View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	
R

 
 

	

i 

TABLE	OF	CONTENTS	

 

		

 
 
 

	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

Table	of	Contents	
	

MESSAGE	FROM	THE	ASSISTANT	SECRETARY	FOR	FINANCIAL	STABILITY	.........................................	v	
EXECUTIVE	SUMMARY	..............................................................................................................................................	viii	
.
	

PART	1:	Management’s	Discussion	and	Analysis	

Background,	OFS	Organization	Structure	and	Programs	................................................................................	3	
OFS	Operational	Goals	.................................................................................................................................................	10	
Operational	Goal	One:	Complete	the	Wind‐down	of	the	Investment	Programs	.................................	10	
Capital	Purchase	Program	..................................................................................................................................	10	
Targeted	Investment	Program	.........................................................................................................................	11	
Asset	Guarantee	Program	..................................................................................................................................	11	
Community	Development	Capital	Initiative	...............................................................................................	11	
Public	Private	Investment	Program	...............................................................................................................	12	
Term	Asset‐Backed	Securities	Loan	Facility	..............................................................................................	12	
Small	Business	Administration	7(a)	Securities	Purchase	Program	..................................................	12	
Automotive	Industry	Financing	Program	....................................................................................................	13	
American	International	Group	(AIG)	Investment	Program	.................................................................	14	
Operational	Goal	Two:	Continue	Helping	Families	in	Need	to	Avoid	Foreclosure	.............................	15	
Operational	Goal	Three:	Minimize	Cost	to	Taxpayer	......................................................................................	16	
Operational	Goal	Four:	Continue	to	Operate	with	the	Highest	Standards	of	Transparency,	
Accountability,	and	Integrity	....................................................................................................................................	17	
Fiscal	Year	2012	and	2013	Financial	Summary	and	Cumulative	Net	Income	......................................	20	
Key	Trends/Factors	Affecting	TARP	Future	Activities	and	Ultimate	Cost	.............................................	25	
Systems,	Controls,	and	Legal	Compliance	...........................................................................................................	27	
Limitations	of	the	Financial	Statements	...............................................................................................................	30	
	

Part	2:	Financial	Report	
Message	from	the	Chief	Financial	Officer	(CFO)	...............................................................................................	33	
Government	Accountability	Office	Auditor’s	Report	......................................................................................	34	
						Appendix	I:	Management’s	Report	on	Internal	Control	Over	Financial	Reporting	......................	40	
						Appendix	II:	OFS	Response	to	Auditor’s	Report	.........................................................................................	41	
FINANCIAL	STATEMENTS	.........................................................................................................................................	42	
Notes	to	the	Financial	Statements	..........................................................................................................................	47	
Required	Supplementary	Information	.................................................................................................................	75	
Other	Information	–	Schedule	of	Spending	.........................................................................................................	77	
	

Part		3:	Appendices	
Appendix	A:	TARP	Glossary	......................................................................................................................................	80	
Appendix	B:	Abbreviations	and	Acronyms	.........................................................................................................	82	
WEBSITES	..........................................................................................................................................	inside	back	cover 
 

TABLE	OF	CONTENTS	

	

 

iii 

THE	DEPAR
RTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY

 
 

iv	

 

MESSA GE	FROM	THE	ASSISTANT	SECRETARY	
A
A
R

 

AGENCY	FI NANCIAL	REPOR
RT	|	FISCAL	YEAR	2013	

 

