As of March 27, 2009, Treasury had disbursed $303.4 billion of the $700 billion in TARP funds (see table). Most of the funds (about $199 billion) went to purchase preferred shares of 532 financial institutions under the Capital Purchase Program (CPP)—Treasury’s primary vehicle under TARP for stabilizing financial markets. Treasury has continued to improve the integrity, accountability and transparency of TARP. For example, it recently expanded monthly surveys of the largest institutions’ lending activity to cover all CPP participants, as GAO recommended. These surveys should provide additional important information about how the capital investments are impacting participants’ lending activities and capital levels. During this period, Treasury has also taken some steps to improve its monitoring of compliance with the terms of its existing agreements, but has yet to hire asset managers to manage its growing portfolio of assets. Treasury officials told us that they still plan to hire asset managers, whose primary role will be to provide market advice about the portfolio, but who also will help monitor dividends and stock purchase limitations. They noted that asset managers will have a limited role in the area of executive compensation. In the interim, Treasury has developed a process to ensure that institutions are complying with dividend, stock repurchase, and executive compensation restrictions. Treasury relies on participants’ representations and warranties articulated in the agreements, and if Treasury finds reason to believe that these representations cannot be relied upon, it can pursue available remedies for any false representations. At this point, Treasury has not taken steps to verify this information or require the institutions to provide any additional documentation. As recommended in our December 2008 report, we continue to believe that Treasury should develop a formal system to help ensure compliance with the agreements and leverage the oversight activities of the bank regulators by having them include compliance with the agreements as part of their ongoing examinations. This type of compliance activity is generally consistent with ensuring the safety and soundness of institutions; the regulators previously told us they are taking steps to build such oversight into their examination procedures. Without a consistent oversight approach, Treasury runs the risk of getting inconsistent or incomplete information from the regulators. OFS had received approximately $2.9 billion in dividends through March 20, 2009, from its investments in CPP and certain other programs. Approximately 20 percent of possible dividends during the period were not declared and, therefore, not paid. This information about the returns on Treasury’s investments has not been shared with Congress and the public. We recommended that, to improve transparency, Treasury should report publicly the monies, such as dividends, paid to it by TARP participants. By not sharing this information, Treasury is missing an opportunity to provide information about the returns it is receiving on its investments. Treasury has also continued to take steps to articulate a more clearly defined vision for TARP; and, in February 2009, it provided its strategy for using its remaining funds. This strategy identified the existing problems and how the various programs would attempt to address them. Specifically, Treasury announced the Financial Stability Plan, which outlines a set of measures to address the financial crisis and restore confidence in the U.S. financial and housing markets. The plan established six components: Capital Assistance Program; Public-Private Investment Fund; Consumer and Business Lending Initiative; Small Business and Community Lending Initiative; the Affordable Housing Support and Foreclosures Prevention Plan; and Transparency and Accountability Agenda. While the initial plan provided a broad vision and strategy, in the subsequent weeks, Treasury provided additional details for the various components of the program. In particular, it has announced its plans to participate in the purchase of troubled assets through public-private partnerships and launched a homeownership protection program, both activities consistent with the original plans for TARP. Given that only 60 days have passed since our last report, we acknowledge the significance of these accomplishments. Yet, Treasury continues to get questions about TARP and what OFS is doing, which raises questions about the effectiveness of its existing communication strategy. While Treasury’s strategy has largely been one of posting information to its Web site, press releases, speeches, testimonies, and ad hoc outreach to Congress, it continues to face ongoing communication challenges. Given the complexity of the issues involved and the heightened public scrutiny, an effective communication strategy continues to be critical, but Treasury has yet to develop a means of regularly and routinely communicating its activities to relevant congressional committees, members, the public, and other critical stakeholders. An effective communication strategy should, among other things, build understanding and support for the program through regular and routine outreach, including confidential member briefings; integrate communications and operations by making communication integral to the program; and increase the impact of communication tools, such as electronic and print media and video. Given that the President’s proposed budget contemplates additional funding, an effective communication strategy is critical for