate  the results to Congress and the American people for determining whether  an extension is needed; and     Update its projected use of funds and, if the program is extended, continue  to re-evaluate them on a periodic basis.
section_title: Agency Comments and Our Analysis
paragraphs: We provided a draft of this report to Treasury for its review and comment.  We also provided excerpts of the draft report to the Federal Reserve and  FDIC for their review. Treasury provided written comments that we have  reprinted in appendix XI. Treasury, the Federal Reserve, and FDIC also  provided technical comments that have been incorporated as appropriate.
In its comments, Treasury noted that “there is important work ahead” and  that our recommendations were constructive as Treasury works to  implement its financial stability programs and enhance OFS’s  performance. In particular, the Assistant Secretary noted in response to  our recommendations that the Secretary in deciding whether to extend  TARP authority beyond December 31, 2009, “will coordinate with  appropriate officials to ensure that the determination is considered in a  broad market context that takes account of relevant objectives, costs, and  measures” and that Treasury will communicate the reasons for the  decision when it is made. Concerning our recommendation that Treasury  update its projected use of funds estimates and if the program is extended,  regularly re-evaluate them, Treasury commented that it regularly evaluates  funding needs for TARP programs and announces revisions as decisions  are made. However, with the exception of AGP and AIFP, Treasury had  not publicly affirmed its projected use estimates since March 2009. As it  continues to evaluate these estimates, Treasury should disclose this  information periodically, including reconciling estimates to actual results.  For example, in March Treasury estimated that it had $135 billion  remaining under TARP. This included $25 billion in estimated repurchases,  yet as of September 25, 2009, actual repurchases totaled almost three  times that amount.
We are sending copies of this report to the Congressional Oversight Panel,  Financial Stability Oversight Board, Special Inspector General for TARP,  interested congressional committees and members, Treasury, the federal  banking regulators, and others. The report also is available at no charge on  the GAO Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  Richard J. Hillman at (202) 512-8678 or hillmanr@gao.gov; Thomas J.  McCool at (202) 512-2642 or mccoolt@gao.gov; or Orice Williams Brown at  (202) 512-8678 or williamso@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix XII.
section_title: Appendix I: Status of GAO Recommendations, as of September 25, 2009
subsections: section_title: Develop a comprehensive system of internal control over TARP activities, including policies, procedures, and guidance that are robust enough to ensure that the program’s objectives and requirements are met.
paragraphs: Develop and implement a well-defined and disciplined risk-assessment process, as such a process is  essential to monitoring program status and identifying any risks of potential inadequate funding of  announced programs.
Review and renegotiate existing conflict-of-interest mitigation plans, as necessary, to enhance  specificity and conformity with the new interim conflicts-of-interest regulation and take continued steps  to manage and monitor conflicts of interest and enforce mitigation plans.
Develop a communication strategy that includes building an understanding and support for the various  components of the program. Specific actions could include hiring a communications officer, integrating  communications into TARP operations, scheduling regular and ongoing contact with congressional  committees and members, holding town hall meetings with the public across the country, establishing  a counsel of advisors, and leveraging available technology.
Require that American International Group, Inc. (AIG) seek concessions from stakeholders, such as  management, employees, and counterparties, including seeking to renegotiate existing contracts, as  appropriate, as it finalizes the agreement for additional assistance.
Update OFS documentation of certain internal control procedures and the guidance available to the  public on determining warrant exercise prices to be consistent with actual practices applied by OFS.
Improve transparency pertaining to TARP program activities by reporting publicly the monies, such as  dividends, paid to Treasury by TARP participants.
Complete the review of, and as necessary renegotiate, the four existing vendor conflicts-of-interest  mitigation plans to enhance specificity and conformity with the new interim conflicts-of-interest rule.
Issue guidance requiring that key communications and decisions concerning potential or actual  vendor-related conflicts of interest be documented.
Ensure that the warrant valuation process maximizes benefits to taxpayers and consider publicly  disclosing additional details regarding the warrant repurchase process, such as the initial price offered  by the issuing entity and Treasury’s independent valuations, to demonstrate Treasury’s attempts to  maximize the benefit received for the warrants on behalf of the taxpayer.
In consultation with the Chairmen of the Federal Deposit Insurance Corporation and the Board of  Governors of the Federal Reserve System, the Comptroller of the Currency, and the Acting Director of  the Office of Thrift Supervision, ensure consideration of generally consistent criteria by the primary  federal regulators when considering repurchase decisions under TARP.
Fully implement a communication strategy that ensures that all key congressional stakeholders are  adequately informed and kept up to date about TARP.
Expedite efforts to conduct usability testing to measure the quality of users’ experiences with the  financial stability Web site and measure customer satisfaction with the site, using appropriate tools  such as online surveys, focus groups, and e-mail feedback forms.
Explore options for providing the public with more detailed information on the costs of TARP contracts  and agreements, such as a dollar breakdown of obligations and/or expenses.
Finally, to help improve the transparency of Capital Assistance Program (CAP)—in particular the stress  tests results—we recommend that the Director of Supervision and Regulation of the Federal Reserve  consider periodically disclosing to the public the aggregate performance of the 19 bank holding  companies against the more adverse scenario forecast numbers for the duration of the 2-year forecast  period and whether or not the scenario needs to be revised. At a minimum, the Federal Reserve  should provide the aggregate performance data to OFS program staff for any of the 19 institutions  participating in CAP or CPP.
Consider methods of (1) monitoring whether borrowers with total household debt of more than 55  percent of their income who have been told that they must obtain HUD-approved housing counseling  do so, and (2) assessing how this counseling affects the performance of modified loans to see if the  requirement is having its intended effect of limiting redefaults.
Reevaluate the basis and design of Home Price Decline Protection (HPDP) program to ensure that the  Home Affordable Modification Program (HAMP) funds are being used efficiently to maximize the  number of borrowers who are helped under HAMP and to maximize overall benefits of utilizing  taxpayer dollars.
Institute a system to routinely review and update key assumptions and projections about the housing  market and the behavior of mortgage holders, borrowers, and servicers that underlie Treasury’s  projection of the number of borrowers whose loans are likely to be modified under HAMP and revise  the projection as necessary in order to assess the program’s effectiveness and structure.
Place a high priority on fully staffing vacant positions in Homeownership Preservation Office (HPO)— including filling the position of Chief Homeownership Preservation Officer with a permanent  placement—and evaluate HPO’s staffing levels and competencies to determine whether they are  sufficient and appropriate to effectively fulfill its HAMP governance responsibilities.
Expeditiously finalize a comprehensive system of internal control over HAMP—including policies,  procedures, and guidance for program Activities—to ensure that the interests of both the government  and taxpayer are protected and that the program objectives and requirements are being met once loan  modifications and incentive payments begin.
