Troubled Asset Relief Program: Treasury Sees Some Returns as It Exits Programs and Continues to Fund Mortgage Programs
Released: 2013-01-07T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: The Emergency Economic Stabilization Act of 2008 authorized Treasury to create TARP, a $700 billion program designed to restore liquidity and stability to the financial system and to preserve homeownership by assisting borrowers struggling to make their mortgage payments. The act also required that GAO report every 60 days on TARP activities in the financial and mortgage sectors. This report examines the condition and status of (1) nonmortgage-related TARP programs and (2) TARP-funded mortgage programs and Treasury's efforts to better ensure that servicers are implementing as intended two new requirements designed to improve interactions with borrowers (the MHA single point of contact and resolution of escalated cases requirements). To do this work, GAO analyzed audited financial data for various TARP programs; reviewed documentation such as program terms and agency reports on TARP programs; and interviewed Office of Financial Stability officials.

Treasury generally agreed with the findings. Treasury, Ally Financial, and General Motors provided technical comments that GAO incorporated, as appropriate.

section_title: What GAO Found
paragraphs: As of September 30, 2012, the Department of the Treasury (Treasury) was managing assets totaling $63.2 billion in nonmortgage-related Troubled Asset Relief Programs (TARP). As of this date, Treasury had exited 4 of the 10 nonmortgage-related programs, and in December 2012 Treasury announced the exit from a fifth program--the American International Group (AIG) Investment Program. Exactly when Treasury will exit the remaining five programs remains uncertain. Treasury has identified several factors that will affect its decisions. For example,

for the Capital Purchase Program (CPP, created to provide capital to financial institutions), the financial condition of the participating institutions and the success of auctions;

for the Community Development Capital Initiative (CDCI, created to provide capital to credit unions and financial institutions in underserved communities), which Treasury has not yet decided to exit, the financial condition of the participating institutions and the rate at which the institutions repay Treasury; and

for the Automotive Industry Financing Program (AIFP, created to prevent a significant disruption of the American automotive industry).

Some programs, such as CPP, have yielded returns that exceed the original investments. Others, such as CDCI and AIFP, have not.

Unlike the nonmortgage-related TARP programs, TARP-funded mortgage programs, which focus on mitigating foreclosures, are ongoing, and Treasury's oversight of new requirements designed to improve servicers' interactions with borrowers showed both challenges and improvements. Treasury allocated $45.6 billion in TARP funds to three programs, including Making Home Affordable (MHA), but more than $40 billion of the funding has not yet been disbursed, and the programs have not reached the expected number of borrowers. The centerpiece of MHA is the Home Affordable Modification Program, which has provided about 1.1 million permanent modifications to borrowers. To help ensure that homeowners receive appropriate assistance from servicers under this and other MHA programs, since September 2011 Treasury has required servicers to identify a "relationship manager" to serve as the homeowner's single point of contact throughout a delinquency or imminent default resolution process. GAO found that Treasury's initial reviews of servicers' implementation of this requirement had identified some inconsistencies. However, oversight of a second requirement designed to improve the resolution of borrower inquiries and disputes (escalated cases) showed that the nine largest servicers had met the performance target. Treasury officials said that the MHA program administrator, Fannie Mae, handled oversight of the escalation process and the vendors who supported in keeping with Treasury's guidelines.

section_title: Letter
paragraphs: The Emergency Economic Stabilization Act of 2008 (EESA) initially  authorized $700 billion to assist financial institutions and markets,  businesses, homeowners, and consumers through the Troubled Asset  Relief Program (TARP). This amount was intended to provide confidence  that the U.S. government would help address the greatest threat the  financial markets and economy had faced since the Great Depression. As  the severity and immediacy of the 2008 financial crisis began to diminish,  Congress reduced the authorized amount to $475 billion as part of the  Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act).

TARP costs were not estimated to reach the authorized amounts, and  over time the projected costs have declined as financial institutions repay  some assistance and other programs move closer to their termination  dates. However, a number of banks that received investments under the  Capital Purchase Program (CPP), the largest TARP program, have  missed dividend or interest payments related to their government  assistance, although the number of banks remaining in the program has  decreased. TARP-funded housing programs also continue their  expenditures in an effort to address the ongoing foreclosure crisis.

The Department of the Treasury (Treasury) is the primary agency  implementing TARP, and it has undertaken a broad range of activities.  Treasury established the Office of Financial Stability (OFS) to carry out  TARP activities, which have included injecting capital into key financial  institutions, implementing programs to address problems in the  securitization markets, providing assistance to the automobile industry,  and offering incentives for modifying residential mortgages, among other  activities.

As required by EESA, we have provided oversight of TARP activities  since they began in 2008. This 60-day report assesses the condition of  TARP as of September 30, 2012. Specifically, it examines the condition  and status of (1) nonmortgage-related TARP programs; and (2) TARP  mortgage programs, including Treasury’s efforts to ensure that servicers  are implementing two requirements. These requirements are establishing  a single point of contact for each borrower and following procedures for  resolving disputed cases that are “escalated” or referred for review.

We provided non-audited financial information for significant repayments occurring after  September 30, 2012. This included information related to the American International  Group (AIG) Investment Program, the Automotive Industry Financing Program (AIFP), and  the Public-Private Investment Program (PPIP). In the first case, Treasury has recouped its  assistance to AIG, and in case of AIFP, the updates relate directly to Treasury’s exit  strategy. We added information for PPIP because the payment amounts were relatively  large. Our future reports on TARP will address audited financial information for the various  nonmortgage TARP programs for the post-September 30, 2012, period. and status of TARP-funded mortgage programs and Treasury’s efforts to  ensure that servicers were implementing the single point of contact  requirement and procedures for resolving escalated cases, we analyzed  Treasury’s public reports and statements; reviewed internal Treasury  documentation; and interviewed OFS officials. For both objectives, we  also leveraged our past reporting on TARP, as well as that of the Special  Inspector General for TARP, as appropriate. Unless otherwise noted, we  provide financial information about the TARP programs throughout this  report as of September 30, 2012. Appendix I contains additional  information about our scope and methodology.

We conducted this performance audit from September 2012 to January  2013 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.
subsections: section_title: Background
paragraphs: When EESA was enacted on October 3, 2008, the U.S. financial system  was facing a severe crisis that rippled throughout the global economy,  moving from the U.S. housing market to an array of financial assets and  interbank lending. The crisis restricted access to credit and made the  financing on which businesses and individuals depended increasingly  difficult to obtain. Further tightening of credit exacerbated a global  economic slowdown. During the crisis, Congress, the President, federal  regulators, and others undertook a number of steps to facilitate financial  intermediation by banks and the securities markets. In addition to  Treasury’s efforts, policy interventions were led by the Board of  Governors of the Federal Reserve System (Federal Reserve) and the  Federal Deposit Insurance Corporation. While the banking crisis in the  United States no longer presents the same level of systemic concerns as  it did in 2008, the financial system continues to face vulnerabilities,  including lagging investor confidence, financial concerns about European  banks and countries, and generally weak economic growth globally.
subsections: section_title: TARP Programs and Implementation
paragraphs: The passage of EESA resulted in a variety of programs supported with  TARP funding. (See table 1.) Treasury estimates several of the  programs over their lifetimes will provide income to the government while  others will incur a cost. Each program that remained active through  September 30, 2012, will be addressed in this report.

Many TARP programs have been winding down, and some have ended.Treasury has stated that when deciding to sell assets and exit TARP  programs, it strives to: protect taxpayer investment and maximize overall investment returns  within competing constraints, and promote the stability of financial  markets and the economy by preventing disruptions to the financial  system; bolster markets’ confidence in order to encourage private capital dispose of investments as soon as practicable.

While Treasury has identified these goals for the exit process for many  programs, we and others have noted that these goals, at times, can  conflict. For example, we previously reported that deciding to unwind  some of its assistance to General Motors (GM) by participating in an initial  public offering (IPO) presented Treasury with a conflict between  maximizing taxpayer returns and exiting as soon as practicable. Holding  its shares longer could have meant realizing greater gains for the  taxpayer but only if the stock appreciated in value. By participating in  GM’s November 2010 IPO, Treasury tried to fulfill both goals, selling  almost half of its shares at an early opportunity. Treasury officials stated  that although they strove to balance these competing goals, they had no  strict formula for doing so. Rather, they ultimately relied on the best  available information in deciding when to start exiting this program.