MESSA
AGE	 FRO THE ASSIST
OM	
E	
TANT	 SE
ECRETAR FOR	 FINANC
RY	
CIAL	
STABILITY	
Dece
ember 5, 2013
3

I am pleased to present the Office of F
m
e
Financial St
tability’s (OF
FS)
Agen Financi Report fo the Fisca Year 2013 This repor
ncy
ial
or
al
3.
rt
desc
cribes our financial and performan results f the fifth year
d
nce
for
of th Troubled Asset Relie Program (TARP). Wi
he
ef
ithin this re
eport
you will find the comparati fiscal ye
ive
ears 2013 an 2012
nd
financial statem
ments for TA
ARP, the Go
overnment A
Accountabil
lity
ce’s
a
on
tatements, a
Offic (GAO) audit opinio on these financial st
GAO on OF
sepa
arate opinion from the G
FS’s internal control ove
er
financial report
ting, and th e results of the GAO’s tests of OFS
S’s
compliance with selected p
h
provisions of laws, regu
f
ulations,
tracts, and grant agreem
g
ments appli
icable to OF
FS.
cont
The Eme
ergency Eco
onomic Stab
bilization Ac (EESA) of 2008 estab
ct
f
blished OFS within the
S
e
Office of Domestic Finance at th Departm
f
F
he
ment of the T
Treasury to implement TARP. Wit
t
th
on
idst of the worst financ crisis sin the Great Depressi
w
cial
nce
ion, TARP w
was
the natio in the mi
created to “restore the liquidity and stabili of the fin
t
t
y
ity
nancial syst
tem.” It was an
s
extraord
dinary respo
onse to an ex
xtraordinar crisis.
ry
Today, it is generall agreed th as a resu of the for
t
ly
hat
ult
rceful and c
coordinated response by the
y
federal government through TA
g
ARP and ma other em
any
mergency pr
rograms, we helped ave
e
ert
what cou have bee a devasta
uld
en
ating collapse of our fin
nancial syst
tem. Althou we are s
ugh
still
repairing the damag from the crisis and many famili still face challenges on a daily
g
ge
m
ies
e
s
basis, th financial system is much more stable and ou economy is growing, albeit not as
he
m
ur
y
wise be the case for
fast as we would lik Credit is more avail
w
ke.
s
lable than w
would otherw
families, businesses and local government banks ar better cap
,
s,
g
ts,
re
pitalized, an we are
nd
impleme
enting reform to addre the unde
ms
ess
erlying caus of the cri
ses
isis.
In additi
ion, OFS ha made sign
as
nificant progress towar winding down TARP investmen
rds
g
P
nts.
As of Sep
ptember 30, 2013, OFS had collect 96.2 per
,
S
ted
rcent of the $421.6 billio in progra
on
am
funds that were disb
bursed unde TARP, as well as an additional $17.5 billion from
er
s
n
Treasury equity in AIG. Here is where we stand con
y’s
n
e
w
ncerning the four categ
e
gories of TAR
RP
investme program
ent
ms:

•

Banking Pro
B
ograms. OFS has collec
cted a total o $273.4 bi
of
illion (includ
ding $6.4 bi
illion
co
ollected in fiscal year 2013) for all TARP bank support pr
f
k
rograms thr
rough
re
epayments, sales, divid
dends, interest, and oth income c
her
compared to $245.5 bill
o
lion
in
nvested. As of Septemb 30, 2013, $3.6 billion in bankin program i
ber
n
ng
investments
s
re
emained outstanding, primarily in community banks, an OFS is co
p
n
y
nd
ontinuing to
o

MESSAGE	FR
ROM	THE	ASSIST
TANT	SECRETAR
RY	

v 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
wind-down these investments through repurchases by banks, asset sales, and
restructurings.

•

Credit Market Programs. OFS has substantially completed the wind-down of all of
the TARP credit market programs, including investments made under the PublicPrivate Investment Program (PPIP), Term Asset-Backed Securities Loan Facility
(TALF) program, and SBA 7(a) Securities Purchase Program. As of the end of fiscal
year 2013, OFS collected $23.5 billion as compared to $19.1 billion of disbursements
under these programs.

•

Auto Industry Financing Program. As of September, 30 2013, OFS has collected
$53.3 billion through sales, repayments, dividends, interest, and other income,
compared to the $79.7 billion in funds that were disbursed under the Automotive
Industry Financing Program (AIFP). Chrysler exited the program in July 2011 and
the wind-down of General Motors (GM) is anticipated to be completed by December
31, 2013. In November 2013, OFS received additional repayment of $5.9 billion from
Ally Financial Inc. (Ally) under an agreement announced in August. As a result,
OFS has recovered over 70% of the investment in Ally Financial Inc. (Ally) through
repayments, dividends, and proceeds in excess of costs. OFS is actively seeking to
wind-down the remaining investment in Ally.