Expeditiously develop a means of systematically assessing servicers’ capacity to meet program  requirements during program admission so that Treasury can understand and address any risks  associated with individual servicers’ abilities to fulfill program requirements, including those related to  data reporting and collection.
section_title: Appendix II: Capital Purchase Program
paragraphs: The Capital Purchase Program (CPP) has been the primary initiative under  the Troubled Asset Relief Program (TARP) for stabilizing the financial  markets and banking system. The Department of the Treasury (Treasury)  created CPP in October 2008 to stabilize the financial system by providing  capital to qualifying regulated financial institutions through the purchase  of senior preferred shares and subordinated debentures. In return for its  investment, Treasury was to receive dividend or interest payments and  warrants. Treasury has stated that by building capital, CPP should help  increase the flow of financing to U.S. businesses and consumers and  support the U.S. economy. At the time of the program’s announced  establishment, nine major financial institutions—considered by federal  banking regulators and Treasury to be essential to the operation of the  financial system—agreed to participate in CPP. Together, these  institutions held about 55 percent of U.S. banking assets. Banking  regulators recommend program participants, which Treasury selects,  based on examination ratings and performance and may accept or reject  applications based on these factors and on mitigating circumstances, such  as confirmed private investment.
subsections: section_title: Funding
paragraphs: On October 14, 2008, Treasury allocated $250 billion of the almost $700  billion for CPP but adjusted its allocation to $218 billion in March 2009.  According to Treasury officials, this downward adjustment reflected the  estimated funding needs of the program based on participation to date and  the money it expected to receive from participants repurchasing their  preferred shares and subordinated debt. As of September 25, 2009,  Treasury had disbursed more than $204.6 billion (see table 9) and had  received about $70.7 billion from repurchases of preferred shares leaving  $84.1 billion available for future CPP funding, according to Tresaury.
section_title: Status of Efforts
paragraphs: Through CPP, Treasury had provided more than $204 billion in capital to  685 institutions as of September 25, 2009. These purchases ranged from  $301,000 to $25 billion per institution and represented about 94 percent of  the $218 billion Treasury allocated for CPP. As of September 25, 2009, the  types of institutions that received CPP capital varied in size and included  280 publicly held institutions, 337 privately held institutions, 1 mutual  institution, 45 S-corporations, and 22 community development financial  institutions. These purchases represented investments in state-chartered  and national banks and bank holding companies located in the District of  Columbia, Puerto Rico, and every state except Montana and Vermont. For  a detailed listing of financial institutions that received CPP funds as of  September 25, 2009, see GAO-10-24SP. While the last application deadline  was May 14, 2009, for mutual institutions, on May 13, 2009, the Secretary of  the Treasury extended the CPP program to November 21, 2009, for all  types of small banks. The program is starting to wind down, with fewer  than 115 applications under consideration by regulators and fewer than 30  applications by Treasury as of September 18, 2009.
Treasury and the federal bank regulators continue to review applications  for CPP. According to Treasury, as of September 25, 2009, it had received  over 1,300 CPP applications (including approximately 10 under the small  bank program) from the banking regulators, with fewer than 30 awaiting  decision by OFS’s Investment Committee. For many applications in this  category, Treasury is awaiting updated information from the regulators  before taking the application to the Investment Committee for a vote. The  bank regulators also reported that they were reviewing applications of  fewer than 115 institutions plus more than 50 under the small bank  program that had not yet been forwarded to Treasury. Qualified financial  institutions generally have 30 calendar days after Treasury notifies them of  preliminary approval for CPP funding to submit investment agreements  and related documentation. OFS officials stated that more than 430  financial institutions that received preliminary approval had withdrawn  their CPP applications as of September 25, 2009. Institutions withdrew  their applications for a variety of reasons, including the uncertainty  surrounding future program requirements, the legal cost to close  transactions (for small institutions), cost of warrants, and improving  confidence in the banking system that allowed them to raise capital in the  private markets.
In addition to outflows, Treasury had received about $6.7 billion in  dividend payments and interest payments from CPP participants as of  September 25, 2009. CPP participants repurchased about $70.7 billion in  preferred shares and paid another $2.9 billion to repurchase their warrants  and preferred stock received through the exercise of warrants.
section_title: Key Activities Under CPP
paragraphs: October 13, 2008: Consistent with conditions prescribed by the  Emergency Economic Stabilization Act of 2008 (the act), Treasury notifies  Congress that Treasury officials have determined that it would be more  efficient to purchase preferred shares issued by certain financial  institutions instead of purchasing mortgage-related assets.
October 14, 2008: Treasury announces that it will make direct capital  investments in a broad array of qualifying financial institutions in  exchange for preferred stock and warrants through CPP. Also, Treasury  allocates $125 billion in purchases for the first nine financial institutions  deemed systemically significant by federal bank regulators and Treasury.  The nine large financial institutions agree to participate in CPP, in part, to  signal the importance of the program for the system.
October 14, 2008: Treasury provides a description of CPP terms for  investments in public financial institutions and issues the term sheet for  public institutions. The deadline for public institutions to submit  applications to their primary federal bank regulator is November 14, 2008.
October 20, 2008: Treasury published in the Federal Register an interim  final rule to provide guidance on the executive compensation provisions  applicable to CPP participants.
October 20, 2008: Treasury and the four federal banking agencies—the  Board of Governors of the Federal Reserve System, the Office of the  Comptroller of the Currency, the Office of Thrift Supervision, and the  Federal Deposit Insurance Corporation—issue application guidelines,  frequently asked questions, and standardized terms for making capital  investments in public financial institutions. The deadline for public  institutions to submit applications to their primary federal bank regulator  is November 14, 2008.
October 28, 2008: Treasury settles the capital purchase transactions with  eight of the nine institutions participating in the first round of CPP for a  total of $115 billion.
November 17, 2008: Treasury issues standardized terms for making capital  investments in privately held financial institutions. December 8, 2008, is  the deadline for privately held institution to submit applications to their  primary federal bank regulator for CPP funds.
January 14, 2009: Treasury issues standardized terms for making capital  investments in S-corporations and answers to frequently asked questions  for qualified financial institutions applying to CPP that are S-corporations.  The term sheet provides for issuances of debt instead of preferred stock  issued by certain other CPP participants. The deadline for S-corporations  to submit applications to their primary federal bank regulator is February  17, 2009.
February 17, 2009: Treasury publishes its first Monthly Lending and  Intermediation Snapshot with information from the top 21 financial  institutions participating in CPP.
February 17, 2009: The American Recovery and Reinvestment Act of 2009  (ARRA) amends the Emergency Economic Stabilization Act of 2008 by  allowing financial institutions to repurchase or buy back their preferred  shares and warrants from Treasury at any time with the approval of their  primary federal regulator. Under the original terms of CPP, financial  institutions are prohibited from repurchasing in the first 3 years unless  they had completed a qualified equity offering.
February 26, 2009: Treasury publishes frequently asked questions  addressing changes to CPP under ARRA.
March 31, 2009: The first financial institutions begin repaying their CPP  capital investments (that is, repurchasing preferred shares) after receiving  approval from their primary federal banking regulator. Five institutions  pay $353 million to Treasury.