Moreover, in some cases Treasury’s ability to exercise control over the  timing of its exit from TARP programs is limited. For example, Treasury  has limited control over its exit from the Public-Private Investment  Program (PPIP), because the program’s exit depends on when each  public-private investment fund (PPIF) decides to sell its investments.  Treasury continues to face this tension in its goals with a number of  TARP programs. Figure 1 provides an overview of key dates for TARP  implementation and the unwinding of some programs. In addition,  appendix III provides information on Treasury’s administration of the  TARP programs, including an update on the staffing challenges we have  previously reported and Treasury’s reliance on the private sector to assist  with TARP administration and operations.

section_title: Most Nonmortgage- Related Programs Continue to Wind Down
paragraphs: Most nonmortgage-programs continue to wind down, but the status and  potential ending date of each nonmortgage-related TARP program varies.  Key information includes,  the estimated date, if known, that the program will end or stop  acquiring new assets and no longer receive funding;

Treasury’s estimated date for exiting the program or selling the assets  it acquired while the program was open; outstanding assets, as applicable, as of September 30, 2012;the lifetime estimated costs (or income) for each program as  calculated by Treasury.
subsections: section_title: Institutions’ Financial Strength and the Outcomes of Auctions Will Help Determine When Remaining Participants Exit CPP
paragraphs: While repayments and income from CPP investments have exceeded the  original outlays, the financial strength of participating institutions and the  outcome of future securities auctions will help determine when the  remaining institutions exit the program. As we have reported, Treasury  disbursed $204.9 billion to 707 financial institutions nationwide from  October 2008 through December 2009. As of September 30, 2012,  Treasury had received $219.5 billion in repayments and income from its  CPP investments, exceeding the amount originally disbursed by $14.6  billion (see fig. 2). The repayment and income amount included $193.2  billion in repayments of original CPP investments, as well as $11.8 billion  in dividends, interest, and fees; $7.7 billion in warrant income; and $6.9  billion in net proceeds in excess of costs. After accounting for write-offs  and realized losses on sales totaling $3.0 billion, CPP had $8.7 billion in  outstanding investments as of September 30, 2012. Treasury estimates  lifetime income of $14.9 billion for CPP as of September 30, 2012.

Over half (417) of the 707 institutions that originally participated in CPP  had exited the program as of September 30, 2012. Of the 417  institutions that have exited CPP, about 42 percent, or 175 institutions,  exited by repaying their investments. Another 40 percent, or 165  institutions, exited CPP by exchanging their securities under other federal  programs: 28 through TARP’s Community Development Capital Initiative  (CDCI) and 137 through the non-TARP Small Business Lending Fund  (SBLF) (see fig. 3). Of the remaining 18 percent of CPP recipients that  exited the program, 56 had their securities sold by Treasury, 18 went into  bankruptcy or receivership, and 3 merged with another institution.

As of September 30, 2012, much of the $8.7 billion in outstanding  investments was concentrated in a relatively small number of institutions.  The largest single outstanding investment was $967.9 million, and the top  three outstanding investments totaled $2.3 billion—27 percent of the  amount outstanding. The top 25 remaining CPP investments accounted  for $5.4 billion, or 63 percent of the outstanding amount. In addition, while  290 of the original 707 institutions remained in CPP, their $8.7 billion in  outstanding investments accounted for just 4 percent of what Treasury  originally disbursed.

However, the number of institutions that have missed payments has been  rising. The cumulative number of financial institutions that had missed at  least one scheduled dividend or interest payment by the end of the month  in which the payments were due rose from 219 as of August 31, 2011, to  242 as of August 31, 2012. These 242 institutions represent over one- third of the 707 institutions that participated in CPP and account for a  cumulative total of 1,631 missed payments. As of August 31, 2012, 208  institutions had missed three or more payments and 142 had missed six  or more. The total amount of missed dividend and interest payments was  $376 million, although some of these payments were later made prior to  the end of the reporting month. On a quarterly basis, the number of  institutions missing dividend or interest payments due on their CPP  investments increased steadily from 8 in February 2009 to 150 in August  2012, or about half of the institutions still in the program (see fig. 4). This  increase occurred despite the reduced program participation, so the  proportion of those missing scheduled payments has risen accordingly.

The number of institutions missing payments has stabilized in recent  quarters, but most of the institutions with missed payments had missed  them repeatedly. In particular, 133 of the 150 institutions that missed  payments in August 2012 had also missed payments in each of the  previous three quarters. Moreover, these 150 institutions had missed an  average of 7.3 additional previous payments, while 4 had never missed a  previous payment. Institutions can elect whether to pay dividends and  may choose not to pay for a variety of reasons, including decisions that  they or their federal and state regulators make to conserve cash and  maintain (or increase) capital levels. Institutions are required to pay  dividends only if they declare dividends, although unpaid cumulative  dividends generally accrue and the institution must pay them before  making payments to other types of shareholders, such as holders of  common stock.

In May 2012, Treasury announced a strategy to wind down its remaining  investments. The strategy includes three options that the department  says will protect taxpayer interests, promote financial stability, and  preserve the strength of the nation’s community banks. These options  include allowing banks to repurchase or restructure their investments or  selling Treasury-held stock through public auctions. In considering these  options, Treasury will need to balance the goals of protecting taxpayer- supported investments while expeditiously unwinding the program.  Treasury officials said that they would continue to evaluate the CPP exit  strategy, but added that they expected to continue using these options for  the foreseeable future.

The first option allows banks, with the approval of their regulators, to  repurchase from Treasury their preferred shares in full. Treasury points  out that this strategy has been used since 2009 and is one it expects  some banks to continue to use through late 2013. Under this option,  Treasury’s ability to exit the program largely depends on the ability of  institutions to repay their investments. Institutions will have to  demonstrate that they are financially strong enough to repay the CPP  investments in order to receive regulatory approval to exit the program.  Dividend rates will increase from 5 percent to 9 percent for remaining  institutions beginning in late 2013, a development that may prompt  institutions to repay their investments. If broader interest rates are low,  especially approaching the dividend reset, banks could have further  incentive to redeem their preferred shares.

A second option allows banks to restructure their investments, usually in  connection with a merger or a plan to raise new capital. With this option,  Treasury receives cash or other securities that generally can be sold  more easily than preferred stock. Treasury officials said that, as of early  October 2012, approximately 28 restructurings had occurred. The officials  expected a limited number of restructurings to continue, but added that  because Treasury’s investments were sometimes sold at a discount  during restructuring, they would approve the sales only if the terms  represented the best deal for taxpayers.

Under the third option, Treasury may sell its preferred stock through  public auctions. Treasury conducted the first such auction of CPP  investments in March 2012 and reported that it generated strong investor  interest. As of September 30, 2012, Treasury had conducted six auctions  resulting in the sale of 40 investments with total net proceeds of about  $1.3 billion. Treasury also reported that this option can be beneficial for  community banks that do not have easy access to the capital markets,  because it could attract new, private capital to replace the temporary  TARP support. Treasury expects this option to continue to be part of its  effort to wind down CPP. Thus far, Treasury has sold investments  individually, but noted that it might combine other investments, particularly  smaller ones, into pools. Whether Treasury sells stock individually or in  pools, the outcome of this option will depend largely on investor demand  for these securities.

section_title: The Financial Strength of CDCI Participants Will Affect When Treasury Terminates the Program
paragraphs: Treasury disbursed $570 million to its 84 CDCI participants and  completed funding the program in September 2010 (see fig. 5). As we  previously reported, CDCI is structured much like CPP, in that it has  provided capital to financial institutions by purchasing equity and  subordinated debt from them. No additional funds are available through  the program, as CDCI’s funding authority expired in September 2010. As  of September 2012, Treasury expects CDCI will cost approximately $200  million over its lifetime, less than half of the $570 million obligated to the  program. Officials stated that CDCI will have a lifetime cost, while CPP is  estimated to result in lifetime income, in part because CDCI provides a  lower dividend rate that increases the net financing cost to Treasury.  Also, unlike CPP, the program does not require warrants from  participating institutions that would have helped offset Treasury’s costs.  As of September 30, 2012, two CDCI participants have repaid Treasury  $2.85 million, and Treasury has received $22 million in dividend  payments from CDCI participants.

As with CPP, Treasury must continue to monitor the performance of CDCI  participants because their financial strength will affect their ability to repay  Treasury. According to Treasury officials, Treasury will continue to hold its  CDCI investments and has not made any disposition decisions about the  program. However, they said that when Treasury decides to exit the CDCI  program, it will need tools in place similar to those used by CPP  institutions to exit the CPP program. As of September 30, 2012, 5 of the  84 CDCI participants had missed at least one dividend or interest  payment, and 2 of the participants had paid accrued and unpaid  dividends after missing the initial scheduled payment date(s), according  to Treasury. While the continuing weak economy could negatively affect  distressed communities and the CDFIs that serve them, the program’s  low dividend rates may help participants remain current on payments.

When Treasury will exit CDCI is unknown, but the dividend rate that  program participants pay increases in 2018. However, Treasury officials  noted that the program was intended to be long term and said that they  believed the program was meeting its objective by providing long-term,  low-cost capital. CDCI institutions have an opportunity to keep CDCI  capital in their communities, which are usually moderate and low income,  for a longer time. Treasury officials indicated that, as with CPP  investments, Treasury’s current practice was to hold CDCI investments  but that this strategy could change, and Treasury could opt to sell its  CDCI shares.

section_title: Competing Goals and Market Conditions Have Affected Treasury’s Exit from GM and Ally
paragraphs: Since investing roughly $80 billion in the automotive industry, as of  September 30, 2012, Treasury had received more than $40 billion in  proceeds. Nevertheless, Treasury still held substantial investments in GM  and Ally Financial, which included 32 percent of GM’s common stock, 74  percent of Ally Financial’s common stock, and $5.9 billion of Ally  Financial’s mandatory convertible preferred stock (see fig. 6).

