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. 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. 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. 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.