April 7, 2009: Treasury issues three term sheets for qualifying financial  institutions applying to CPP that are mutual holding companies. The  deadline for mutual institutions to submit applications to their primary  federal bank regulator is May 7, 2009.
April 14, 2009: Treasury releases term sheet for mutual banks applying to  CPP that do not have holding companies. The deadline for mutual  institutions to submit applications to their primary federal bank regulator  is May 14, 2009.
April 22, 2009: Treasury announces the selection of three firms  (AllianceBernstein LP; FSI Group, LLC; and Piedmont Investment  Advisors, LLC) to serve as asset managers for CPP and other programs.  Treasury officials state that these managers would have a role in helping  ensure that institutions are honoring dividend payments and stock  repurchases requirements.
May 13, 2009: The Treasury Secretary announces in a speech that  Treasury has taken additional actions under CPP to ensure that small  community banks and holding companies (qualifying financial institutions  with total assets less than $500 million) will have the capital they needed  to lend to creditworthy borrowers. Small banks have until November 21,  2009, to apply to CPP under all term sheets.
May 14, 2009: Treasury notifies six insurance companies that they have  received preliminary CPP funding approval. All insurance companies  complied with the requirements to participate in CPP under existing term  sheets, as these companies are organized as bank or thrift holding  companies and filed their CPP applications by the deadline date. As of  September 25, 2009, two of the six had been funded.
June 1, 2009: Treasury releases its first CPP Monthly Lending Report,  which includes information on outstanding balances on consumer loans,  commercial loans, and total loans of all CPP participants.
June 9, 2009: Treasury announces that 10 of the largest U.S. financial  institutions participating in CPP are eligible to complete the repurchase  process and repay about $68 billion, having obtained regulatory consent to  their repayment requests.
June 10, 2009: Treasury adopts an interim rule to implement the  executive compensation and corporate governance provisions of the act,  as amended by ARRA.
June 17, 2009: Ten of the largest U.S. bank holding companies—all but  one of which participated in the Supervisory Capital Assessment Program  exercise—repay about $68 billion in CPP capital investments to Treasury.
June 26, 2009: Treasury announces its policy with respect to warrant  repurchases and the disposition of warrants received in connection with  investments made under CPP. Also, frequently asked questions about  warrants and CPP are published.
August 17, 2009: Treasury, in conjunction with bank regulators, publishes  the first Quarterly Capital Purchase Report of regulatory financial data for  CPP and non-CPP banks, thrifts, and bank holding companies. It focuses  on three broad categories: on- and off-balance sheet items, performance  ratios, and asset quality measures.
December 31, 2009: Deadline for Treasury to end the approval process for  the additional funding of institutions under CPP and TARP unless the  Treasury Secretary extends it.
section_title: Appendix III: Capital Assistance Program
subsections: section_title: Program Overview
paragraphs: In February 2009, the Department of the Treasury (Treasury) announced  the Financial Stability Plan, which outlined a set of measures to help  address the financial crisis and restore confidence in our financial and  housing markets by restarting the flow of credit to consumers and  businesses, strengthening financial institutions, and providing aid to  homeowners and small businesses. The plan announced six key  components, one of which was the Capital Assistance Program (CAP).  CAP is designed to help ensure that qualified financial institutions have  sufficient capital to withstand severe economic challenges. These  institutions must meet eligibility requirements that will be substantially  similar to those used for Capital Purchase Program (CPP). A key  component of CAP is the Supervisory Capital Assessment Program  (SCAP), which the 19 largest U.S. bank holding companies (those with  risk-weighted assets of $100 billion or more as of December 31, 2008) were  required to participate in. Specifically, federal bank regulators, led by the  Board of Governors of the Federal Reserve System, conducted capital  assessments or “stress tests” to determine whether the largest bank  holding companies have enough capital to absorb losses and continue  lending even if conditions were worse than expected between December  2008 and December 2010. Institutions deemed not to have sufficient  capital were given 6 months to raise private capital or to access capital  through CAP. Institutions with less than $100 billion in risk-weighted  assets were not required to complete a stress test but are also eligible to  obtain capital under CAP. In a process similar to the one used for CPP,  institutions interested in CAP must submit applications to their primary  federal banking regulators by November 9, 2009. The regulators are to  submit recommendations to Treasury regarding an applicant’s viability.
In addition, as part of the application process, institutions must submit a  plan showing how they intend to use this capital to support their lending  activities and how the assistance will impact their lending compared to  what would have been possible without it. Participating institutions under  CAP will be required to submit to Treasury monthly reports—similar to  those for CPP—on their lending activities.
section_title: Funding
paragraphs: To date, Treasury has not allocated any funding to CAP.
section_title: Status of Efforts
paragraphs: The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC),  and the Office of the Comptroller of the Currency (OCC) conducted the  stress test in the spring of 2009. More than 150 examiners, supervisors,  accountants, economists, and other specialists from these banking  agencies participated in the supervisory process. On May 7, 2009, the  Federal Reserve announced the results of SCAP. SCAP results showed that  10 of the 19 bank holding companies needed to raise approximately $75  billion in additional capital. The 10 institutions that needed to raise  additional capital filed their capital plans with the Federal Reserve by the  June 8, 2009, deadline.
Federal banking regulators said that as of September 18, 2009, they had  received 6 CAP applications from institutions wanting to participate in the  program. Regulators noted that they had forwarded no applications to  Treasury for funding consideration. Therefore, no funds have been  disbursed under CAP, according to Treasury officials.
section_title: Key Activities under CAP
paragraphs: February 10, 2009: CAP was announced as a key component of  Treasury’s Financial Stability Plan.
February 25, 2009: Treasury announces the terms and conditions for  CAP.
February 25, 2009: Federal bank regulatory agencies announce that they  would start conducting forward-looking economic assessments of large  U.S. banking holding companies. Also, the three economic assumptions  underlying the stress test are published.
April 24, 2009: The Federal Reserve publishes details of the stress test  process and methodologies employed by the federal banking supervisors  in their forward-looking capital assessment of large U.S. bank holding  companies.
May 7, 2009: The Federal Reserve and Treasury announce the results of  the stress test under CAP. Also, the Treasury Secretary releases a  statement announcing his hopes that the release of the results will lead to  increased bank lending.
May 7, 2009: Treasury publishes frequently asked questions on CPP  repayment and CAP.
June 1, 2009: The Federal Reserve announces the criteria it plans to use  to evaluate applications to repurchase Treasury’s capital investments of  the 19 institutions that underwent stress tests.
June 8, 2009: The deadline for bank holding companies that need to raise  capital under the stress test to file their capital plan with the Federal  Reserve.
