Since TARP was authorized, Treasury has implemented a range of programs aimed at stabilizing the financial system and preserving homeownership. As of June 30, 2010, it had disbursed $385 billion for TARP loans and equity investments, and Treasury has already recouped some of these disbursements (table 1). As of June 30, 2010, Treasury had received almost $25 billion in dividend and interest payments and warrant repurchases and more than $198 billion in repayments. Bank capital programs. Bank capital programs authorized under TARP, such as CPP, TIP, and the Capital Assistance Program (CAP), were established to help stabilize the financial system and ensure the flow of credit to businesses and consumers. Treasury is no longer disbursing funds through these programs because according to Treasury, they have largely achieved their goals of both stabilizing the financial system and individual institutions. CPP was intended to restore confidence in the banking system by increasing the amount of capital in the system. Treasury provided capital to qualifying financial institutions by purchasing preferred shares and warrants or subordinated debentures. Under the CPP, Treasury disbursed about $205 billion to 707 financial institutions nationwide from October 2008 through December 2009. Treasury has received about $147 billion in repayments and about $17 billion in dividend and interest payments and warrant income as of June 30, 2010. In our past reports, we have made numerous recommendations to strengthen transparency and accountability of this key TARP program. For instance, we recommended that Treasury report whether financial institutions’ activities are generally consistent with the purposes of program. We also recommended that Treasury consider making the warrant valuation process transparent to the public by disclosing details regarding the warrant repurchase process. In both of these areas, Treasury has addressed these recommendations by releasing bank survey information on lending and detailed reports on warrant repurchases. However, as institutions leave the program, which includes the largest banks, they are no longer required to report information on lending to Treasury. TIP was designed to foster market stability and thereby strengthen the economy by investing in institutions that Treasury deemed critical to the functioning of the financial system on a case-by-case basis. Only two institutions—Bank of America Corporation and Citigroup Inc.— participated in this program and each received $20 billion in capital investment. Both institutions repaid Treasury for these investments in December 2009. CAP was designed to further improve confidence in the banking system by helping ensure that the nation’s largest 19 U.S. bank holding companies had sufficient capital to cushion themselves against larger than expected future losses, as determined by the Supervisory Capital Assessment Program (SCAP)—or “stress test”—conducted by the federal banking regulators. CAP made TARP funds available to any institution not able to raise private capital to meet SCAP requirements. In the end, 9 of the 10 institutions that needed additional capital as a result of SCAP raised over $70 billion from private sources, and GMAC received additional capital from Treasury under the Automotive Industry Financing Program (AIFP). No CAP investments were made and the program closed on November 9, 2009. Although these programs are no longer making new investments, the lessons learned from them will be useful in future efforts to stabilize the financial markets and improve ongoing bank supervision. We are currently reviewing the characteristics of firms that received CPP investments and assessing Treasury’s procedures for selecting institutions to participate and Treasury’s role when institutions elect to repay their CPP investments. We are also evaluating the process that the regulators used to design and implement SCAP, as well as the financial performance of the participating institutions compared to SCAP estimates. As part of this work, we will also assess how regulators and the banks are applying lessons learned from SCAP. We plan to issue reports on CPP and SCAP in the coming months. Auto Industry Financing Program (AIFP). From December 2008 through June 2009, Treasury committed $81.1 billion to help stabilize the auto industry, including about $62 billion to fund GM and Chrysler while they restructured. In return for the assistance provided 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. As of June 30, 2010, approximately $11.2 billion of the $79.7 billion disbursed has been repaid to the Treasury. Treasury has stated that it plans to sell its equity in these companies as soon as practicable. The federal government’s ability to recoup its investments will depend on the profitability of GM and Chrysler. Since we last reported on the financial condition of the auto industry in November 2009, Chrysler and GM have shown some indications of progress towards returning to profitability. For example: In April and May 2010, both the new GM and new Chrysler released financial statements for 2009 and the first quarter of 2010. Thus far, according to Treasury officials, both companies are doing better than they and Treasury had initially