To determine the nature and purpose of TARP activities from March 27, 2009, through June 12, 2009, unless noted otherwise, and the status of actions taken in response to our recommendations from our March 2009 report, we reviewed documents from OFS that described the amounts, types, and terms of Treasury’s purchases of senior preferred stocks, subordinated debt, and warrants under the Capital Purchase Program (CPP). We also reviewed documentation and interviewed officials from OFS who were responsible for approving financial institutions to participate in CPP and overseeing the repurchase process for CPP preferred stock and warrants. Additionally, we contacted officials from the four federal banking regulators—the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), and the Office of Thrift Supervision (OTS)—to obtain information on their process for reviewing CPP applications, the status of pending applications, their process for reviewing preferred stock and warrant repurchase requests, and their examination process for reviewing recipients’ lending activities and compliance with TARP requirements. To update the status of the Targeted Investment Program (TIP), the Systemically Significant Failing Institutions Program (SSFI), and the Automotive Industry Financing Program (AIFP), we reviewed relevant documents and interviewed OFS officials about these programs. We also met with Federal Reserve officials to discuss the stress test methodology and results for the 19 largest U.S. bank holding companies and reviewed related documents relevant to the Capital Assistance Program (CAP). To provide an update on the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF) and its efforts related to small business securitizations—and in consideration of GAO’s statutory limitations on auditing certain functions of the Federal Reserve—we reviewed publicly available information on the Web sites of the Federal Reserve and the Federal Reserve Bank of New York that had been made available since our March 2009 report. We also interviewed officials in OFS for updates to TALF. For updates to Public Private Investment Program (PPIP) and small business efforts related to its Consumer and Business Lending Initiative, we reviewed agency documentation and interviewed Treasury and FDIC officials. For updates on the Small Business Administration (SBA) efforts related to improving credit and securitization markets for small businesses, we relied on previously issued GAO work. To determine Treasury’s progress in developing an overall communications strategy for TARP, we assessed Treasury’s activities based on GAO reports on effective communications. We also accessed www.financialstability.gov—Treasury’s new Web site for communication of TARP-related strategies—through June 4, 2009. Further, we interviewed officials from OFS and Treasury’s Office of Public Affairs to determine what steps Treasury had taken to coordinate communications with the public and Congress. To determine the status of OFS’s efforts to hire staff to administer TARP duties, we reviewed OFS’s organizational chart, documents on staff composition and workforce planning, Treasury’s most recent budget proposal submission to the Office of Management and Budget (OMB), and OFS vacancy announcements posted on www.financialstability.gov and www.USAjobs.gov from March 31, 2009, to June 8, 2009. We also reviewed our prior work on human capital flexibilities and strategic workforce planning to assess OFS’s performance in these areas. In addition, we met with a variety of Treasury and OFS officials to discuss the staffing levels of OFS offices including vacancies, their processes for recruiting employees with the skill sets and competencies needed to administer TARP, steps taken to find permanent replacements to fill key leadership positions, and the extent of pay comparability challenges. We also met with officials from the Office of Personnel Management to discuss their coordination with Treasury in establishing hiring flexibilities and other tools to staff OFS. To assess OFS’s process for vetting employees’ potential conflicts of interest, we reviewed information from Treasury’s databases used to track submission and reviews of Treasury employees’ confidential and public financial disclosure reports. Specifically, we reviewed information in the databases for 64 OFS employees hired as of April 23, 2009. Of these, 56 were permanent employees required to submit confidential financial disclosure reports and 8 were senior-level officials required to submit public disclosure reports. In order to determine the reliability of the information provided in the databases, we interviewed Treasury officials and performed basic tests on the data. We determined that the information provided for these 64 employees was sufficiently reliable for our purposes. We also reviewed standard operating procedures that Treasury developed to manage the submissions and reviews of its employees’ financial disclosure reports and new internal operating procedures developed specifically for reviewing OFS employees’ confidential financial disclosure reports. In coordination with GAO experts on federal ethics laws and regulations, we reviewed information provided by 15 senior-level OFS officials in public financial disclosure reports and identified any potential conflicts meriting additional discussion with Treasury ethics counsel. In addition, we met