•

American International Group. In fiscal year 2013, OFS exited all remaining
holdings in American International Group, Inc. (AIG). During the financial crisis,
the peak amount of assistance provided by OFS and the Federal Reserve to prevent
the collapse of AIG totaled $182.3 billion, a part of which was later cancelled. As a
result of the combined efforts of AIG, Treasury, and the Federal Reserve, $22.7
billion in excess of the total of funds disbursed to AIG has been recovered through
sales and other income. Of the $67.8 billion total disbursed to AIG by OFS, TARP’s
cumulative net proceeds from repayments, sales, dividends, interest, and other
income related to AIG assets totaled $55.3 billion. As Treasury’s non-TARP AIG
shares generated proceeds in excess of cost of $17.5 billion, total net proceeds in
excess of cost were $5.0 billion for Treasury as a whole.

While OFS carefully winds down the investment programs under TARP, we are continuing
to implement the TARP Housing Programs to help millions of struggling homeowners avoid
foreclosure, primarily through mortgage modifications and other forms of assistance. These
programs (includes government sponsored enterprise (GSE) and non-GSE) have also set
new mortgage modification and consumer protection standards which have helped to
transform the mortgage servicing industry and thereby help millions more families. On
May 30, 2013, the Obama Administration extended the application deadline for the Making
Home Affordable Program through December 2015 in order to provide struggling
homeowners additional time to access sustainable mortgage relief.

vi	

	

MESSAGE	FROM	THE	ASSISTANT	SECRETARY	

 

AGENCY	FI NANCIAL	REPOR
RT	|	FISCAL	YEAR	2013	

 
The financial and pe
erformance data contai
ined in this report are r
reliable and complete. For
d
the fifth consecutive year, OFS has earned unmodified opinions o its financ stateme
e
d
d
on
cial
ents
nternal control over fin
nancial repo
orting from t GAO. In 2013, OFS was also
the
n
S
and its in
awarded its fourth consecutive Certificate of Excellen in Accou
d
c
nce
untability Re
eporting by the
Association of Gover
rnment Acc
countants.
rks
eport, as I will step dow as Assist
w
wn
tant Secreta for Fina
ary
ancial
This mar my last financial re
Stability this month Since the spring of 2009, it has been an hon and priv
y
h.
e
2
nor
vilege to ser
rve
my country by helpi to respond to this te
ing
errible finan
ncial crisis. TARP did what it was
s
supposed to do—it helped to sta
d
h
abilize our financial sy stem and it did so faste better an
f
t
er,
nd
cheaper than most people expec
p
cted. We sh
hould never forget the t
r
true costs of the financial
f
crisis in human suff
fering and economic da
e
amage—the jobs lost, th foreclosed homes, th
he
d
he
e
hat
ot
ced, and the retirement that must be postpon
e
ts
t
ned.
college educations th could no be financ
But with
hout the gov
vernment’s forceful resp
f
ponse, the d
damage wou have bee far worse and
uld
en
e
the costs to repair th damage would have been far h
s
hat
e
higher.
y,
Sincerely

Timothy G. Massad
Assistant Secretary fo Financial Stability
t
or
S

MESSAGE	FR
ROM	THE	ASSIST
TANT	SECRETAR
RY	

vii 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 

EXECUTIVE SUMMARY
 
restarting economic growth, and in restoring
access to capital and credit.

The U.S. Department of Treasury’s (Treasury),
Office of Financial Stability (OFS) presents to
the reader the fiscal year 2013 Agency Financial
Report (AFR) for the Troubled Asset Relief
Program (TARP). The enclosed Management’s
Discussion and Analysis (MD&A) is required
supplementary information to the financial
statements and provides a high level overview of
OFS, which is the office within the Treasury
that was established to implement TARP,
pursuant to the Emergency Economic
Stabilization Act of 2008 (EESA).

Since late 2010 when OFS’s authority to make
new commitments under TARP expired, OFS
has focused on carefully winding down TARP’s
investment programs, recovering the OFS’s
outstanding investments, and continuing to
implement the various housing programs under
TARP to help struggling homeowners avoid
foreclosure. While the total disbursed for TARP
programs was $421.6 billion, OFS has collected
$405.5 billion (or $423.0 billion if including the
$17.5 billion in proceeds from the additional
Treasury AIG shares discussed on page 14)
through repayments, sales, dividends, interest,
and other income. As of September 30, 2013,
only $23.5 billion in investments remain
outstanding.