projected in terms of revenues, operating earnings, and cash flow. We are in the process of reviewing the financial statements in more detail for a subsequent report. Also in April 2010, GM repaid Treasury the remaining $4.7 billion on the $6.7 billion in debt it owed to Treasury using TARP funds from an escrow account established for the company when it reorganized through the bankruptcy process. According to Treasury officials, GM was legally permitted to keep the remaining $6.6 billion left in the escrow account after this repayment. Treasury recently stated that it plans to participate in a GM initial public offering (IPO), in which Treasury, other GM shareholders, and GM will sell a portion of their shares in the company. Treasury stated that it expects the IPO to occur sometime after the third quarter of this year. Treasury has hired the Lazard investment firm to help manage its equity and prepare for the IPO. The proceeds from the sale of Treasury’s shares will be used towards repaying the government’s initial investment in GM. While these steps indicate progress in the companies’ journey towards profitability, the extent to which the federal government will recoup its investment in the auto industry is uncertain, and the companies’ face several challenges in the coming years. For instance: In April 2010, we reported on the impact of restructuring on GM’s and Chrysler’s pension plans. We found that although the new companies had assumed sponsorship of the pension plans, the future of the plans remained uncertain, in part because the companies are legally required to make large contributions to the plans that they will be able to make only if they became profitable again. If the companies are not able to return to viability and their plans are terminated, the Pension Benefit Guarantee Corporation would face the significant financial and administrative costs of taking over these plans. While Chrysler and GM sales, and industry sales as a whole, were up substantially in spring 2010 from spring 2009 (up 12 percent for GM and 35 percent for Chrysler), more recent trends are not as positive. For example, compared with May 2010 levels, June 2010 sales decreased more than usual (13 percent for GM and 12 percent for Chrysler). Industry analysts largely attributed this decline to consumers’ wariness about the state of the economy. Improved economic conditions, and in turn, improved vehicle sales, are critical to the future profitability of the companies and the timing and success of an IPO. To help address these challenges, we made several recommendations in our November 2009 report. For example, we recommended that Treasury ensure that it had adequate staffing to monitor the government’s investment in the auto companies and that it communicate to Congress its plans to monitor the companies’ performance. In response to our recommendation, Treasury has hired additional staff to monitor the federal government’s investment in the auto companies. However, as of July 2010 Treasury had not committed to additional communication with Congress on its future monitoring plans. In addition, we are continuing to monitor the financial condition of the industry and in ongoing work are reviewing the current financial condition and outlook of GM and Chrysler. As part of that ongoing work, we are also reviewing the status of the federal government’s efforts to assist workers and communities that have relied on the auto industry for their economic base. American International Group, Inc (AIG) Investments. One of TARP’s earliest programs was designed to provide exceptional assistance aimed at preventing broad disruptions to the financial markets by stabilizing institutions that were considered systemically significant. In particular, in November 2008 Treasury joined the Federal Reserve’s effort to provide assistance to AIG, which first began in September 2008 and was restructured in November 2008 and again in March 2009. Since early 2009, we have been monitoring the status of federal assistance to AIG and the company’s financial condition using GAO-developed indicators and we have issued two reports that include information on them. In the April 2010 report, our indicators showed that AIG’s financial condition had remained relatively stable largely due to the federal assistance from the Federal Reserve and Treasury. AIG is repaying its debt to the federal government, but much of the progress reflects numerous exchanges of debt that AIG owed the Federal Reserve Bank of New York Revolving Credit Facility for various issues of preferred equity. With this shift from debt to equity, the federal government’s exposure to AIG is increasingly tied to the future health of AIG, its restructuring efforts, and its ongoing performance. Similarly, the government’s ability to fully recoup the federal assistance is uncertain and will be determined by the long-term health of AIG, the company’s success in selling businesses as it restructures, and other market factors such as the performance of the insurance sectors and the credit derivatives markets that are beyond the control of AIG or the government. We will continue to monitor these issues and plan to issue our next report in October 2010. Home Affordable Modification Program (HAMP).