Treasury officials told us that they continued to monitor GM’s financial  condition as well as overall market and economic conditions as they  developed a divestment strategy for GM. In general, GM’s financial  condition has improved since the IPO, but the company continued to  address challenges with its European operations. Specifically, GM’s net  income rose 43 percent—from about $6.5 billion in 2010 to about $9.3  billion in 2011, with the company achieving 11 straight quarters of  profitability since its formation in July 2009. However, the company saw a  decline in net income in 2012—from about $8.5 billion in the first three  quarters of 2011 to about $5.1 billion in the first three quarters of 2012.  GM officials reported this decline was largely due to increased losses in  the company’s European Operations, a region where the automotive  industry as a whole struggles. The company continues to post losses in  Europe, with vehicle sales declining 7.4 percent between the first three  quarters of 2011 and the first three quarters of 2012. In contrast, GM’s  North American sales increased 3.2 percent over 2011 levels for that  same time period. The company has reported taking actions to help  restructure its European operations and expects financial results to  improve.

The company has also recently made a number of other changes in an  effort to improve its financial condition and flexibility. In June 2012, in an  effort to de-risk its pension plans and further strengthen its balance sheet,  GM announced that it would provide certain U.S. salaried retirees with a  continued monthly payment administered and paid by The Prudential  Insurance Company of America and others with a voluntary lump-sum  payment option, which it estimated would reduce its salaried pension  obligation by about $29 billion. In November 2012 GM announced plans  for its captive financing subsidiary, GM Financial, to acquire Ally  Financial, Inc.’s International Operations in 14 countries, which the  company expects to drive higher vehicle sales in China, Mexico, Europe  and Latin America. Also in November 2012, GM secured a new $11  billion revolving to help improve GM Financial’s financial flexibility.

In December 2012, two years after the GM IPO, Treasury announced that  it would sell 200 million or 40 percent of its remaining shares in the  company, and intends to sell the other remaining 300.1 million shares  through a pre-arranged written trading plan within the next 12 to 15  months, subject to market conditions. In May 2011, we reported that GM’s  share price would have to increase dramatically from current levels to an  average of more than $54 for Treasury to fully recoup its investment.  Because the December 2012 sale price of $27.50 per share is  considerably less than the breakeven level, GM’s shares will now have to  increase to roughly $72 per share, or more than double the average 2012  share price, for Treasury to fully recoup its investment (see fig. 7).

In addition to its outstanding investments in GM, Treasury remains  heavily invested in Ally Financial. According to Treasury officials, the  department continues to explore all potential options for divesting its  interest in Ally Financial, including public and private options such as a  possible IPO or selling its equity in a private transaction. However, since  we last reported on Ally Financial the company has undergone a number  of changes that could affect the timing of Treasury’s exit. For instance,  on May 14, 2012, Ally Financial’s mortgage subsidiary Residential  Capital, LLC, and certain of its subsidiaries, filed for Chapter 11  bankruptcy. The company is also in the process of selling its international  business, which includes auto finance, insurance, and banking and  deposit operations in Canada, Mexico, Europe, the United Kingdom,  China, and South America. According to Ally Financial, contracts for each  of these countries have been signed, and deal closings are expected to  occur in stages throughout the first half of 2013. Ally Financial reported  that these actions would improve the financial viability of the company  and increase the likelihood of repaying Treasury. Ally’s net income for the  first three quarters of 2012 has declined from the same period in 2011— decreasing from a positive $49 million in 2011 to a loss of $204 million in  2012. This loss is primarily attributable to charges related to the  Residential Capital, LLC, bankruptcy filing in the second quarter of  2012.

The challenges facing Ally Financial and reductions in the share prices of  common stock holdings in GM highlight how market conditions contribute  to the risks associated with AIFP and the variability of lifetime cost  estimates. The projected lifetime cost of AIFP has increased since 2010  and as of September 30, 2012, was estimated at $24.3 billion—about  $700 million more than in September 2011 and almost $10 billion more  than in September 2010. According to Treasury officials, Treasury  continues to balance its goals of exiting as soon as practicable and  maximizing taxpayer returns.

section_title: Treasury Sold Its Remaining AIG Shares
paragraphs: On December 11, 2012, Treasury announced that it agreed to sell all of  its remaining shares of AIG common stock, and on December 14, 2012,  announced that it had received payment from its final sale of AIG stock,  bringing to an end the government’s assistance to the company. Prior to  TARP, in September 2008 AIG received assistance in the form of a loan  from the Federal Reserve Bank of New York (FRBNY). In exchange, AIG  provided shares of preferred stock to the AIG Credit Facility Trust that  FRBNY created. These preferred shares were converted to common  stock and then transferred to the Treasury. In addition to this and other  non-TARP support, Treasury provided assistance to AIG in November  2008 through TARP by purchasing preferred shares that were also later  converted to common stock. In late January 2011, following the  recapitalization of AIG, Treasury owned 1.655 billion common shares in  AIG (1.092 billion TARP and 0.563 billion non-TARP) and a $20.3 billion  preferred interest in two special purpose vehicle subsidiaries of AIG.

In May 2011, Treasury began to sell its AIG shares. Since then and  through six offerings, Treasury has sold all of its shares of AIG common  stock, both TARP and non-TARP shares. The shares it sold in May 2011  and March 2012 to the public brought $29 per share; the shares it sold in  May and August of 2012 to the public brought $30.50 per share; and the  shares it sold in September and December 2012 to the public brought  $32.50 per share. The share price, on a weighted average basis, was  $31.18, exceeding Treasury’s break-even price of $28.73 per share on an  overall cost basis for both the TARP and non-TARP shares. At an  average price of $31.18 per share, the returns include about $34 billion  on the 1.092 billion TARP shares and $17.6 billion on the 563 million non- TARP shares—totaling over $51.6 billion in proceeds. (See table 2.)  While it has sold its remaining AIG common shares, Treasury continues  to hold warrants to purchase approximately 2.7 million shares of AIG  common stock.

Treasury received approximately $72.8 billion of proceeds and cancelled  $2 billion of its commitment, undrawn, on the AIG investments, exceeding  the $69.8 billion total Treasury commitment to assist AIG by  approximately $5 billion. As of December 2012, the total reflected the  $54.3 billion generated on Treasury’s common stock sales and AIG  repaid $20.3 billion on the preferred interests in two special purpose  vehicle subsidiaries of AIG. In addition, Treasury said that it received  $930 million in interest and participation rights on the special purpose  vehicle investments. Treasury’s returns from selling common stock have  been in addition to those realized by the returns of other assistance to  AIG. With AIG’s final repayment of all FRBNY assistance to the company  in 2012, FRBNY had realized returns in the form of interest, dividends,  and fees in excess of the assistance it provided AIG through a revolving  credit facility and several special purpose vehicles.

As of September 30, 2012, prior to the December 2012 sale of AIG shares.  Treasury lowered its expected lifetime cost from $24.3 billion to $15.3  billion for its TARP shares and increased its expected income from $12.8  billion to $17.6 billion for its non-TARP shares, changing what was an  expected net estimated cost of $11.5 billion to a net expected gain of $2.3  billion for assistance to AIG.

section_title: Treasury Expects Lifetime Income from Term Asset- backed Securities Loan Facility (TALF) and Plans to Exit the Program by 2015
paragraphs: The Federal Reserve established TALF in an effort to reopen the  securitization markets and improve access to credit for consumers and  businesses. As of September 30, 2012, Treasury is committed to  contributing as much as $1.4 billion to provide credit protection to FRBNY  for TALF loans should borrowers fail to repay and surrender the asset- backed securities (ABS) or commercial mortgage-backed securities  (CMBS) pledged as collateral. To date, Treasury has disbursed $100  million for start-up costs related to the FRBNY-established TALF special- purpose vehicle, TALF LLC (see fig. 8). TALF LLC receives a portion of  the interest income earned on TALF loans (known as excess interest  under the program) that can be used to purchase any borrower- surrendered collateral from FRBNY.

FRBNY stopped issuing new TALF loans in 2010.report that FRBNY TALF loan balances, which were $29.7 billion in  September 2010, had fallen to $11.3 billion as of September 30, 2011,  and to $1.5 billion as of September 26, 2012. Agency officials also  indicated that all TALF loans were current and that borrowers continued  to pay down their loans.

Treasury officials  Excess interest in TALF LLC grew by more than 30 percent between  October 2010 and September 2011, rising from $523 million to $685.6  million. Over the next year (September 2011 to September 2012), it grew  to $754.2 million. If the balance of excess interest in TALF LLC exceeds  the value of any surrendered collateral, Treasury may not need to  disburse any additional funds for the program and could instead realize  lifetime income because it will receive 90 percent of funds remaining in  TALF LLC after all obligations are repaid and the program ends. Further,  the equity that borrowers hold in TALF collateral has grown since TALF  loans were first issued. As of September 30, 2012, Treasury estimated  that TALF would result in a lifetime income of approximately $517 million.  Treasury officials told us in September 2012 that they did not have any  particular concerns about the CMBS market that would have an effect on  current TALF holdings, and that prices remained strong throughout 2012.  Despite these positive trends, the officials told us that FRBNY and  Treasury staff will continue to monitor market conditions and credit rating  agency actions that could affect TALF assets. As we have previously  reported, market value fluctuations could affect future results.

