When EESA was signed on October 3, 2008, the U.S. financial system faced a severe crisis that has 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 depend 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 economy remains vulnerable, with unemployment higher than in the recent past. Globally, concerns about the stability of European banks and countries, especially Greece, escalated in 2011— demonstrating that problems remain in the global economy and financial markets. The passage of EESA resulted in a variety of programs supported with TARP funding. (See table 1.) Some of these programs have begun to unwind.overview of key dates for TARP implementation and the unwinding of some programs. TARP programs continue to wind down, and some programs have ended. Treasury has stated its goals for the exit process for many programs, but as we and others have reported, these goals at times conflict. Treasury has stated that when deciding to sell assets and exit TARP programs, it will strive to: protect taxpayer investment and maximize overall investment returns promote the stability of financial markets and the economy by bolster markets’ confidence to increase private capital investment, dispose of the investments as soon as it is practicable. For example, we previously reported that deciding to unwind some of its assistance to 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 they strove to balance these competing goals, but have no strict formula for doing so. Rather, they ultimately relied on the best available information in deciding when to start exiting this program. Moreover, Treasury’s ability to exercise control over the timing of its exit from TARP programs is limited in some cases. For example, Treasury will likely decide when to exit AIG based on market conditions but Treasury has less control over its exit from PPIP because the program’s exit depends on the timing of each public-private investment fund (PPIF) selling its investments. Treasury continues to face this tension in its goals with a number of TARP programs as they continue to unwind. Throughout this section we provide the status of each TARP program that remains open or still holds assets that need to be managed, including when the program will end (or stop acquiring new assets and no longer receive funding) and when Treasury will exit the program (or sell assets it acquired while the program was open). We also provide information on outstanding assets, as applicable—both the book value and the market value—as of September 30, 2011. Also included are the lifetime estimated costs for each program calculated by Treasury. Later in this report we discuss the reasons for recent changes in several of Treasury’s cost estimates between September 2010 and September 2011. While repayments and income from CPP investments have exceeded the original outlays, financial strength will determine when 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.received $208.1 billion in repayment and income from its CPP investments, exceeding the amount originally disbursed by $3.2 billion (see fig. 2). The repayment and income amount included $182.4 billion in repayments of original CPP investments, as well as $11.2 billion in dividends, interest, and fees; $7.6 billion in warrant income; and $6.9 billion in net proceeds in excess of costs. After accounting for writeoffs and realized losses on sales totaling $2.6 billion, CPP had $17.3 billion in As of September 30, 2011, Treasury had outstanding investments as of September 30, 2011. Treasury estimates lifetime income of $13 billion for CPP as of September 30, 2011. See Department of the Treasury, Troubled Asset Relief Program (TARP) Monthly 105(a) Report-September 2011 (Washington, D.C.: Oct. 11, 2011). investments. Another 52 percent, or 165 institutions, exited CPP by exchanging their securities under other federal programs: 28 through CDCI and 137 through the Small Business Lending Fund (see fig. 3).the remaining 8 percent of CPP recipients that exited the program, 13 went into bankruptcy or receivership, 11 had their securities sold by Treasury, and 2 merged with another institution. Also, according to data in a Treasury report, as of September 30, 2011, 390 of the original 707 institutions remained in CPP but accounted for only 8.4 percent of the original investments. Much of the $17.3 billion in outstanding investments was concentrated in a relatively small number of institutions. The largest single outstanding investment was $3.5 billion, and the top four outstanding investments totaled $6.8 billion. The top 25 remaining CPP investments accounted for $11.3 billion. 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 164 as of November 30, 2010, to 226 as of November 30, 2011. 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. These figures differ from the number of dividend or interest payments outstanding because some institutions made their payments after the end of the reporting month. CPP dividend and interest payments are due on February 15, May 15, August 15, and November 15 of each year, or the first business day subsequent to those dates. The reporting period ends on the last day of the calendar month in which the dividend or interest payment is due. institutions still in the program (see fig. 4).despite reduced program participation, and the proportion of those missing scheduled payments has risen accordingly. The number of institutions missing payments stabilized in recent quarters; however, most of these institutions had repeatedly missed payments. In particular, 119 of the 158 institutions that missed payments in November 2011 had also missed payments in each of the previous three quarters. Moreover, these 158 institutions had missed an average of 4.8 additional previous payments, and only 7 had never missed a previous payment. On July 19, 2011, Treasury announced that it had, for the first time, exercised its right to elect members to the boards of directors of two of the remaining CPP institutions. In considering whether to nominate directors, Treasury said that it would proceed in two steps. First, after an institution misses five dividend or interest payments, Treasury sends OFS staff members to observe board meetings. Second, once an institution has missed six dividend payments, Treasury decides whether to nominate a board member based on a variety of considerations, including what it learns from the board meetings, the institution’s financial condition, the function of its board of directors, and the size of its investment. The financial strength of the participating institutions will largely determine the speed at which institutions repay their investments and exit and the amount of total lifetime income. 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. The institutions’ financial strength will also be a primary factor in their decisions to make dividend payments, and institutions that continue to miss payments may also have difficulty exiting CPP. Moreover, dividend rates will increase for remaining institutions beginning in late 2013, up to 9 percent, which may prompt institutions to repay their investments as that dividend increase approaches. If broader interest rates are low, especially approaching the dividend reset, banks could have further incentive to redeem their preferred shares. Treasury will need to balance the goals of protecting taxpayer-supported investments while expeditiously unwinding the program. Treasury officials told us that Treasury’s practice was generally to hold, rather than sell, its CPP investments. As a result, Treasury’s ability to exit the program largely depends on the ability of institutions to repay their investments. However, Treasury officials noted that if warranted, Treasury could change its practice in the future and sell its investments. In an upcoming report, we plan to describe the financial condition of the remaining CPP institutions and compare them with institutions that already exited and those that never participated. Treasury has disbursed $570 million to its 84 CDCI participants, 28 of which had previously participated in CPP (see fig. 5). As we previously reported, CDCI is structured similarly to CPP in that it provides 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. While no CDFIs have repaid Treasury’s investment as of September 30, 2011, Treasury has thus far received $10 million in dividend payments from CDCI participants.