According to OFS, from the inception of TARP through March 9, 2011, it has disbursed $410 billion, and received more than $286 billion primarily from interest, dividends, and principal repayments on direct loans, repurchases of investments, and sales of investments. OFS reported $150 billion in gross direct loans and investments outstanding as of March 9, 2011 (see table 1). The reported net cost of TARP transactions from inception through September 30, 2010, was $18.5 billion; however, the ultimate cost of TARP will change as a result of (1) differences between the estimated values of the direct loans and investments as of September 30, 2010, and the amounts OFS will ultimately realize (as the assumptions and estimates underlying the valuation of these assets are inherently subject to substantial uncertainty), and (2) further disbursements, such as those relating to the housing programs which are not subject to repayment. Under CPP, Treasury invested $205 billion in over 700 financial institutions nationwide. Treasury provided capital to qualifying financial institutions from October 2008 to December 2009 by purchasing preferred shares or subordinated debentures. In return for its investment, Treasury received preferred stock or debentures, which provided for dividend payments (if declared by the issuer) or interest payments, as well as warrants. As table 1 shows, through March 9, 2011, Treasury had received about $171 billion in full and partial repayments. However, Treasury continues to face challenges in managing its remaining investments. For example, a growing number of CPP participants have missed scheduled dividend or interest payments. As of February 28, 2011, 189 institutions had not made at least one scheduled dividend or interest payment by the end of the reporting month in which the payments were due, for a total of 697 missed payments. Over the past 2 years, the number of CPP institutions missing dividend or interest payments by quarter has increased steadily from 8 in February 2009 to 152 in February 2011, or about 27 percent of existing CPP participants. Although the number of CPP institutions missing dividend payments is large and increasing, they represent a small share of the total dollar amount of original CPP investments. Generally, if an institution has not paid in full a total of six dividend or interest payments, Treasury has the right to elect two members to the institution’s board of directors. As of February 28, 2011, 32 institutions had at least six missed payments that remained unpaid, and Treasury had not yet exercised its right to nominate directors for these institutions. However, 31 CPP institutions that have missed at least five payments have agreed to have Treasury observers attend meetings of their boards of directors. As more institutions miss scheduled dividend payments, Treasury faces a significant challenge of determining the extent to which it will exercise its right to nominate board members. In August 2010, Treasury began addressing this challenge by publicly releasing information on its policies and procedures for nominating board members to these institutions. These plans include using OFS staff to observe board meetings of institutions missing at least five dividend or interest payments and using a variety of considerations—such as an institution’s financial condition and function of its board of directors—to decide whether to nominate a board member. In addition, in order to protect its interests in CPP investments and promote financial stability, Treasury has conducted a limited, but growing, number of exchanges and dispositions. Over the last 2 years, Treasury has restructured the assistance provided to 16 CPP participants by swapping its preferred stock for other forms of equity securities or selling the preferred stock to new investors involved in a merger or capital restructuring with a CPP institution. OFS finalized policies and procedures governing exchanges and dispositions of TARP securities, including CPP investments, in October 2009. OFS stated that it would consider various factors when assessing an institution’s proposal for an asset exchange, including the impact on the institution’s capital, the possible impact on Treasury’s position relative to holders of similar securities, the U.S. government’s overall economic position, and whether any premiums paid over market prices are reasonable and consistent with similar transactions in the marketplace. Through February 2011, Treasury had received about $171 billion in full and partial repayments from 146 institutions, including 28 institutions that exchanged $363 million of their CPP investments for investments under Treasury’s CDCI program. However, questions about the health of smaller banks continue, and small institutions participating in CPP may face challenges in fulfilling the terms needed to exit the program. According to Treasury data, 75 percent of the total dollar amount of CPP investments in institutions under $10 billion in assets remains outstanding compared to only 10 percent for investments in institutions over $10 billion. Our recent report on CPP identified weaknesses in Treasury’s monitoring of regulators’ decisions to approve or deny requests to repay CPP investments. The