Treasury expects to exit TALF by 2015, although it does not have  complete control over its exit because its role in TALF is secondary to that  of the Federal Reserve. Treasury models loan repayments using TALF  loan terms and data provided by the Federal Reserve and projects  repayment schedules, collateral cash flows, prepayments, and  performance loss rates. Based on these analyses, Treasury expects that  the last TALF loan will be paid in 2015. No borrowers have surrendered  TALF collateral to date, and all loans are current. However, should TALF  LLC be required to purchase and manage TALF assets, Treasury could  be involved in TALF beyond 2015, as TALF assets may have maturity  dates that extend beyond the loan maturity dates.

section_title: The Investment Periods for PPIP Funds Have Terminated, and All PPIF Funds Have Begun Unwinding
paragraphs: Treasury created PPIP, partnering with private funds, to purchase  troubled mortgage-related assets from financial institutions. Treasury  provided the PPIFs with equity and loan commitments of approximately  $7.4 billion and $14.7 billion, respectively, but disbursed a total of $18.6  billion. PPIFs have finished their 3-year investment period, which started  at each fund’s inception date. There were nine PPIFs established through  PPIP, the first of which was liquidated in the first quarter of 2010 and the  last terminated in December 2012. PPIFs with terminated investment  periods can no longer draw money from Treasury or make new  investments under this authority, and Treasury has not granted approval  for any new draws under the PPIP program. With the investment  periods ended, PPIFs must begin unwinding their positions and  completely divest within 5 years, although Treasury can decide to extend  this period for up to 2 additional years for each PPIF. According to  Treasury, the PPIF liquidated in the first quarter of 2010 yielded Treasury  a profit of $20.1 million on its $156.3 million equity investments and the  PPIF whose investment period ended in September 2011 returned all of  its equity proceeds to Treasury and fully wound down its fund. Three  additional PPIFs have returned 100 percent of Treasury and private  investors’ equity investments in the fund with equity gains and fully repaid  Treasury’s debt. According to Treasury, these three funds have a small  amount of capital remaining to unwind their operations. The investment  periods for the remaining PPIFs have subsequently ended and thus have  begun to unwind.

According to Treasury, as of September 30, 2012, PPIFs had accessed  about 86 percent of the equity and debt available through Treasury and  private investors, and had repaid Treasury a total of $6.7 billion in debt  financing. In addition, since September 30, 2012, Treasury has received  around $5.5 billion of payments under PPIP. As of September 30, 2012,  Treasury estimates that PPIP will ultimately result in lifetime income of  about $2.4 billion (see fig. 9). As of November 5, 2012, the four PPIFs  that have sold all of their remaining investments and returned  substantially all of the proceeds have generated more than $1.4 billion in  realized gains and income on Treasury’s equity and warrant investments.  However, according to Treasury, the ultimate results will depend on a  variety of factors, including when PPIFs choose to divest and the  performance of the assets they hold.

Treasury officials said that their role while PPIFs were in their investment  periods was to follow the progress of each PPIF’s investment strategy  and the risks and target returns of the portfolios. In this role, Treasury  staff and contractors monitored compliance with PPIP terms. With the end  of the PPIFs’ investment periods, Treasury officials said that Treasury  would focus on the strategies PPIFs used to maintain and ultimately  divest themselves of their portfolios. Also, Treasury officials said that the  contractors hired to provide investment fund consulting and analysis of  PPIF portfolios would continue to provide such services in this  postinvestment period.

Current PPIP terms stipulate an exit by 2017.found in some other TARP programs, Treasury officials do not face the  same consideration of competing goals in exiting the program because  the terms of the program dictate when the PPIFs must wind down.  However, Treasury officials noted that PPIFs can liquidate at any time  before the exit date. Officials also noted that the program was designed to  discourage firms from keeping their investments outstanding longer than  needed by the PPIF fund managers after the investment period expired,  at which time PPIFs would no longer have access to debt financing from  Treasury, unless permitted by provisions within the loan agreement and  approved by Treasury. Now that the investment periods have terminated,  PPIFs must pay down their Treasury loans and make distributions to their  partners as the PPIFs receive proceeds from RMBS and CMBS  payments and dispositions. Officials noted that this program structure  created an incentive for PPIFs to sell their assets promptly once their  access to Treasury ended. The officials also said that they were not  concerned about any effects of PPIPs’ eventual winding down on  markets, as the 5-year period for unwinding would likely mitigate them.

section_title: Mortgage Programs Remain Active, and Oversight Has Shown Both Challenges and Improvements
paragraphs: To help meet EESA’s goals of preventing avoidable foreclosures and  preserving homeownership, Treasury allocated $45.6 billion in TARP  funds to three mortgage programs:

Making Home Affordable (MHA), which has several components,  including the Home Affordable Modification Program (HAMP);

Housing Finance Agency Innovation Fund for the Hardest Hit Housing  Markets (Hardest Hit Fund or HHF); and

Department of Housing and Urban Development’s (HUD) Federal  Housing Administration (FHA) Refinance of Borrowers in Negative  Equity Positions (FHA Short Refinance or FHASR).

The bulk of the funds allocated to TARP programs to help distressed  borrowers avoid foreclosure—$40.1 billion—had not yet been disbursed  as of September 30, 2012. The estimated lifetime cost for the mortgage  programs is $45.6 billion. Unlike for the programs discussed previously,  Treasury will continue to disburse TARP funds under the mortgage  programs for several more years. Specifically, homeowners have until  December 31, 2013, to apply for assistance under MHA programs, and  Treasury will continue to pay incentives for up to 5 years after the last  permanent modification begins. Treasury’s obligation under FHASR will  continue until September 2020. Unlike TARP expenditures under some  other programs, such as those that provided capital infusions to banks,  expenditures under these programs are generally direct outlays of funds  with no provision for repayment.
subsections: section_title: TARP-Funded Mortgage Programs Continue to Assist Homeowners, but Much of the Funding Remains Unspent
paragraphs: The centerpiece of Treasury’s MHA program is HAMP, which seeks to  help eligible borrowers facing financial distress avoid foreclosure by  reducing their monthly first-lien mortgage payments to more affordable  levels. Treasury announced HAMP (now called HAMP Tier 1) on  February 18, 2009. Generally, HAMP Tier 1 is available to qualified  borrowers who occupy their properties as their primary residences and  whose first-lien mortgage payment is more than 31 percent of their  monthly gross income. Treasury shares with mortgage holders or  investors the cost of lowering borrowers’ monthly payments to 31 percent  of monthly income for a 5-year period. In an effort to reach more  borrowers, Treasury established HAMP Tier 2, which servicers began  implementing in June 2012. HAMP Tier 2 is available for either owner- occupied or rental properties, and borrowers’ monthly mortgage  payments prior to modification do not have to exceed a specified  threshold. Treasury also provides incentive payments for modifications  under HAMP Tier 1 and HAMP Tier 2 to servicers and investors, and to  borrowers under HAMP Tier 1.

Treasury originally announced that up to 3 million to 4 million borrowers   However, Treasury reported that through  would be helped under HAMP. September 2012 only about 1.1 million permanent modifications had been  started.experienced a significant decline, as shown in figure 10. Since June 1,  2010, when Treasury began requiring all servicers to perform full income   Monthly activity peaked during the early part of 2010 and has  verification to determine a borrower’s eligibility for HAMP before offering a  trial modification, the monthly number of new trial modifications reported  by servicers has remained below 40,000. Monthly trial modification starts  during September 2012 were the lowest reported since the initial roll-out  of the program in 2009. Treasury has not yet published data on the  number of trial periods or permanent modifications started under HAMP  Tier 2, according to Treasury officials.

In addition to HAMP, Treasury has implemented a number of additional  MHA components that use TARP funds to augment or complement the  HAMP first-lien modification program:

Home Affordable Foreclosure Alternatives Program. The Home  Affordable Foreclosure Alternatives Program offers assistance to  homeowners looking to exit their homes through a short sale or deed- in-lieu of foreclosure. Treasury offers incentives to eligible  homeowners, servicers, and investors under the program. Through  September 2012, servicers reported completing about 74,000 short  sales and 1,900 deeds-in-lieu under the program.

Home Price Decline Protection Incentives. This program provides  investors with additional incentives to modify loans under HAMP on  properties located in areas where home prices have recently declined  and where investors are concerned that price declines may persist.  Through September 2012, Treasury had paid about $269 million to  investors in program incentives to support the HAMP modification of  more than 154,000 loans.

Principal Reduction Alternative (PRA). PRA requires servicers to  evaluate the benefit of principal reduction for mortgages that have a  loan-to-value ratio of 115 percent or more and that are not owned or  guaranteed by Fannie Mae or Freddie Mac. Servicers are required to  evaluate homeowners for PRA when evaluating them for a HAMP  first-lien modification but are not required to actually reduce principal  as part of the modification. Through September 2012, servicers  reported having started about 78,000 permanent modifications with  principal reductions under PRA.