November 9, 2009: The deadline for bank holding companies to  implement their capital plans and to apply for and fund transactions.
section_title: Appendix IV: Targeted Investment Program
subsections: section_title: Program Overview
paragraphs: The Targeted Investment Program (TIP) was designed to prevent a loss of  confidence in financial institutions that could (1) result in significant  market disruptions, (2) threatened the financial strength of similarly  situated financial institutions, (3) impair broader financial markets, and  (4) undermine the overall economy. The Department of the Treasury  (Treasury) determines the forms, terms, and conditions of any investments  made under this program and considers institutions for approval on a  case-by-case basis based on the threats posed by the potential  destabilization of the institution, the risk caused by a loss of confidence in  the institutions, and the institution’s importance to the nation’s economy.  Treasury may, on a case-by-case basis, use this program in coordination  with a broader guarantee involving other agencies of the federal  government. Treasury requires any institution participating in this program  to provide Treasury with warrants or alternative considerations, as  necessary, to minimize the long-term costs and maximize the benefits to  the taxpayers in accordance with the Emergency Economic Stabilization  Act of 2008 (the act). Institutions that participate in TIP are subject to  stringent regulations regarding executive compensation, lobbying  expenses, and other corporate governance requirements. Only two  institutions have participated in the TIP program: Bank of America and  Citigroup.
section_title: Status of Efforts
paragraphs: No new applicants have applied for TIP assistance since Bank of America  received TIP assistance in early 2009. As of September 25, 2009, Bank of  America and Citigroup have not repurchased their preferred shares or  warrants. On July 30, 2009, Citigroup exchanged its fixed-rate cumulative  perpetual stock ($20 billion) for trust preferred securities. This exchange  was part of Citigroup’s overall agreement with Treasury to exchange all of  Treasury’s investments in Citigroup. It included the exchange of the  Capital Purchase Program’s preferred shares of $25 billion for common  stock in Citigroup, which essentially gave Treasury a common equity  interest in the bank holding company.
section_title: Key Activities
paragraphs: December 31, 2008: Treasury enters into an agreement with Citigroup to  purchase $20 billion in Fixed Rate Cumulative Perpetual Preferred Stock  and a warrant to purchase common stock.
January 15, 2009: Treasury enters into an agreement with Bank of  America Corporation to purchase $20 billion in preferred stock and a  warrant to purchase common stock.
February 27, 2009: Citigroup announces plans to undertake a series of  transactions, involving the exchange of privately and publicly held  preferred securities and trust securities for common stock and the  exchange of up to $25 billion of Treasury CPP senior preferred.
May 7, 2009: Citigroup announces that it would expand its planned  exchange of preferred securities and trust preferred securities held by  public and private investors (other than Treasury) for common stock from  $27.5 billon to $33 billion following the results of the stress test.
June 9, 2009: Treasury and Citigroup finalize their exchange agreement  and Treasury agree to convert up to $25 billion of the Treasury CPP senior  preferred shares for interim securities and warrants and its remaining  preferred securities acquired in connection with assistance provided to  Citigroup under the TIP and AGP programs for trust preferred securities  so that the institution could strengthen its capital structure by increasing  tangible common equity.
July 23, 2009: Citigroup announces completion of the exchange of $12.5  billion of the Treasury CPP senior preferred and $12.5 billion of privately  held convertible preferred securities for interim securities and warrants.
July 30, 2009: Treasury announces the final results of its offer to  exchange publicly held preferred securities and trust securities, as well as  the exchange by Treasury of its remaining $12.5 billion of Treasury CPP  senior preferred shares outstanding for interim securities and warrants.
September 3, 2009: Citigroup announces the mandatory conservation of  the interim securities issued in the exchange offers into common stock,  and cancellation of the warrants, in accordance with the terms of the  exchange offers.
section_title: Appendix V: Systemically Significant Failing Institutions Program
subsections: section_title: Program Overview
paragraphs: The Systemically Significant Failing Institutions (SSFI) program was  established to provide stability and prevent disruptions to financial  markets from the failure of institutions that are critical to the functioning  of the U.S. financial system.
section_title: Status of Efforts
paragraphs: The only participating institution was American International Group, Inc.  (AIG). Federal assistance to AIG is a joint effort by the Department of the  Treasury (Treasury) and the Board of Governors of the Federal Reserve  System and Federal Reserve Banks (Federal Reserve). We recently issued  a report on the status of this assistance.
section_title: Key Activities under SSFI
paragraphs: November 10, 2008: Treasury announces plans to use its SSFI program to  purchase $40 billion in AIG preferred shares.
November 25, 2008: AIG enters into an agreement with Treasury, which  agrees to purchase $40 billion of AIG’s fixed-rate cumulative perpetual  preferred stock (Series D) and a warrant to purchase approximately 2  percent of the then issued shares of AIG’s common stock to Treasury.
April 17, 2009: AIG and Treasury enter into an agreement in which  Treasury agrees to exchange its $40 billion of AIG’s Series D fixed-rate  cumulative perpetual preferred stock for $41.6 billion of AIG’s Series E  fixed-rate noncumulative perpetual preferred shares. Also, Treasury  provided a $29.8 billion equity capital facility to AIG, which then issued to  Treasury 300,000 shares of fixed-rate noncumulative perpetual preferred  stock (Series F) and a warrant to purchase up to 3,000 shares of AIG’s  common stock.
section_title: Appendix VI: Asset Guarantee Program
subsections: section_title: Program Overview
paragraphs: Under the Asset Guarantee Program (AGP), the Department of the  Treasury (Treasury) provides federal government assurances for assets  held by financial institutions that are deemed critical to the functioning of  the U.S. financial system. The goal of AGP is to encourage investors to  keep funds in the institutions. According to Treasury, placing guarantees,  or assurances, against distressed or illiquid assets was viewed as another  way to help stabilize the financial system.
In implementing AGP, Treasury collects a premium, deliverable in a form  deemed appropriate by the Treasury Secretary. As required by the statute,  an actuarial analysis is used to ensure that the expected value of the  premium is no less than the expected value of the losses to TARP from the  guarantee. The U.S. government would also provide a set of portfolio  management guidelines to which the institution must adhere for the  guaranteed portfolio.
section_title: Status of Efforts
paragraphs: The set of insured assets was first designated by Citigroup and submitted  to Treasury for approval. In accordance with section 102(a), assets to be  guaranteed must have been originated before March 14, 2008. The program  is meant only for systemically significant institutions and can be used in  coordination with other programs.
Since early 2009, no new participants have applied to the AGP program.  Bank of America withdrew from the program and in September 2009  negotiated a termination fee of $425 million that was paid to the Federal  Reserve, the Federal Deposit Insurance Corporation, and Treasury. Thus,  as of October 1, 2009, Citigroup is the only institution participating in AGP.  On January 15, 2009, Citigroup issued preferred shares to the Treasury and  the Federal Deposit Insurance Corporation (FDIC), and a warrant to  Treasury in exchange for $301 billion of loss protection on a specified pool  of Citigroup assets. As a result of receipt of principal repayments and  charge-offs, the total asset pool has declined by approximately $35 billion  from the original $301 billion to approximately $266.4 billion. As part of a  series of exchange offers undertaken by Citigroup in July 2009, the  preferred shares issued to Treasury and FDIC for Citigroup’s participation  in AGP were exchanged for new Citigroup trust preferred securities.
section_title: Key Activities under AGP
paragraphs: January 15, 2009: Citigroup enters into an agreement with the Treasury,  FDIC and the FRBNY to guarantee losses arising on a $301 billion portfolio  of Citigroup assets. As consideration for the loss-sharing agreement,  Citigroup issues non-voting perpetual, cumulative preferred stock and a  warrant to the Treasury.