Five years ago, the U.S. financial system faced
challenges on a scale not seen since the Great
Depression. The banks and financial markets
that American families and businesses rely on to
meet their everyday financing needs were on the
brink of failure. By October 2008, major
financial institutions were threatened and many
of them tried to shore up their balance sheets by
shedding risky assets and hoarding cash. People
were rapidly losing trust and confidence in the
stability of America’s financial system and the
capacity of the government to contain the
damage. Without immediate and forceful action
by the federal government, the U.S. economy
faced the risk of falling into a second Great
Depression.

The MD&A highlights the establishment of OFS,
its background, mission, organizational
structure, and programs. OFS administers
programs that fall into two major categories:
Investment and Housing. In total, OFS has
responsibility for 12 individual programs. Most
of these programs have either been closed or are
in the process of winding down.
Each year, OFS reports on our Operational
Goals, which were developed by management to
achieve our strategic goal of ensuring the overall
stability and liquidity of the financial system,
preventing avoidable foreclosures, and by
preserving homeownership. The first
operational goal for OFS is to complete the winddown of the TARP investment programs. OFS is
continuing to implement the three-pronged exit
strategy, announced in May 2012, for the
Capital Purchase Program (CPP). That strategy
includes waiting for those banks that are able to
repay in full in the near future to do so,
restructuring OFS’s investments in limited

It was out of these extraordinary circumstances
in the fall of 2008 that TARP was created as a
central part of a series of emergency measures
by the federal government. Collectively, TARP
and the federal government’s other emergency
programs helped to prevent the collapse of our
financial system. As a result of the careful
design, implementation, and coordination of
these programs, the federal government was
able to limit the broader financial and economic
damage caused by the crisis. Although we are
still recovering, these measures were critical to

viii	

	

EXECUTIVE	SUMMARY	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Program (MHA) is helping homeowners and
assisting in stabilizing the housing market. On
May 30, 2013, the Administration extended the
application deadline for MHA programs through
December 31, 2015, to provide struggling
homeowners additional time to access
sustainable mortgage relief, and to align the end
date with other key assistance programs. The
largest program within MHA is the Home
Affordable Modification Program (HAMP).
Under this program more than 1.4 million
homeowners have had their mortgages modified
permanently. HAMP has also set new standards
and changed practices throughout the mortgage
servicing industry in fundamental ways. In
addition, the Hardest Hit Fund provides funding
to 18 states and the District of Columbia to
provide assistance to struggling homeowners
through locally-tailored programs. All 19
programs are fully operational and have created
extensive infrastructures to operate these
programs, including selecting and training
networks of housing counselors to assist with
applications, creating portals to aid homeowners
in applying for assistance, and hiring
underwriters and other staff to review and
approve applications.

cases, and selling investments through auctions
in cases where the bank is not expected to repay
in the near future. As of September 30, 2013,
both the Targeted Investment Program (TIP)
and the Asset Guarantee Program (AGP) were
closed and have generated positive returns on
behalf of taxpayers.
As of September 30, 2013, OFS has substantially
completed the wind-down of the three TARP
credit market programs which resulted in a
positive return on behalf of taxpayers. OFS has
recovered all debt and equity investments made
in the Public-Private Investment Program
(PPIP). OFS’s loan commitment made through
the Term Asset-Backed Securities Loan Facility
(TALF) was fully repaid or extinguished during
fiscal year 2013. The Small Business
Administration 7(a) Securities Purchase
Program (SBA 7(a)) was successfully closed
during fiscal year 2012 with the processing of
the fifth and final disposition of securities.
OFS continues to wind-down the Automotive
Industry Financing Program (AIFP) with the
sale of 399 million shares of GM common stock
during fiscal year 2013. These sales were
conducted according to the plan announced in
December 2012 to sell OFS’s remaining shares
in GM within the next 12-15 months, subject to
market conditions. In November 2013, per an
August 2013 agreement, OFS collected a total of
$5.9 billion from Ally, as it repurchased all of its
MCP stock from OFS and paid the agency to
eliminate certain rights under the original
agreement. OFS is actively seeking to winddown the remaining investment.