Second Lien Modification Program. The Second Lien Modification  Program provides additional assistance to homeowners receiving a  HAMP first-lien permanent modification who have an eligible second  lien with participating servicers. When a borrower’s first lien is  modified under HAMP, participating program servicers must offer to  modify the borrower’s eligible second lien according to a defined  protocol. This assistance can result in a modification or even full or  partial extinguishment of the second lien. On February 16, 2012,  Treasury doubled the amount of incentives provided on second-lien  modifications that included principal reduction and became effective  on or after June 1, 2012. Through September 2012, servicers  reported starting about 97,000 second-lien modifications, of which  about 24,000 fully extinguished the second lien.

Government-insured or guaranteed loans (FHA-HAMP and RD- HAMP). FHA and the Department of Agriculture’s Rural Housing  Service (RHS) have implemented modification programs similar to  HAMP Tier 1 for FHA-insured and RHS-guaranteed first-lien mortgage  loans. Each of these programs results in loan modifications that  provide borrowers with an affordable monthly mortgage payment  equal to 31 percent of the homeowners’ monthly gross income and  requires borrowers to complete a trial payment plan before permanent  modification. If a modified FHA-insured or RHS-guaranteed mortgage  loan meets Treasury’s eligibility criteria, the borrower and servicer can  receive TARP-funded incentive payments from Treasury. Treasury  reported that there were nearly 9,100 permanent modifications started  that received Treasury FHA-HAMP incentives through September  2012. According to Treasury officials, servicers had reported only 11  modifications that qualified for Rural Development (RD)-HAMP  incentives as of September 30, 2012.

Treasury/FHA Second Lien Program (FHA2LP). Under this program,  Treasury provides incentive payments to servicers and investors if  they partially or fully extinguish second liens associated with an FHA  Short Refinance. Servicers can receive a one-time payment of $500  for each second lien extinguished under the program, and investors  are eligible for incentive payments based on the amount of principal  extinguished. According to Treasury, no second liens had been  extinguished and no incentive payments made under the  Treasury/FHA Second Lien Program as of September 30, 2012.

Treasury obligated $29.9 billion to MHA, of which nearly $4.0 billion had  been disbursed as of September 2012 (see fig. 11). Treasury estimated  that an additional $6.5 billion could be spent on incentives for HAMP  modifications and other MHA interventions that were already in effect as  of September 2012, assuming none of these modifications default. After  combining these potential incentive payments with incentives already  paid, Treasury estimated that $19.4 billion of the $29.9 billion remain  available for future modifications and other interventions.

In addition to the MHA program, Treasury has allocated $7.6 billion in  TARP funds for HHF, which seeks to help homeowners in 18 states hit  hardest by unemployment and house price declines (Alabama, Arizona,  California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan,  Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode  Island, South Carolina, and Tennessee) plus the District of Columbia.  States were chosen because they had experienced steep home price  declines, high levels of unemployment in the economic downturn, or both.  According to Treasury, each state housing agency gathered public input  to implement programs designed to meet the distinct challenges  homeowners in their state were facing. As a result, HHF programs vary  across states, but services offered often include mortgage payment  assistance for unemployed homeowners and reinstatement assistance to  cover arrearages (e.g., one-time payment to bring a borrower’s delinquent  mortgage current). Treasury reported that it had disbursed  approximately $1.5 billion to the states for the HHF program as of  September 2012. States reported having spent about $742 million  through September 2012 to help more than 77,000 homeowners since  the program began, and $199 million on administrative expenses.

Treasury has also allocated $8.1 billion in TARP funds to the FHA Short  Refinance program to enable homeowners whose mortgages exceed the  value of their homes to refinance into more affordable mortgages. This  opportunity allows borrowers who are current on their mortgage—or if  they are delinquent, who successfully complete a trial period—to qualify  for an FHA Short Refinance loan if the lender or investor writes off the  unpaid principal balance of the original first lien mortgage by at least 10  percent. Treasury entered into a letter of credit facility with Citibank in  order to fund up to $8 billion of any losses associated with providing FHA  Short Refinance loans. Treasury’s commitment extends until September  2020, and to the extent that FHA experiences losses on those refinanced  mortgage loans, Treasury will pay claims up to the predetermined  percentage after FHA has paid its portion of the claim. Treasury will also  pay a fee to the issuer of the letter of credit based on the amount of funds  drawn against the letter of credit and any unused amount. The terms of  the agreement cap the fee at $117 million. As of September 30, 2012,  FHA had insured 1,774 loans with a total face value of $307 million under  the refinance program. As of September 30, 2012, Treasury had paid  about $7.2 million in fees to Citibank, which issued the letter of credit.  Treasury also placed $50 million in a reserve account to cover any future  loss claims on these loans, although no funds have been disbursed for  loss claim payments.

section_title: Treasury Has Identified Both Implementation Challenges and Improvements in Processes Aimed at Enhancing Borrower Assistance
paragraphs: Through its monitoring of processes put in place to improve servicers’  communication with borrowers and resolution of disputes, Treasury has  identified some implementation challenges but has also found  improvements in performance. One process, which Treasury announced  in May 2011, requires large servicers participating in HAMP to identify a  “relationship manager” to serve as the borrower’s single point of contact  throughout the delinquency or imminent default resolution process,  effective September 1, 2011. By implementing this requirement, called  the single point of contact requirement, Treasury was seeking to enhance  communications between servicers and borrowers during the delinquency  resolution process.point of contact requirement, Treasury adopted compliance review  procedures to determine whether servicers (1) had established a single  point of contact in accordance with MHA requirements, (2) were  monitoring assignments and activities to verify that they were in  accordance with internal policies and MHA guidance, and (3) had created   To monitor servicers’ implementation of the single  written notices of assignments or changes and sent accurate, timely  information on them to borrowers. Following the effective date of  Treasury’s requirement, Treasury’s compliance agent, MHA-C, used  these procedures to assess servicers’ implementation of the single point  of contact requirement during dedicated compliance reviews, according to  Treasury.

These initial reviews revealed some initial challenges with implementing  the requirement, including delays in assigning relationship managers to  borrowers and poor communication of assignments and reassignments.  Servicers’ performance was reflected in the qualitative measures of  internal controls included in the servicer assessments that Treasury  publishes quarterly, according to Treasury. The reviews also identified  areas in which the servicers differed in their implementation of the  requirements, such as the precise timing of the assignment of relationship  managers. Treasury officials said that servicers have many options for  appropriately implementing the requirement, given the flexibility provided  in its guidance, and noted that servicers were making progress in  addressing the issues identified in the initial compliance reviews.  However, Treasury officials also stated that they were considering  whether to issue additional guidance to clarify the requirements and to  help ensure greater consistency across servicers.

Treasury put in place another process aimed at enhancing borrower  assistance: a case escalation process for resolving borrower inquiries and  disputes. In June 2010, we reported that it was unclear whether the  process that Treasury had established for resolving concerns about  HAMP eligibility determinations was effective. The escalation process in  place at that time lacked standard requirements for complaint tracking,  and Treasury had not clearly communicated the availability of the  escalation process through the HOPE Hotline to the borrower. In  November 2010, Treasury announced requirements for servicers to adopt  a standard process for resolving certain borrower MHA disputes—called  escalated cases—effective February 1, 2011. Treasury now requires that  servicers have procedures and personnel in place to provide timely and  appropriate responses to escalated cases. Escalated cases include but  are not limited to: allegations that the servicer did not assess the borrower for the  applicable MHA program(s) according to program guidelines;  inquiries regarding inappropriate program denials or the content of a  nonapproval notice; and disputes or inquiries about the initiation or continuance of a  foreclosure action in violation of program guidelines.

In addition, MHA Help and the HAMP Solution Center (collectively  referred to as the MHA support centers) can refer escalated cases to the  servicer on behalf of either borrowers or third parties assisting borrowers.  MHA Help, which is a team of specialists dedicated exclusively to working  with borrowers and servicers to resolve escalated MHA cases, receives  cases from borrowers who call the HOPE Hotline. A third party, such as a  housing counselor, may escalate a case through the HAMP Solution  Center.

In its capacity as the MHA program administrator, Fannie Mae staffs the  HAMP Solution Center and oversees vendors that staff MHA Help and  the HOPE Hotline, according to Treasury. In order to resolve a case  escalated through these support centers, the servicer must obtain the  concurrence of the center that escalated the case with the proposed  resolution. If the case cannot be resolved at the support center, it is  forwarded to Treasury, which works with the servicer to resolve the issue  Treasury has adopted procedures to monitor the performance of servicers  and borrower support centers in resolving escalated cases. Treasury  currently publicly reports on one servicer performance measure related to  escalations: the average number of days required to resolve escalated  cases involving loans not owned or guaranteed by Fannie Mae or Freddie  Mac. Treasury established a target of 30 calendar days or fewer  (including processing time by the support center). In the most recent two  quarters for which data were available (the second and third quarters of  2012), the nine largest MHA servicers achieved that target. In the two  prior quarters, one of these servicers did not achieve the target.

In addition to reporting on the timeliness of the escalation process,  Treasury conducts other reviews to monitor the program administrator’s  management of its vendors and the outcomes of the process. The  program administrator prepares weekly and monthly performance reports  for the HOPE Hotline and the MHA support centers. These reports  include case escalation information for the larger MHA servicers.