January 16, 2009: Bank of America Corporation enters into a term sheet  (Term Sheet) with the Treasury, FDIC, and the Board of Governors of the  Federal Reserve System, in which the agencies agreed in principle to  guarantee losses arising on a $118 billion portfolio of Bank of America  Corporation assets.
May 6, 2009: Bank of America Corporation notifies the Treasury, FDIC,  and the Federal Reserve of its plan to terminate negotiations with respect  to the loss sharing guarantee program.
July 30, 2009: Treasury exchanges all of its Fixed Rate Cumulative  Perpetual Stock received as premium under the Citigroup AGP agreement,  “dollar for dollar’ for Trust Preferred Securities.
September 21, 2009: Bank of America announces that it has reached an  agreement to pay a total of $425 million to the USG in connection with the  termination of the Term Sheet, which is equal to: (a) the out-of-pocket  expenses of the USG in negotiating and entering into the Term Sheet and  the negotiations concerning the definitive documentation, consisting of  the expenses of its advisors; and (b) the fee that would have been payable  under the Term Sheet but pro-rated for the period commencing on January  16, 2009, and ending on May 6, 2009, and adjusted for certain exclusions  from the asset pool.
section_title: Appendix VII: Consumer and Business Lending Initiative
subsections: section_title: Program Overview
paragraphs: The Consumer and Business Lending Initiative includes the Department of  the Treasury’s (Treasury) role in the Board of Governors of the Federal  Reserve System’s and the Federal Reserve Bank of New York’s (Federal  Reserve) Term Asset-Backed Securities Loan Facility (TALF) and  Treasury’s plan to directly purchase securities backed by SBA-guaranteed  small business loans. TALF—a Federal Reserve Bank of New York  (FRBNY) credit facility supported by a backstop of $20 billion in the  Troubled Asset Relief Program (TARP) funds from Treasury—was  announced by the Federal Reserve in November 2008. The goal of the  program is to provide up to $200 billion in low-cost financing for investors  to purchase a variety of consumer, small business, and commercial  mortgage securitizations with the goal of unfreezing securitization markets  and increasing credit access for consumers and small businesses.  Also  under the initiative, Treasury anticipates purchasing securities backed by  SBA 7(a) guaranteed loans and securities backed by SBA 504 loan  guarantees to jumpstart securitization and credit markets for small  businesses though it had not purchased any SBA-backed securities as of  September 2009.
section_title: Status of Efforts
paragraphs: Between March 2009 and September 2009, approximately $51.7 billion in  TALF funds were requested. Table 17 provides a summary of monthly loan  requests by asset class.
section_title: Key Activities under Consumer and Business Lending Initiative
paragraphs: November 25, 2008: The Federal Reserve announces TALF, agreeing to  lend up to $200 billion on a nonrecourse basis to holders of newly issued  AAA-rated asset-backed securities (ABS) backed by credit cards, auto  loans, student loans, and small business loans guaranteed by the SBA.
February 10, 2009: As part of the Financial Stability Plan, the Federal  Reserve, FRBNY, and Treasury announce a willingness to consider  expanding the size of the TALF to $1 trillion over the life of the program.
March 3, 2009: The agencies launch the TALF program, and the first  subscription occurs.
March 19, 2009: The agencies expand the range of eligible collateral to  include asset-backed securities backed by mortgage servicing advances,  business equipment loans or leases, floorplan loans, and leases of vehicle  fleets. They also announce an intention to expand the list of eligible  collateral to include previously issued securities—so called “legacy  securities”—as a complement to the Public-Private Investment Program  (PPIP).
May 1, 2009: The Federal Reserve announces that two new asset classes  are eligible for TALF funding: newly-issued commercial mortgage-backed  securities (CMBS) and ABS backed by insurance premium finance loans.
May 19, 2009: The Federal Reserve announces that certain high-quality  legacy CMBS are eligible for TALF funding.
June 2, 2009: Aggregate loan requests for the program reach peak levels  for consumer and business ABS.
July 16, 2009: The first legacy CMBS loan requests are submitted to  TALF.
August 17, 2009: The Federal Reserve and Treasury jointly announce  TALF’s extension for ABS and legacy CMBS collateral through March  2010, and through June 2010 for newly-issued CMBS collateral. Also, the  Federal Reserve states that it does not anticipate further additions to the  eligible asset classes.
September 1, 2009: FRBNY approves four non-primary dealers to  supplement the 18 primary dealers that interface between FRBNY and  TALF borrowers.
section_title: Appendix VIII: The Public-Private Investment Program
paragraphs: The Department of the Treasury (Treasury)—with assistance from the  Board of Governors of the Federal Reserve System and the Federal   Reserve Bank of New York (Federal Reserve) and the Federal Deposit   Insurance Corporation (FDIC)—designed the Public-Private Investment  Program (PPIP) to lessen the impact of legacy assets on balance sheets   and thereby improve consumer and business lending. PPIP has two   distinct components: the Legacy Securities Program and the Legacy Loans  Program. Under the Legacy Securities Program, commercial mortgage- backed securities and non-agency residential mortgage-backed securities  will be purchased and managed by fund managers overseeing public- private investment funds. According to Treasury, in the course of  prequalifying nine fund managers, Treasury vetted each of them for their  investment strategy—primarily long-term buy and hold. Public-private  investment funds will raise equity capital from private sector investors and  receive matching equity funds and secured nonrecourse loans from  Treasury. The Legacy Loans Program is designed to encourage the  purchase of troubled and illiquid loans from FDIC-insured banks and  thrifts. FDIC will provide debt guarantees and Treasury will provide equity  co-investment to private funds purchasing such loans through an auction.  FDIC will oversee the new funds. FDIC held a pilot sale of receivership  assets to test the funding mechanism contemplated by the Legacy Loans  Program, and continues to develop the program should it be needed in the  future.
subsections: section_title: Funding
paragraphs: PPIP has not disbursed any of its $100 billion TARP allocation as of  September 25, 2009, (see table 18).
section_title: Status of Efforts
paragraphs: For the Legacy Securities Program, nine fund managers have been  prequalified, and as of October 5, 2009, Treasury officials stated that five  fund mangers had raised the requisite capital to receive matching funds  and leverage from Treasury—though no investments have yet been made.  FDIC recently tested a funding mechanism based on the legacy loan  program model, but agency officials are still assessing the outcome.  Treasury, in consultation with the Federal Reserve, needs to make a  systemic risk determination for the legacy loans program to be  implemented, according to FDIC officials.
section_title: Key Activities
paragraphs: March 23, 2009: Treasury and FDIC officials release the initial outlines of  PPIP.