American Recovery and Reinvestment Act of 2009 included provisions modifying the terms of CPP repayments to require that Treasury allow any institution to repay its CPP investment subject only to consultation with the appropriate federal bank regulator. Treasury officials indicated that, as a result of these changes, they had not provided guidance or criteria to regulators on deciding when to allow institutions to repay CPP investments and had not collected information on the reasons for these decisions. However, according to Treasury, it helped facilitate meetings among the regulators in the spring of 2009 at which they discussed standards for permitting TARP recipients to repay. Bank regulatory officials said they used existing supervisory procedures that were generally applicable to capital reductions as a basis for reviewing CPP repurchase requests. In our recent report, we found that while the decision ultimately lies with the regulators, without collecting information on or monitoring regulators’ decisions, Treasury had no basis for determining whether decisions involving similar institutions were being made consistently and, thus, whether CPP participants were being treated equitably. Further, absent information on why regulators made repayment decisions, Treasury cannot provide feedback to regulators. Accordingly, we recommended that Treasury periodically collect and review certain information from bank regulators on the analysis and conclusions supporting their decisions on CPP repayment requests and provide feedback for the regulators’ consideration on the extent to which regulators are evaluating similar institutions consistently. In its response, Treasury stated that it would consider ways to address the objectives of our recommendations while also noting the constraints presented by the law and principles of regulatory independence. TALF provided loans to private investors to purchase asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) to encourage the issuance of new securitizations and provide liquidity for new consumer and business loans. To assist in this effort, Treasury provides credit protection for TALF. TALF made about $71 billion in loans from March 2009 through June 2010, with most of them secured by credit card ABS, auto loan ABS, legacy CMBS, and student loan ABS. According to the Federal Reserve, more than half of these loans have been repaid. Moreover, Treasury has not had to disburse any TARP funds to cover losses from unpaid loans. However, until all loans are repaid to FRBNY, it is important for Treasury to continue to monitor TALF to anticipate future needs for credit support. Treasury has addressed concerns that we raised about Treasury’s role in TALF, including monitoring risks related to commercial mortgage-backed securities, formalizing the decision-making process with the Federal Reserve, and conducting an assessment of how to track and report on assets that might be surrendered. From December 2008 through December 2009, Treasury announced $86.3 billion in funding available to help stabilize the auto industry and disbursed $79.7 billion of this funding, including (1) about $62 billion to fund Chrysler and GM while they restructured, (2) about $16.3 billion to provide capital assistance to Ally Financial, and (3) $1.5 billion to a special purpose vehicle (SPV) created by Chrysler Financial. In return for its assistance to Chrysler and GM, Treasury received 9.85 percent equity in the reorganized Chrysler, 60.8 percent equity and $2.1 billion in preferred stock in the reorganized GM, and $13.8 billion in debt obligations between the two companies. In return for its investment in Ally Financial, Treasury received preferred shares equaling ownership of more than half of Ally Financial by the end of 2009 and almost three-quarters by the end of 2010. As of March 9, 2011, approximately $29.5 billion had been repaid and Treasury owned 33.3 percent equity in GM, 9.2 percent in Chrysler, and 73.8 percent in Ally. A substantial portion of these repayments come from GM, via its initial public offering (IPO). In total, Treasury sold over 412 million of its shares in GM’s IPO, for which it received $13.5 billion in In March 20 net proceeds to repay the government’s initial investment. Treasury sold $2.7 billion of trust preferred securities in Ally Financial. Since emerging from bankruptcy in the summer of 2009, Chrysler and GM have shown signs of progress in returning to profitability; however, their ability to fully repay the AIFP debt and equity investments depends on a variety of factors, which will require Treasury’s ongoing oversight. One sign of progress is that vehicle sales increased substantially for both companies in January and February of 2011 compared to the prior year (23 percent and 49 percent for GM; 23 percent and 13 percent for Chrysler). In addition, in 2010 both companies released financial statements that, according to Treasury officials, exceeded Treasury’s projections for revenues, operating earnings, and cash flows. Also, GM held an IPO in late 2010 and Chrysler expects to hold an IPO in 2011. Nevertheless, while GM’s and Chrysler’s financial conditions have improved, each faces challenges that could affect their financial future.