Treasury officials in the Office of Financial Agents and the  Homeownership Preservation Office review these reports with the  program administrator and, as necessary, its vendors. In addition,  Treasury reviews a sample of escalated case files monthly to ensure that  staff at the support centers are providing the services Treasury expects of  them. Staff from the Homeownership Preservation Office score the files— five from each support center—on seven criteria that indicate whether:  the resolution template was properly completed;  the full course of the resolution could be easily identified and  understood;  the case was resolved according to the escalation case process;

MHA policy and guidance were appropriately applied; engagement with the servicer led to timely closure of the case;  reasonable efforts had been made to reach the requestor and resolve  the inquiry; and  the support center representative demonstrated homeowner  advocacy.

Treasury began scoring escalated case files in January 2012, and  according to documents Treasury provided to us, the support centers’  scores improved substantially between January 2012 and June 2012.  Treasury officials said that they had provided training for staff of the  support centers to serve as advocates for homeowners and had provided  additional training for this purpose. The most notable improvement in the  support centers’ scores was in the area of demonstrating homeowner  advocacy. Treasury’s continued attention to resolutions of escalated  cases and the performance of the support centers and servicers is  instrumental in helping to ensure that eligible borrowers receive  appropriate assistance.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to Treasury for its review and comment.  In its written comments, reproduced in appendix IV, Treasury generally  concurred with our findings. We also provided relevant portions of the  draft report to Ally Financial and General Motors to verify the factual  information they provided about their companies and business trends.  Treasury, Ally Financial, and General Motors provided technical  comments that we have incorporated as appropriate.

We are sending copies of this report to the Financial Stability Oversight  Board, Special Inspector General for TARP, interested congressional  committees and members, and Treasury. The report also is available at  no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact  A. Nicole Clowers at (202) 512-8678 or clowersa@gao.gov for questions  about non-mortgage-related TARP programs, or Mathew Scire at   (202) 512-8678 or sciremj@gao.gov for questions about mortgage-related  TARP programs. 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 V.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives in this report were to examine the condition and status of  (1) nonmortgage-related Troubled Asset Relief Programs (TARP)  programs and (2) TARP mortgage programs, including Treasury’s efforts  to ensure that servicers are implementing two new requirements.

To assess the condition and status of all the nonmortgage-related  programs initiated under the TARP, we collected and analyzed data about  program utilization and assets held, as applicable, focusing primarily on  financial information that we had audited in the Office of Financial  Stability’s (OFS) financial statements, as of September 30, 2012. In some  instances we provided more recent, unaudited financial information. The  financial information includes the types of assets held in the program,  obligations that represent the highest amount ever obligated for a  program (to provide historical information on total obligations),  disbursements, and income. We also provide information on program  start dates, defining them based on the start of the first activity under a  program, and we provide program end dates, based on official  announcements or program terms from the Department of the Treasury  (Treasury). Finally, we provide approximate program exit dates—either  estimated by Treasury or actual if the exit already occurred—that reflect  the time when a program will no longer hold assets that need to be  managed. We also used OFS cost estimates for TARP that we audited as  part of the financial statement audit. In addition, we tested OFS’s internal  controls over financial reporting as they relate to our annual audit of  OFS’s financial statements. The financial information used in this report is  sufficiently reliable to assess the condition and status of TARP programs  based on the results of our audits of fiscal years 2009, 2010, 2011, and  2012 financial statements for TARP.

Further, we reviewed Treasury documentation such as program terms,  press releases, and reports on TARP programs and costs. Also, we  interviewed OFS program officials to determine the current status of each  TARP program, the role of TARP staff while most programs continue to  unwind, and to update what is known about exit considerations for TARP  programs. Other TARP officials we interviewed included those  responsible for financial reporting. Additionally, in reporting on these  programs and their exit considerations we leveraged our previous TARP  reports and publications from the Special Inspector General for TARP, as  appropriate. In addition, we did the following:

For the Capital Purchase Program, we used OFS’s reports to describe  the status of the program, including the amount of investments  outstanding, the number of institutions that had exited the program,  and the amount of dividends paid. In addition, we reviewed Treasury’s  press releases on the program and interviewed officials from  Treasury.

For the Community Development Capital Initiative, we interviewed  program officials to determine what exit concerns Treasury has for the  program.

To update the status of the Automotive Industry Financing Program  and Treasury’s plans for managing its investment in the companies,  we leveraged our past work and reviewed information on Treasury’s  plans for overseeing its remaining financial interests in General  Motors (GM) and Ally Financial, including Treasury reports. To obtain  information on the current financial condition of the companies, we  reviewed information on GM’s and Ally Financial’s finances and  operations, including financial statements and industry analysts’  reports. We also interviewed officials from Treasury.

To update the status of the American International Group, Inc. (AIG)

Investment Program (formerly the Systemically Significant Failing  Institutions Program), we reviewed relevant documents from Treasury  and other parties. For the AIG Investment Program, these documents  included Emergency Economic Stabilization Act of 2008 (EESA)  monthly 105(a) reports provided periodically to Congress by Treasury,  public information made available by the Federal Reserve Bank of  New York, and other relevant documentation such as AIG’s financial  disclosures and Treasury’s press releases. We also interviewed  officials from Treasury.

For the Term Asset-Backed Securities Loan Facility (TALF), we  reviewed program terms and requested data from Treasury about  loan prepayments and TALF LLC activity. Additionally, we interviewed  OFS officials about their role in the program as it continues to unwind.

To update the status of the Public-Private Investment Program, we  analyzed program quarterly reports, term sheets, and other  documentation related to the public-private investment funds. We also  interviewed OFS staff responsible for the program to determine the  status of the program while it remains in active investment status.

To obtain the final status for Small Business Administration (SBA) 7(a)

Securities Purchase Program that Treasury exited and for which  Treasury no longer holds assets that it must manage, we reviewed  Treasury’s recent reports and leveraged our past work.

To assess the status of TARP-funded mortgage programs and Treasury’s  efforts to ensure servicers are implementing the Making Home Affordable  (MHA) single point of contact and resolution of escalated cases  requirements, we reviewed Treasury reports, guidance, and  documentation and interviewed Treasury officials. Specifically, to  determine the status of Treasury’s TARP-funded housing programs, we  obtained and reviewed Treasury’s published reports on the programs and  servicer performance, as well as guidelines and related updates issued  by Treasury for each of the programs. In addition, we obtained  information from and interviewed Treasury officials about the status of the  TARP-funded mortgage programs, including the actions Treasury had  taken to address our prior recommendations. To assess the status of  Treasury’s efforts to ensure servicers are implementing the MHA single  point of contact requirement, we reviewed Treasury’s compliance review  procedures and review findings related to single point of contact for  several of the largest MHA servicers. To assess Treasury’s oversight of  the escalated case resolution process, we obtained documentation from  Treasury of its process for monitoring the MHA borrower support  centers—MHA Help and the Home Affordable Modification Program  (HAMP) Solution Center—and reviewed monthly performance reports.  We also interviewed Treasury officials about their oversight of the single  point of contact requirement and case escalation process.

We conducted this performance audit from September 2012 to January  2013 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: Appendix II: Treasury’s Termination of the TARP Small Business Administration 7(a) Securities Purchase Program
paragraphs: The SBA 7(a) Securities Purchase Program was launched as part of  TARP to help facilitate the recovery of the secondary market for small  business loans. Under this program, Treasury purchased securities that  comprised the guaranteed portion of SBA 7(a) loans.

These loans finance a wide range of small business needs, including  working capital, machinery, equipment, furniture, and fixtures. Treasury  originally invested $367 million in 31 SBA 7(a) securities between March  and September 2010. These securities comprised more than 1,000 loans  from 17 different industries, including retail, food services, manufacturing,  scientific and technical services, health care, and educational services.  Since Treasury began its purchases, the SBA 7(a) market has recovered  with new SBA 7(a) loan volumes returning to precrisis levels.

Treasury sold its eight remaining securities in the portfolio for  approximately $63.2 million in proceeds on January 24, 2012. That sale  marked the wind down of this TARP program. In total, Treasury recovered  $376 million through sales ($334 million) and principal and interest  payments ($42 million) over the life of the SBA 7(a) Securities Purchase  Program. After considering Treasury’s cost of financing, the SBA 7(a)  Securities Purchase Program resulted in an income of approximately $4  million to taxpayers on Treasury’s original investment of $367 million   (see fig. 12).

section_title: Appendix III: Treasury’s Office of Financial Stability Staffing and Use of Private Sector Contracting
subsections: section_title: Office of Financial Stability Staffing
paragraphs: As we noted in our 2012 annual TARP report, Treasury has addressed  several staffing challenges that we had previously identified, and the  overall staffing numbers, which began to decline in 2011, continued to  decrease through September 30, 2012 (see fig. 13). Treasury’s Office of  Financial Stability (OFS) used employees (including term employees) and  detailees from other Treasury offices and other federal agencies to meet  its workload requirements.

OFS’s overall staffing numbers declined from 198 in 2011 to 163 in 2012,  but staffing levels within individual OFS offices have fluctuated according  to the resources needed. Many OFS staff were not replaced because  their skill sets were no longer needed; for example, many staff in the  Chief Investment Office were not replaced as the investment programs  wound down.