ensuring the support necessary to obtain the funding. Therefore we recommended in our March 2009 report that Treasury develop a communication strategy that includes building understanding and support for the various components of the program and suggested specific actions, such as hiring a communications officer, integrating communications into TARP operations, and scheduling regular and ongoing contact with congressional committees and members, among other actions. Treasury has taken appropriate actions to bolster the conditions or requirements for assistance that is deemed exceptional, but certain assistance may require that it go farther to help repair damage caused to the program. Controversies about the actions of some TARP participants continue to create issues for the program, in general, and AIG, in particular. While Treasury has announced $70 billion dollars in assistance to AIG—more assistance than has been provided to any other single institution to date—it has yet to disperse the up to $30 billion of additional assistance or finalize the terms under which the assistance will be provided. Therefore, Treasury has the ability to further improve the integrity and accountability associated with this additional assistance, announced in March 2009. Based on our previous work on government assistance to the private sector, as well as the Treasury Secretary’s position, as articulated in the Financial Stability Plan, that “government support must come with strong conditions,” Treasury has an opportunity to take additional steps to strengthen its agreement with AIG by requiring AIG to seek concessions from management, employees, and counterparties before the agreement is finalized. For example, Treasury could require that AIG seek to renegotiate contracts with its employees, as appropriate, such as those related to the retention bonuses provided to AIG Financial Products and existing counterparties that would face substantial losses were AIG to have its credit downgraded or fail. While we understand that Treasury is making an investment in AIG, Treasury’s failure to act in this instance could cause additional harm to the program’s reputation and impair its ability to seek additional funding for the program if it were to need it in the future. We recommended in our March 2009 report that Treasury require that AIG seek to renegotiate existing contracts with management, employees, and counterparties, among others, as appropriate, as it finalizes its agreement for the up to $30 billion in additional assistance, announced on March 2, 2009. Following the announcement of Treasury’s Homeownership Affordability and Stability Plan, in March 2009, Treasury released information on its Making Home Affordable Program. One of its components—the Home Affordable Modification Program (HAMP)—will use $50 billion in TARP funds to modify mortgages. According to OFS officials, Fannie Mae and Freddie Mac will provide an additional $25 billion for a total of $75 billion to assist up to 4 million homeowners in order to avoid potential foreclosure. The Making Home Affordable program also includes a non- TARP funded initiative to help up to 4 million to 5 million homeowners refinance loans owned or guaranteed by Freddie Mac and Fannie Mae at current market rates. According to Treasury, this initiative could help homeowners save thousands of dollars in annual mortgage payments. Treasury worked with other agencies to estimate the cost and number of borrowers that would be eligible for loan modifications under HAMP and to design program parameters. On March 19, 2009, in order to reach out to borrowers, Treasury launched a Making Home Affordable Web site, which, among other things, provides program, eligibility, and housing counselor information. While the basic structure of HAMP has been announced, as of March 23, 2009, Treasury had not specified several components of the program, including a system of internal controls over TARP funds used to make loan modifications. According to Treasury, it plans to put in place such a system of internal control by the time the first payments are due to servicers. In addition, as of March 20, 2009, Treasury had not provided specific information on incentive payments, which servicers and mortgage holders/investors would be eligible for under HAMP. We will continue to monitor the design and implementation of this program, with a particular focus on the empirical basis for HAMP and the structure and effectiveness of its system of internal control. Treasury also established the Auto Industry Financing Program (AIFP) in December 2008 to prevent a disruption of the domestic automotive industry that would pose systemic risk to the nation’s economy. Under this program, Treasury has lent $13.4 billion to General Motors (GM) and $4 billion to Chrysler to allow the automakers to continue operating while working out details of their plans to become solvent, such as achieving concessions from stakeholders. The loans were designed to allow the automakers to operate through the first quarter of 2009 with recognition that, after that point, GM and Chrysler would need additional funds or have to take other steps, such as an orderly bankruptcy. As required by the terms of their loan agreements, GM and Chrysler submitted restructuring plans to Treasury in February that describe the actions the automakers will take to become financially solvent. Because of the continued sluggish economy and lower than expected revenues, GM and Chrysler are requesting an additional $16.6 billion and $5 billion in federal financial assistance, respectively.