March 26, 2009: FDIC announces a comment period for the Legacy Loan  Program.
April 24, 2009: Private asset managers submit applications to Treasury as  part of the Legacy Securities Program selection process.
June 3, 2009: FDIC announces that the Legacy Loan Program is put on  hold. FDIC officials state that financial institutions have been able to raise  capital without selling troubled assets through the Legacy Loan Program.
July 8, 2009: Treasury preapproves nine fund managers to operate public- private investment funds for the Legacy Securities Program. Fund  managers select ten small-, veteran-, minority-, and women-owned  businesses as partners.
July 31, 2009: FDIC announces a model funding mechanism based on the  Legacy Loan Program for a test sale of receivership assets.
September 25, 2009: Treasury officials state that two of the nine  prequalified fund managers have raised at least the required minimum of  $500 million each to begin investing in legacy securities, though no  investments have yet been made.
October 5, 2009: Treasury officials state that an additional three of the  nine prequalified fund managers have raised at least the required minimum  of $500 million each to begin investing in legacy securities, though no  investments have yet been made.
section_title: Appendix IX: Auto Industry Financing Program
subsections: section_title: Program Overview
paragraphs: The Department of the Treasury (Treasury) established the Automotive  Industry Financing Program (AIFP) in December 2008 to help stabilize the  U.S. automotive industry and avoid disruptions that would pose systemic  risk to the nation’s economy. Under this program, Treasury has authorized  a total of about $81.1 billion of Troubled Asset Relief Program (TARP)  funds to help support automakers, automotive suppliers, consumers, and  automobile finance companies as of September 25, 2009. A sizeable  amount of funding has been to support the restructuring of Chrysler Group  LLC (Chrysler) and General Motors Company (GM). The AIFP consists of  the following four components:    Funding to Support Automakers during Restructuring. Treasury has  provided financial assistance to Chrysler and GM to support their  restructuring in an attempt to return to profitability. The assistance was  provided in loans and equity investments in the companies.
Auto Supplier Support Program. Under this component of the program,  Chrysler and GM received funding for the purpose of ensuring payment to  suppliers. The program is designed to ensure that automakers receive the  parts and components they need to manufacture vehicles and that  suppliers have access to credit from lenders. The funding provided to  Chrysler and GM in this program is in the form of a debt obligation.
Warranty Commitment Program. The program was designed to mitigate  consumer uncertainty about purchasing vehicles from the restructuring  automakers by providing funding to guarantee the warranties on new  vehicles purchased from participating manufacturers that were  undergoing restructuring. The funds provided to the companies ultimately  were not needed, because both companies were able to continue to honor  consumer warranties.
section_title: Funding
paragraphs: purchased preferred membership stock with warrants and common equity  interest in GMAC—which includes funding to help support retail and  wholesale purchases for Chrysler. To provide strategic guidance for AIFP  and to advise the President and the Secretary of the Treasury on issues  impacting the financial health of the industry, the White House established  the Presidential Task Force on the Auto Industry. Treasury also hired staff  with expertise in the financial industry to help oversee the assistance.
section_title: Key Activities under AIFP
paragraphs: Since December 2008, about $81.1 billion in AIFP funds have been  authorized. Below are key developments in the program.
December 19, 2008: Treasury announces the creation of AIFP using TARP  funds to stabilize the U.S. automotive industry and avoid disruptions that  would pose systemic risk to the nation’s economy.
December 29, 2008: Treasury purchases $5 billion in preferred stock with  exercised warrants in GMAC LLC.
December 31, 2008: Treasury provides a $13.4 billion loan to GM to assist  the company’s restructuring.
January 2, 2009: Treasury provides a $4 billion loan to Chrysler and a  $1.5 billion loan to Chrysler Financial Services Americas LLC.
February 17, 2009: Chrysler and GM submit restructuring plans to  Treasury as required by the terms of their loan agreements.
March 19, 2009: Treasury announces the Auto Supplier Support Program  to ensure payments to automotive suppliers.
March 30, 2009: The White House announces that Chrysler and GM’s  restructuring plans do not establish a credible path to viability or merit  additional federal government investment. The companies are given  additional time to show greater progress.
March 30, 2009: Treasury announces the Warranty Commitment Program  to guarantee the warranties on new vehicles purchased from participating  auto manufacturers.
April 3, 2009: GM receives loans of $2.5 billion, under the Auto Supplier  Support Program.
April 7, 2009: Chrysler receives loans of $1 billion, under the Auto  Supplier Support Program.
April 29, 2009: Treasury commits to providing a loan of up to $500 million  to Chrysler under the Warranty Commitment Program.
April 30, 2009: The White House announces it will provide an additional  $8.5 billion to support Chrysler’s restructuring.
May 20, 2009: Treasury provides GM with an additional $4 billion for  restructuring.
May 21, 2009: Treasury purchases $7.5 billion in preferred stock with  exercised warrants in GMAC LLC.
May 27, 2009: Treasury provides a $360 million loan for the Warranty  Commitment Program.
June 1, 2009: Treasury announces it will provide GM with up to an  additional $30.1 billion to support the company’s bankruptcy proceeding  and transition through restructuring.
After emerging from bankruptcy in June 2009, Chrysler has seen the  appointment of several new senior officials, including its chief executive  officer and chief financial officer, as well as a newly constituted board of  directors, which Chrysler officials said met for the first time in July 2009.  When we met with Chrysler in September 2009, officials told us that the  company was focused on developing a new business plan, with assistance  from Fiat in the areas of product development, distribution, and sales and  marketing.
GM has continued to take steps to restructure, funded by the $30.1 billion  in financing that Treasury provided in June. On July 5, 2009, a bankruptcy  judge approved GM’s motion to sell its assets to a new company in which  the federal government would have a majority share. On July 10, 2009, the  asset sale was finalized, and Treasury executed a loan agreement with the  restructured GM, under which the company is required to repay Treasury  $7.1 billion. The remainder of the funding that Treasury provided to GM  was converted to 60.8 percent ownership in the new company and $2.1  billion in preferred stock. Other stakeholders also received equity in GM.  In consideration of their ownership stakes, GM’s shareholders—including  Treasury—received the right to appoint directors to GM’s board. The new  members of GM’s board have been appointed, and the board held its first  in-person meeting in August.