According to Treasury officials, Treasury evaluates departing staff on a  case-by-case basis to determine whether a vacancy needs to be filled  and whether present staff can cover the departing staff’s responsibilities,  and only one new staff person was added in 2012. In addition, OFS  officials stated that OFS had detailed some of its staff to other Treasury  programs, as Treasury had exited several programs and no longer had  assets to manage for them and many of the other TARP programs were  winding down. Treasury officials continue to anticipate that staffing levels  in OFS offices will decrease over time, and some staff have moved or  may relocate to other parts of Treasury or other federal agencies.

Treasury also has addressed several turnover-related staffing issues. We  previously reported that a number of staff from the OFS leadership team  departed in 2010 and 2011, and in 2013 the terms of two other leadership  team members are scheduled to expire. As we previously reported, OFS  addressed this leadership challenge by replacing the Assistant Secretary of  Financial Stability with OFS’s former Chief Counsel in 2011 and replacing  departing OFS leaders with existing OFS staff members (generally to term  positions). We also reported that OFS had been addressing other staffing  issues, including implementation of its staffing plan.

section_title: Contracts and Other Agreements Supporting TARP Administration and Operations
paragraphs: Since TARP was established, Treasury has relied on the private sector to  assist OFS with TARP administration and operations. Treasury engages  with private sector firms through financial agency agreements, contracts,  and blanket purchase agreements. According to OFS procedures,  financial agency agreements are used for services that cannot be  provided with existing Treasury or contractor resources. Specifically,  Treasury has relied on financial agents for asset management,  transaction structuring, disposition services, custodial services, and  administration and compliance support for the TARP housing assistance  programs. In addition, Treasury uses TARP contracts for a variety of  legal, investment consulting, accounting, and other services and supplies.

Through September 30, 2012, Treasury had awarded 19 financial agency  agreements, 13 of which remained active, and awarded or used 131  contracts and blanket purchase agreements, of which about 40 percent  remained active. As shown in table 3, the obligated value of the financial  agency agreements and contracts totaled more than $900 million, with  most of the funding going for financial agency agreements. The increase  in obligations since 2010 is largely due to Treasury’s reliance on financial  agents to support the oversight of TARP assets and the continued  implementation of the housing programs over the last couple of years.  Also, 3 of its financial agency agreements for transaction structuring and  disposition services remained active.

The vast majority of the financial agency agreement obligations shown  above (approximately $525 million) are for Federal National Mortgage  Association (Fannie Mae) and Federal Home Loan Mortgage Corporation  (Freddie Mac), which provide administrative and compliance services,  respectively, for the TARP housing programs. The two largest contracts  are $35 million with PricewaterhouseCoopers, LLP for internal control  services and $17 million with Cadwalader, Wickersham & Taft, LLP for  legal services. Treasury also has encouraged small and minority- and  women-owned businesses to pursue opportunities for TARP contracts  and financial agency agreements. The majority of these businesses  participating in TARP are subcontractors.

section_title: Managing Potential Conflicts of Interest
paragraphs: Treasury has taken a number of actions since 2008, in part in response to  recommendations we made, to establish a structured system to manage  potential conflicts of interest involving its contractors and financial agents.  The system is based on a regulation Treasury issued in interim form in  2009 and final form in 2011 that prohibits retained entities from engaging  in activities that create organizational or personal conflicts of interest  without a waiver or mitigation under a Treasury-approved plan. The  regulation sets forth standards to address actual and potential conflicts  that may arise, establishes responsibilities for contractors and financial  agents in preventing conflicts from occurring, and outlines Treasury’s  process for reviewing and addressing conflicts.

Treasury has developed and implemented a multifaceted process to  manage and oversee potential conflicts of interest that is managed by  OFS’s Office of the Chief Compliance Officer. The process includes  reviewing proposed contracts and financial agency agreements,  approving contractor and financial agent mitigation plans, responding to  conflict-of-interest inquiries from contractors and financial agents,  verifying that contractors and financial agents are regularly certifying that  they are preventing or properly mitigating actual or potential conflicts of  interest, and preparing feedback reports that provide a snapshot of how  each contractor and financial agent is performing with respect to conflict- of-interest requirements. In addition, because the monitoring of conflicts  of interest is based to some degree on self-reported information that  contractors and financial agents submit, Treasury began conducting  onsite design and compliance reviews in 2011. These reviews are  designed to evaluate the effectiveness of contractors’ and financial  agents’ internal controls and procedures for identifying and addressing  conflicts of interest.

section_title: Appendix IV: Comments from the Department of the Treasury

section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts

section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Dan Garcia-Diaz; Gary Engel;  and William T. Woods (lead directors); Marcia Carlsen; Lynda Downing;  Harry Medina; Joseph O’Neill; John Oppenheim; Raymond Sendejas; and  Karen Tremba (lead assistant directors); Donald Brown; Emily Chalmers;  Rachel DeMarcus; Sarah Farkas; John Forrester; Christopher Forys;  Jackie Hamilton; Heather Krause; Risto Laboski; Aaron Livernois; John  Lord; Marc Molino; Dragan Matic; and Erin Schoening have made  significant contributions to this report.

section_title: Related GAO Products
paragraphs: Treasury Continues to Implement Its Oversight System for Addressing  TARP Conflicts of Interest. GAO-12-984R. Washington, D.C.:   September 18, 2012.

Troubled Asset Relief Program: Further Actions Needed to Enhance  Assessments and Transparency of Housing Programs. GAO-12-783.  Washington, D.C.: July 19, 2012.

Foreclosure Mitigation: Agencies Could Improve Effectiveness of Federal  Efforts with Additional Data Collection and Analysis. GAO-12-296.  Washington, D.C.: June 28, 2012.

Troubled Asset Relief Program: Government’s Exposure to AIG Lessens  as Equity Investments Are Sold. GAO-12-574. Washington, D.C.:   May 7, 2012.

Capital Purchase Program: Revenues Have Exceeded Investments, but  Concerns about Outstanding Investments Remain. GAO-12-301.  Washington, D.C.: March 8, 2012.

Management Report: Improvements Are Needed in Internal Control over  Financial Reporting for the Troubled Asset Relief Program.   GAO-12-415R. Washington, D.C.: February 13, 2012.

Troubled Asset Relief Program: As Treasury Continues to Exit Programs,  Opportunities to Enhance Communication on Costs Exist. GAO-12-229.  Washington, D.C.: January 9, 2012  Financial Audit: Office of Financial Stability (Troubled Asset Relief  Program) Fiscal Years 2011 and 2010 Financial Statements.   GAO-12-169. Washington, D.C.: November 10, 2011.

Troubled Asset Relief Program: Status of GAO Recommendations to  Treasury. GAO-11-906R. Washington, D.C.: September 16, 2011.

Troubled Asset Relief Program: The Government’s Exposure to AIG  Following the Company’s Recapitalization. GAO-11-716. Washington,  D.C.: July 28, 2011.

Troubled Asset Relief Program: Results of Housing Counselors Survey  on Borrowers’ Experiences with the Home Affordable Modification  Program. GAO-11-367R. Washington, D.C.: May 26, 2011.

Troubled Asset Relief Program: Survey of Housing Counselors about the  Home Affordable Modification Program, an E-supplement to   GAO-11-367R. GAO-11-368SP. Washington, D.C.: May 26, 2011.

TARP: Treasury’s Exit from GM and Chrysler Highlights Competing  Goals, and Results of Support to Auto Communities Are Unclear.   GAO-11-471. Washington, D.C.: May 10, 2011.

Management Report: Improvements Are Needed in Internal Control Over  Financial Reporting for the Troubled Asset Relief Program.   GAO-11-434R. Washington, D.C.: April 18, 2011.

Troubled Asset Relief Program: Status of Programs and Implementation  of GAO Recommendations. GAO-11-476T. Washington, D.C.:   March 17, 2011.

Troubled Asset Relief Program: Treasury Continues to Face  Implementation Challenges and Data Weaknesses in Its Making Home  Affordable Program. GAO-11-288. Washington, D.C.: March 17, 2011.

Troubled Asset Relief Program: Actions Needed by Treasury to Address  Challenges in Implementing Making Home Affordable Programs.   GAO-11-338T. Washington, D.C.: March 2, 2011.

Troubled Asset Relief Program: Third Quarter 2010 Update of  Government Assistance Provided to AIG and Description of Recent  Execution of Recapitalization Plan. GAO-11-46. Washington, D.C.:  January 20, 2011.

Troubled Asset Relief Program: Status of Programs and Implementation  of GAO Recommendations. GAO-11-74. Washington, D.C.:  January 12, 2011.

Financial Audit: Office of Financial Stability (Troubled Asset Relief  Program) Fiscal Years 2010 and 2009 Financial Statements.   GAO-11-174. Washington, D.C.: November 15, 2010.

Troubled Asset Relief Program: Opportunities Exist to Apply Lessons  Learned from the Capital Purchase Program to Similarly Designed  Programs and to Improve the Repayment Process. GAO-11-47.  Washington, D.C.: October 4, 2010.

Troubled Asset Relief Program: Bank Stress Test Offers Lessons as  Regulators Take Further Actions to Strengthen Supervisory Oversight.  GAO-10-861. Washington, D.C.: September 29, 2010.