The third operational goal of OFS is to minimize
the cost of the TARP programs to the taxpayer.
OFS manages TARP investments to minimize
costs to taxpayers by carefully managing the
timely exit of these investments to reduce
taxpayers’ exposure, returning TARP funds to
reduce the federal debt, and continuing to
replace government assistance with private
capital in the financial system. OFS has taken a
number of steps during fiscal years 2012 and
2013 to dispose of its outstanding investments in
a manner that balances the need to exit these
investments as quickly as practicable with
maximizing returns on behalf of taxpayers. OFS
also takes steps to ensure that TARP recipients
comply with any TARP-related statutory or
contractual obligations such as executive
compensation requirements and restrictions on
dividend payments.

OFS exited its remaining holdings in the
American International Group, Inc. (AIG)
Investment Program in December 2012 and sold
remaining warrants in March 2013. As of
September 30, 2013, OFS does not hold any
residual interest in AIG.
OFS’s second operational goal is to continue
helping struggling homeowners avoid
foreclosure. The Making Home Affordable

EXECUTIVE	SUMMARY	

	

ix 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
In addition to discussing program performance,
the MD&A also addresses OFS’s financial
performance in the Fiscal Year 2013 and 2012

OFS’s final goal is to continue to operate with
the highest standards of transparency,
accountability, and integrity. OFS posts a
variety of reports online that provide the reader
with regular and comprehensive information
about how TARP funds are being spent, who has
received them and on what terms, and how
much has been collected to date. As part of this
effort, in June 2013, OFS enhanced and
expanded the existing TARP Tracker on its
website to enable users to view the flow of funds
for a specific time period or over the lifetime of a
TARP program. OFS also publishes the audited
annual report. In addition, OFS continues to
maintain productive working relationships with
three oversight bodies charged with auditing
and reviewing the TARP activities.

x	

Financial Summary and Cumulative Net Income
section. OFS provides an overview of its
financial data and explains its fiscal year 2013
net income from operations and related loans,
equity investments and other credit programs.
Finally, the Systems, Controls, and Legal
Compliance section of the MD&A provides a
discussion of the actions OFS has taken to
address its management control responsibilities.
This section includes OFS’s assurance related to
the Federal Manager’s Financial Integrity Act,
the determination of its compliance with both
the Federal Financial Management
Improvement Act and the Improper Payment
Elimination and Recovery Act.

	

EXECUTIVE	SUMMARY	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	
R

 

MANAGEME
ENT’S	DISCUSSIO
ON	AND	ANALYSI
IS	

1 

THE	DEPAR
RTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY

 

2	

MANA GEMENT’S	DISCUSSION	AND	ANALYSIS	
A
U
N

 

AGENCY	FI NANCIAL	REPOR
RT	|	FISCAL	YEAR	2013	

 

PART 1: Man
T
nagemen Discu
nt’s
ussion a Anal
and
lysis
Backg
ground, OFS Org
O
ganizati Structure an Progr
ion
nd
rams
Background		
In respon to the wor financial crisis since the
nse
rst
t
Great Depression, the Troubled As
e
sset Relief
suant to the
Program (TARP) was created purs
n
)
Emergency Economic Stabilization Act (EESA)
on Octobe 3, 2008. To carry out th authoritie
er
o
he
es
given to the Secretary of the Treas
t
y
sury to
implemen TARP, the U.S. Depart
nt
e
tment of the
Treasury (Treasury) established th Office of
e
he
Financial Stability (O
l
OFS) within th Office of
he
Domestic Finance. EE
c
ESA authoriz the
zed
Secretary of the Treas
y
sury to estab
blish TARP to
o
“purchase and to mak and fund commitments
e,
ke
c
to purcha
ase, troubled assets from any financial
l
institutio on terms and condition as are
on,
a
ns
determined by the Sec
cretary” to re
estore the
liquidity and stability of the financial system.
y
The term “troubled assets” and “f
ms
a
financial
institutio are define within EE
on”
ed
ESA, which ca
an
be found at:
http://ww
ww.gpo.gov/fd
dsys/pkg/BILL
LS110hr142
24enr/pdf/BIL
LLS-110hr14
424enr.pdf. In
I
addition, Section 109 of EESA provides
authority to assist hom
y
meowners.
The Dodd
d-Frank Wall Street Refor and
l
rm
Consume Protection Act (the Dod
er
dd-Frank Act
t),
signed into law in July 2010, reduced total
TARP purchase autho
ority from $700 billion to a
cumulativ $475 billio OFS’s au
ve
on.
uthority to
make new commitmen under TA
w
nts
ARP expired on
o
October 3, 2010. OFS is carefully managing th
3
S
he
dispositio of TARP fi
on
inancial asse to recover
ets
r
OFS’s out
tstanding inv
vestments wh continuing
hile
to implem
ment initiativ to help struggling
ves
homeown
ners avoid for
reclosure.