section_title: Appendix X: Home Affordable Modification Program
paragraphs: The Department of the Treasury’s (Treasury) Office of Financial Stability  (OFS) developed the Home Affordable Modification Program (HAMP) to  address two of the stated purposes of the Emergency Economic  Stabilization Act (the act)—preserving homeownership and protecting  home values. According to Treasury, HAMP’s primary goal is to help up to  three to four million borrowers who are struggling to make their mortgage  payments by reducing their monthly payments to an affordable level (loan  modification), thereby preventing unnecessary foreclosures and helping to  stabilize home prices in the neighborhoods hit hardest by foreclosures. To  implement the program, Treasury has delegated significant responsibilities  to its financial agents, Fannie Mae and Freddie Mac, to act as the program  administrator and compliance agent for HAMP, respectively. Under HAMP,  Treasury will use Troubled Asset Relief Program (TARP) funds to share  the cost of reducing monthly payments on first-lien mortgages with  mortgage holders and investors, and provide financial incentives to  servicers, borrowers, and mortgage holders and investors for loans  modified under the program. Under HAMP, Treasury also plans to (1)  provide additional incentives to mortgage holders/investors to modify,  rather than foreclose on, loans in areas where home price declines have  been most severe; (2) provide incentives to modify or pay off second-lien  loans of borrowers whose first mortgages were modified under HAMP;  and (3) provide incentives to servicers and borrowers to pursue  alternatives to foreclosure (short sales and deeds-in-lieu) to homeowners  who do not qualify for a HAMP modification or cannot maintain payments  during the trial period or modification. As of September 25, 2009, 63  servicers have signed up to participate in the program, covering  approximately 85 percent of U.S. mortgage loans.
subsections: section_title: Funding
paragraphs: Treasury has announced that up to $50 billion of funds from TARP may be  used for HAMP. Most of these funds are directed to the modification of  first-lien mortgages held by borrowers in danger of foreclosure (first-lien  modification program). To monitor HAMP’s funding needs, Treasury has  estimated the funding requirements, or caps, for each participating  servicer based on the number of modifications they are expected to  perform during the entire duration of the program. The caps include  maximum payable incentives associated with modifying borrowers’ first- lien mortgages, including incentive payments to borrowers, servicers, and  mortgage holders and investors. According to Treasury, cap allocations  are initially set based on publicly available information and are updated  using more complete data on the servicers’ mortgage portfolios. Treasury  has been reassessing each servicer’s cap on a quarterly basis, using data  on the actual number of modifications made by the servicer under the  program. As of September 25, 2009, Treasury had allocated a total of $22.3  billion through the caps on its 63 participating servicers, of which about  $946,000 has been paid out in servicer and investor incentive payments.
section_title: Status of Efforts
paragraphs: Most of Treasury’s efforts to develop HAMP have been directed to the  first-lien modification program. Treasury has designed the first-lien  program to target borrowers in default (defined as 60 days or more  delinquent on their mortgage payments) or in imminent danger of default  (borrowers that are current on their mortgages but facing hardships such  as job loss or interest rate increases on their adjustable rate mortgages).  Treasury has established several eligibility requirements for borrower  participation in HAMP, including that the property be an owner-occupied,  single-family residence (one to four units) that is the borrower’s primary  residence and that the mortgage loan amount not exceed specified dollar  thresholds. Additionally, borrowers cannot participate in HAMP if they  have non-GSE loans unless their servicers have signed participation  agreements with Fannie Mae—Treasury’s administrator for the program.  According to Treasury, as of September 25, 2009, the following HAMP  progress has been made related to loans not owned or guaranteed by  Fannie Mae and Freddie Mac:    63 servicers had signed participation agreements for the first-lien    More than 1.3 million solicitation letters for HAMP loan modifications to    More than 328,000 HAMP trial modification offers to borrowers;    More than 209,000 HAMP trial modifications had started; and    1,080 borrowers had successfully completed the trial period and received  HAMP modifications.
Of the three other subprograms that were announced as part of HAMP in  the March 4, 2009, program guidelines, Treasury has recently begun to  implement the Home Price Decline Prevention (HPDP) program but has  not implemented the other two. Treasury issued official guidance on  HPDP in late July 2009 and began implementing the program on  September 1, 2009. As of that date, the net present value model used to  calculate borrowers’ eligibility for HAMP took into account the additional  incentive payments available through HPDP to investors in areas of the  country where price declines had been large. However, the extent to  which HPDP will increase the number of modifications made remains  unclear. In our July 2009 report, we recommended that Treasury re- evaluate the basis and design of the HPDP program to ensure that HAMP  funds are being used effectively. Treasury released detailed guidelines on  the second-lien modification component of HAMP on August 13, 2009.  However, these guidelines require that servicers sign participation  agreements with Fannie Mae on or before December 31, 2009, to be  eligible for the program. As of September 25, 2009, no servicers have  signed such participation agreements. Finally, Treasury had not released  any detailed guidelines on the foreclosure alternatives component of  HAMP.
We previously reported that although the central program—the first-lien  modification program—had been implemented, many of its administrative  processes and its internal control policies and procedures were not yet  finalized. Fannie Mae, as HAMP administrator, has mapped operational  processes and identified points of control for multiple aspects of HAMP,  such as servicer registration and servicer set-up in HAMP’s electronic  system, servicer data reporting, trial and official modifications, and the  steps of the payment process administered by Fannie Mae. Fannie Mae has  also drafted procedures to carry out many of these processes and internal  controls. According to Fannie Mae, processes, controls and procedures  have not been finalized for a planned servicer call center, and the  budgeting and billing of Fannie Mae’s work under the HAMP financial  agent agreement. Processes and controls designed by Fannie Mae to date  were to be tested by September 30, 2009, according to Fannie Mae  officials. In addition, Freddie Mac, as HAMP compliance agent, has  mapped out the overall compliance program, working with OFS and  PricewaterhouseCoopers LLP, and is developing policies and procedures  to carry it out. In a related effort, Freddie Mac has described to us its  methods for testing compliance for 233 program requirements. In addition,  according to Treasury, Treasury and its financial agents have formalized a  charter for a HAMP Compliance Committee. Treasury also noted that the  Committee is finalizing a policy for addressing remedies for identified  instances of noncompliance among servicers. However, while Treasury  has drafted performance measures to evaluate HAMP, these measures  have not been fully developed and have yet to be implemented.
On August 4, 2009, Treasury released its first report on the performance of  participating servicers under HAMP. The Monthly Servicer Performance  Report showed significant variations among the servicers in the  percentage of delinquent borrowers in their servicing portfolios that had  been offered or received trial modifications. For example, for servicers  that had signed up to participate in the program before May 31, 2009, the  percentage of delinquent borrowers who had been offered HAMP trial  modifications ranged from 0 percent to 45 percent, and the percentage of  their delinquent borrowers who had started HAMP trial modifications  ranged from 0 percent to 25 percent. Such variations have highlighted  potential issues with servicers’ capacity to implement HAMP. In our July  2009 report, we expressed concern that Treasury was not fully vetting  servicers signing HAMP loan modification participation agreements and  recommended that Treasury develop a means of systematically assessing  servicers’ capacity to meet program requirements during program  admission. As compliance agent for HAMP, Freddie Mac has developed  several different types of reviews intended to be conducted after a servicer  has signed up to participate in the program that touch on issues of servicer  capacity. Freddie Mac is currently working with Treasury to refine these  procedures, which include:  “full” on-site reviews, which are 1-week reviews that include a detailed  management interview about all HAMP processes, walk-throughs of each  of these processes, and file reviews of a sample of the servicer’s loan files;   walk-through reviews, which are 1- to 2-day reviews that can occur sooner  than a “full” review and that go into less detail on loss mitigation,  collections, and investor accounting processes; and “second look” reviews, which are off-site loan file reviews that look for  servicer errors in evaluating borrowers for HAMP.
section_title: Key activities under HAMP
paragraphs: February 18, 2009: Treasury announced HAMP, a national loan  modification program intended to offer assistance to up to three to four  million homeowners by reducing monthly payments to sustainable levels.