Financial Assistance: Ongoing Challenges and Guiding Principles  Related to Government Assistance for Private Sector Companies.   GAO-10-719. Washington, D.C.: August 3, 2010.

Troubled Asset Relief Program: Continued Attention Needed to Ensure  the Transparency and Accountability of Ongoing Programs.   GAO-10-933T. Washington, D.C.: July 21, 2010.

Management Report: Improvements are Needed in Internal Control Over  Financial Reporting for the Troubled Asset Relief Program.   GAO-10-743R. Washington, D.C.: June 30, 2010.

Troubled Asset Relief Program: Treasury’s Framework for Deciding to  Extend TARP Was Sufficient, but Could be Strengthened for Future  Decisions. GAO-10-531. Washington, D.C.: June 30, 2010.

Troubled Asset Relief Program: Further Actions Needed to Fully and  Equitably Implement Foreclosure Mitigation Programs. GAO-10-634.  Washington, D.C.: June 24, 2010.

Debt Management: Treasury Was Able to Fund Economic Stabilization  and Recovery Expenditures in a Short Period of Time, but Debt  Management Challenges Remain. GAO-10-498. Washington, D.C.:   May 18, 2010.

Troubled Asset Relief Program: Update of Government Assistance  Provided to AIG. GAO-10-475. Washington, D.C.: April 27, 2010.

Troubled Asset Relief Program: Automaker Pension Funding and Multiple  Federal Roles Pose Challenges for the Future. GAO-10-492. Washington,  D.C.: April 6, 2010.

Troubled Asset Relief Program: Home Affordable Modification Program  Continues to Face Implementation Challenges. GAO-10-556T.  Washington, D.C.: March 25, 2010.

Troubled Asset Relief Program: Treasury Needs to Strengthen Its  Decision-Making Process on the Term Asset-Backed Securities Loan  Facility. GAO-10-25. Washington, D.C.: February 5, 2010.

Troubled Asset Relief Program: The U.S. Government Role as  Shareholder in AIG, Citigroup, Chrysler, and General Motors and  Preliminary Views on its Investment Management Activities.   GAO-10-325T. Washington, D.C.: December 16, 2009.

Financial Audit: Office of Financial Stability (Troubled Asset Relief  Program) Fiscal Year 2009 Financial Statements. GAO-10-301.  Washington, D.C.: December 9, 2009.

Troubled Asset Relief Program: Continued Stewardship Needed as  Treasury Develops Strategies for Monitoring and Divesting Financial  Interests in Chrysler and GM. GAO-10-151. Washington, D.C.:   November 2, 2009.

Troubled Asset Relief Program: Capital Purchase Program Transactions  for October 28, 2008, through September 25, 2009, and Information on  Financial Agency Agreements, Contracts, Blanket Purchase Agreements,  and Interagency Agreements Awarded as of September 18, 2009.   GAO-10-24SP. Washington, D.C.: October 8, 2009.

Troubled Asset Relief Program: One Year Later, Actions Are Needed to  Address Remaining Transparency and Accountability Challenges.   GAO-10-16. Washington, D.C.: October 8, 2009.

Debt Management: Treasury Inflation Protected Securities Should Play a  Heightened Role in Addressing Debt Management Challenges.   GAO-09-932. Washington, D.C.: September 29, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-1048T. Washington,  D.C.: September 24, 2009.

Troubled Asset Relief Program: Status of Government Assistance  Provided to AIG. GAO-09-975. Washington, D.C.: September 21, 2009.

Troubled Asset Relief Program: Treasury Actions Needed to Make the  Home Affordable Modification Program More Transparent and  Accountable. GAO-09-837. Washington, D.C.: July 23, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-920T. Washington,  D.C.: July 22, 2009.

Troubled Asset Relief Program: Status of Participants’ Dividend  Payments and Repurchases of Preferred Stock and Warrants.   GAO-09-889T. Washington, D.C.: July 9, 2009.

Troubled Asset Relief Program: 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.

Troubled Asset Relief Program: June 2009 Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-658. Washington, D.C.:  June 17, 2009.

Auto Industry: Summary of Government Efforts and Automakers’  Restructuring to Date. GAO-09-553. Washington, D.C.: April 23, 2009.

Troubled Asset Relief Program: March 2009 Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-504. Washington, D.C.:  March 31, 2009.

Troubled Asset Relief Program: Capital Purchase Program Transactions  for the Period October 28, 2008 through March 20, 2009 and Information  on Financial Agency Agreements, Contracts, and Blanket Purchase  Agreements Awarded as of March 13, 2009. GAO-09-522SP.  Washington, D.C.: March 31, 2009.

Troubled Asset Relief Program: March 2009 Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-539T. Washington,  D.C.: March 31, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-484T. Washington,  D.C.: March 19, 2009.

Federal Financial Assistance: Preliminary Observations on Assistance  Provided to AIG. GAO-09-490T. Washington, D.C.: March 18, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-474T. Washington,  D.C.: March 11, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-417T. Washington,  D.C.: February 24, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-359T. Washington,  D.C.: February 5, 2009.

Troubled Asset Relief Program: Status of Efforts to Address  Transparency and Accountability Issues. GAO-09-296. Washington, D.C.:  January 30, 2009.

Troubled Asset Relief Program: Additional Actions Needed to Better  Ensure Integrity, Accountability, and Transparency. GAO-09-266T.  Washington, D.C.: December 10, 2008.

Auto Industry: A Framework for Considering Federal Financial  Assistance. GAO-09-247T. Washington, D.C.: December 5, 2008.

Auto Industry: A Framework for Considering Federal Financial  Assistance. GAO-09-242T. Washington, D.C.: December 4, 2008.

Troubled Asset Relief Program: Status of Efforts to Address Defaults and  Foreclosures on Home Mortgages. GAO-09-231T. Washington, D.C.:  December 4, 2008.

Troubled Asset Relief Program: Additional Actions Needed to Better  Ensure Integrity, Accountability, and Transparency. GAO-09-161.  Washington, D.C.: December 2, 2008.


Question-summary annotations: questions: question: What assets did the Treasury manage in 2012?
answer: As of September 30, 2012, the Department of the Treasury (Treasury) was managing assets totaling $63.2 billion in nonmortgage-related Troubled Asset Relief Programs (TARP).

question: How was the Treasury dropping these  nonmortgage-related TARPs?
answer: As of this date, Treasury had exited 4 of the 10 nonmortgage-related programs, and in December 2012 Treasury announced the exit from a fifth program--the American International Group (AIG) Investment Program.
child_questions: question: How will the Treasury continue this process?
answer: Exactly when Treasury will exit the remaining five programs remains uncertain.

question: Why is the Treasury dropping these programs?
answer: Treasury has identified several factors that will affect its decisions.

questions: question: How do nonmortgage-related TARP programs and TARP-funded mortgage programs compare?
answer: Unlike the nonmortgage-related TARP programs, TARP-funded mortgage programs, which focus on mitigating foreclosures, are ongoing, and Treasury's oversight of new requirements designed to improve servicers' interactions with borrowers showed both challenges and improvements.

question: How has Treasury funded TARP?
answer: Treasury allocated $45.6 billion in TARP funds to three programs, including Making Home Affordable (MHA), but more than $40 billion of the funding has not yet been disbursed, and the programs have not reached the expected number of borrowers.

question: What is the main function of the MHA?
answer: The centerpiece of MHA is the Home Affordable Modification Program, which has provided about 1.1 million permanent modifications to borrowers.
child_questions: question: How has this program been regulated by the Treasury?
answer: To help ensure that homeowners receive appropriate assistance from servicers under this and other MHA programs, since September 2011 Treasury has required servicers to identify a "relationship manager" to serve as the homeowner's single point of contact throughout a delinquency or imminent default resolution process.

question: How did the GAO evaluate Treasury reviews?
answer: GAO found that Treasury's initial reviews of servicers' implementation of this requirement had identified some inconsistencies.

question: What happened regarding a Treasury oversight?
answer: However, oversight of a second requirement designed to improve the resolution of borrower inquiries and disputes (escalated cases) showed that the nine largest servicers had met the performance target. Treasury officials said that the MHA program administrator, Fannie Mae, handled oversight of the escalation process and the vendors who supported in keeping with Treasury's guidelines.

questions: question: What is the  Emergency Economic Stabilization Act of 2008?
answer: The Emergency Economic Stabilization Act of 2008 authorized Treasury to create TARP, a $700 billion program designed to restore liquidity and stability to the financial system and to preserve homeownership by assisting borrowers struggling to make their mortgage payments.
child_questions: question: How did this report affect the GAO?
answer: The act also required that GAO report every 60 days on TARP activities in the financial and mortgage sectors.

question: What does this report cover?
answer: This report examines the condition and status of (1) nonmortgage-related TARP programs and (2) TARP-funded mortgage programs and Treasury's efforts to better ensure that servicers are implementing as intended two new requirements designed to improve interactions with borrowers (the MHA single point of contact and resolution of escalated cases requirements).

question: What information did the GAO review for this report?
answer: To do this work, GAO analyzed audited financial data for various TARP programs; reviewed documentation such as program terms and agency reports on TARP programs; and interviewed Office of Financial Stability officials.