with Treasury and OFS officials to discuss their reviews of financial disclosure reports and the training provided to OFS staff on the laws and regulations pertaining to ethical conduct in the federal workplace, including those related to conflicts of interest. We met with officials from the Office of Government Ethics (OGE) to discuss pertinent ethics regulations that applied to Treasury and reviewed their guidance on ethical standards of conduct for employees. We also reviewed reports published by Treasury’s Office of the Inspector General describing conflicts of interest incidents and their resolution. To assess OFS’s use of contractors and financial agents to support TARP administration and operations for the period of March 14 through June 1, 2009, we reviewed information from Treasury for (1) new financial agency agreements, contracts, blanket purchase agreements, and interagency agreements; and (2) task orders, modifications, and amendments involving ongoing contracts and agreements. We analyzed this information, in part, to identify small or minority- and women-owned prime contractors and subcontractors providing TARP services and supplies. To report OFS expenses for contracts and agreements, we obtained information from the OFS Chief Financial Officer. To identify the extent to which federal banking regulators use contractors to support their TARP activities, we obtained information from FDIC, Federal Reserve, OCC, and OTS. To assess the status of OFS progress in developing a final TARP conflicts-of- interest rule and responding to our prior recommendations to (1) complete reviews of vendor conflicts-of-interest mitigation plans to conform with the interim rule and to (2) issue guidance requiring key communications and decisions be documented, we interviewed officials from Treasury and reviewed applicable documents. To assess the status of internal controls related to TARP activities and the status of TARP’s consideration of accounting and reporting topics, we reviewed documents provided by OFS and conducted interviews and made inquiries with officials from OFS, including the Chief Financial Officer, Deputy Chief Financial Officer, Deputy Chief Risk Officer, Cash Management Officer, Director of Internal Controls, and their representatives. To evaluate selected internal control activities related to the CPP, AIFP, and SSFI programs, we designed tests using OFS’s process flows, narratives, risk matrices, and high-level operational procedures. As part of our ongoing work, we completed the following additional activities: For CPP, we tested certain internal control activities related to dividend payments received through June 12, 2009, from institutions included in our previous sample of 45 unique preferred stock purchase transactions for the four months ended January 31, 2009. To make that selection, we used a monetary unit sampling (probability proportionate to size) methodology. We also tested dividends received through June 12, 2009, for TIP, Asset Guarantee Program (AGP), and AIFP. For SSFI, we tested selected control activities, including approvals, reviews, and closing documentation, for the American International Group Inc. (AIG) restructuring. The documentation that we reviewed included an exchange agreement and purchase agreement executed on April 17, 2009. For AIFP, we tested controls over the (1) authorization and execution of the initial General Motors Corporation (GM) and Chrysler LLC (Chrysler) agreements (executed on December 31, 2008, and January 2, 2009, respectively), (2) funding process, (3) receipt of promissory notes and securities, (4) disbursements made by Treasury under the agreements, and (5) receipts of interest and principal. In addition, we verified that the loan amounts disbursed to and interest received from GM and Chrysler were consistent with the terms of the agreements. Finally, in our initial report under the mandate, we identified a preliminary set of indicators on the state of credit and financial markets that might be suggestive of the performance and effectiveness of TARP. We consulted Treasury officials and other experts and analyzed available data sources and the academic literature. We selected a set of preliminary indicators that offered perspectives on different facets of credit and financial markets, including perceptions of risk, cost of credit, and flows of credit to businesses and consumers. We assessed the reliability of the data upon which the indicators were based and found that, despite certain limitations, they were sufficiently reliable for our purposes. To update the indicators in this report, we primarily used data from Thomson Datastream—a financial statistics database. As these data are widely used, we conducted only a limited review of the data but ensured that the trends we found were consistent with other research. We also relied on data from Inside Mortgage Finance, Treasury, the Federal Reserve, the Chicago Board Options Exchange, and Global Insight. We have relied on data from these sources for past reports and determined that, considered together, these auxiliary data were sufficiently reliable for the purpose of presenting and analyzing trends in financial markets. The data from Treasury’s survey of lending to the top 21 CPP recipients (as of March 31, 2009) are based on internal reporting from participating institutions, and the definitions of loan categories may vary across banks.