March 4, 2009: Treasury issued official guidance for loan modifications  under HAMP and announced that servicers could begin conducting  modifications that conform to the guidelines. These initial guidelines  largely focused on the first-lien modification subprogram. Treasury also  issued updated guidance on completing first-lien modifications on April 6,  2009.
March 19, 2009: Treasury launched its Making Home Affordable (MHA)
Web site for borrowers to provide information on the program, including  eligibility requirements and housing counseling options, among other  things.
April 13, 2009: The first six servicers signed participation agreements  under HAMP.
April 15, 2009: Treasury launched an administrative Web site for  mortgage servicers to provide them with the information and tools needed  to participate in HAMP.
July 28, 2009: Treasury and the Department of Housing and Urban  Development (HUD) officials held a meeting with all participating  servicers at which they asked the servicers to ramp up their efforts to  increase trial modifications, with a goal of starting 500,000 trial  modifications by November 1, 2009.
July 31, 2009: Treasury issued official guidance on the HPDP component  of HAMP.
August 4, 2009: Treasury released its first monthly Servicer Performance  Report detailing servicers’ progress to date with HAMP. According to  Treasury, the purpose of the report is to document the number of  struggling homeowners already helped under the program, provide  information on servicer performance, and increase the program’s  transparency.
August 13, 2009: Treasury announced details of the second-lien  modification component of HAMP, which allows second liens with  corresponding first liens that have been modified under HAMP to be  modified or extinguished. While Treasury estimates that between one and  one-and-a-half million borrowers may be eligible to receive a second-lien  modification, servicer participation in the second-lien modification  subprogram is unclear, as servicers who had previously signed  participation agreements must sign amended agreements in order to  participate in the program. As of September 25, 2009, no servicers had  signed participation agreements for the second-lien program.
August 27, 2009: Treasury conducted its first disbursement of $276,000 to  one servicer for payment of servicer incentives related to 276 non-GSE  loans modified under HAMP. No payments were disbursed for monthly  mortgage payment reductions or associated incentive payments to  investors or borrowers, and no payments were made to other servicers.
September 25, 2009: Treasury conducted its second disbursement of  about $670,000 to three servicers for payment of servicer incentives and  investor subsidies.
section_title: Appendix XI: Comments from the Department of the Treasury
section_title: Appendix XII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, A. Nicole Clowers, Gary Engel,  Mathew Scirè, and William T. Woods (lead Directors); Cheryl Clark,  Lawrance Evans Jr., Dan Garcia-Diaz, Carolyn Kirby, Barbara Keller, Kay  Kuhlman, Harry Medina, Raymond Sendejas, Karen Tremba (lead Assistant  Directors); Judith Ambrose, Timothy Carr, Tania Calhoun, Emily  Chalmers, Brent Corby, Rachel DeMarcus, M’Baye Diagne, Nancy Eibeck,  Sarah Farkas, Alice Feldesman, Heather Halliwell, Michael Hoffman, Joe  Hunter, Tyrone Hutchins, John Karikari, Amber Keyser, Steven Koons,  Robert Lee, Sarah McGrath, Joseph O’Neill, Rebecca Riklin, Susan Michal- Smith, Maria Soriano, Cynthia Taylor, Angela D. Thomas, Julie Trinder,  Marc Molino, Winnie Tsen , Jim Vitarello, Yun Wang, and Heather  Whitehead have made significant contributions to this report.
section_title: Related GAO Products
paragraphs: Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-1048T. Washington,  D.C.: September 24, 2009.
Troubled Asset Relief Program: Status of Government Assistance  Provided to AIG. GAO-09-975. Washington, D.C.: September 21, 2009.
Troubled Asset Relief Program: Treasury Actions Needed to Make the  Home Affordable Modification Program More Transparent and  Accountable. GAO-09-837. Washington, D.C.: July 23, 2009.
Troubled Asset Relief Program: Status of Participants’ Dividend  Payments and Repurchases of Preferred Stock and Warrants.  GAO-09-889T. Washington, D.C.: July 9, 2009.
Troubled Asset Relief Program: June 2009 Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-658. Washington, D.C.:  June 17, 2009.
Troubled Asset Relief Program: Capital Purchase Program Transactions  for October 28, 2008, through May 29, 2009, and Information on  Financial Agency Agreements, Contracts, Blanket Purchase Agreements,  and Interagency Agreements Awarded as of June 1, 2009. GAO-09-707SP.  Washington, D.C.: June 17, 2009.
Auto Industry: Summary of Government Efforts and Automakers’  Restructuring to Date. GAO-09-553. Washington, D.C.: April 23, 2009.
Small Business Administration’s Implementation of Administrative  Provisions in the American Recovery and Reinvestment Act.  GAO-09-507R. Washington, D.C.: April 16, 2009.
Troubled Asset Relief Program: March 2009 Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-504. Washington, D.C.:  March 31, 2009.
Troubled Asset Relief Program: Capital Purchase Program Transactions  for the Period October 28, 2008 through March 20, 2009 and  Information on Financial Agency Agreements, Contracts, and Blanket  Purchase Agreements Awarded as of March 13, 2009. GAO-09-522SP.  Washington, D.C.: March 31, 2009.
Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-539T. Washington,  D.C.: March 31, 2009.
Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-484T. Washington,  D.C.: March 19, 2009.
Federal Financial Assistance: Preliminary Observations on Assistance  Provided to AIG. GAO-09-490T. Washington, D.C.: March 18, 2009.
Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-474T. Washington,  D.C.: March, 11, 2009.
Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-417T. Washington,  D.C.: February 24, 2009.
Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-359T. Washington,  D.C.: February 5, 2009.
Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-296. Washington, D.C.:  January 30, 2009.
High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 22,  2009.
Troubled Asset Relief Program: Additional Actions Needed to Better  Ensure Integrity, Accountability, and Transparency. GAO-09-266T.  Washington, D.C.: December 10, 2008.
Auto Industry: A Framework for Considering Federal Financial  Assistance. GAO-09-247T. Washington, D.C.: December, 5, 2008.
Auto Industry: A Framework for Considering Federal Financial  Assistance. GAO-09-242T. Washington, D.C.: December 4, 2008.
Troubled Asset Relief Program: Status of Efforts to Address Defaults and  Foreclosures on Home Mortgages. GAO-09-231T. Washington, D.C.:  December 4, 2008.
Troubled Asset Relief Program: Additional Actions Needed to Better  Ensure Integrity, Accountability, and Transparency. GAO-09-161.  Washington, D.C.: December 2, 2008.