Financ and Opera
ce
ations, Office of the Chief of
f
Home Ownership P
Preservation, Office of
,
Financ Agents, O
Chief Report
cial
Office of the C
ting
Officer and Office of the Chief Compliance
r,
f
Officer A Chief Co
r.
ounsel’s Offic also report to
ce
ts
the As sistant Secre
etary and to t Office of the
the
Genera Counsel in the Departm
al
n
ment of the
Treasu
ury.
OFS is not envision as a perm
s
ned
manent
organi zation, so to the maximum extent pos
ssible
when e
economically efficient and appropriate
y
d
e,
OFS ut
tilizes privat sector expe
te
ertise in supp
port
of the e
execution an liquidation of TARP
nd
n
progra
ams. These fi
irms assist in the areas o
n
of
custodi services, accounting a internal
ial
and
control administr
ls,
rative suppor legal advis
rt,
sory,
financi advisory, and informa
ial
ation technolo
ogy.
The OF organizat
FS
tion chart follows:

Assistant Secretary fo
or
Financial Stability

Office of the
Chief
Investment
Officer

Office of
Finance and
Operations

Of
ffice of the
Chief of
C
Home
O
Ownership
Pre
eservation

Office of
f
Financia
al
Agents

Chief
Counsel

Office of the
Chief
Reporting
Officer

Office of the
Chief
Compliance
Officer

 
 
 

OFS	Org
ganization
n	Structure	
OFS is he
eaded by the Assistant Se
ecretary for
Financial Stability. Reporting to the Assistant
l
R
t
t
Secretary are six majo organizati
y
or
ions the: Office
of the Chief Investment Officer, Office of

MANAGEME
ENT’S	DISCUSSIO
ON	AND	ANALYSI
IS	

3 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
OFS has focused on winding down the CPP
according to the exit strategy announced on May
3, 2012. That strategy includes a combination of
repayments in the case of banks which are
expected to repay in the near future, selling
OFS’s positions in banks that are unlikely to
repay in the near-term through auctions, and
restructuring some investments, typically in
connection with a merger or other plan of the
bank to infuse capital, in a way that maximizes
timely OFS collections and helps avoid bank
failures.

OFS	Programs	
	
Bank	Support	Programs	(CPP,	TIP,	AGP,	
CDCI,	CAP,	SCAP)	

By late September 2008, several major financial
institutions had already failed. Many others
were at risk of failure and people were rapidly
losing confidence in the nation’s financial system
as a whole. Therefore beginning in early October
2008, OFS launched five programs to help
stabilize the nation’s banking institutions. A
total of $245.5 billion was invested through
TARP bank support programs.

Targeted	Investment	Program	

Capital	Purchase	Program	

OFS established the Targeted Investment
Program (TIP) in December 2008. The program
gave OFS the necessary flexibility to provide
funding to financial institutions that were
critical to the functioning of the U.S. financial
system to prevent a loss of confidence in these
critical institutions. This could have resulted in
substantial disruption to financial markets,
threatened the financial strength of similarly
situated financial institutions and undermined
the overall economy.

The Capital Purchase Program (CPP) was
launched in October 2008 to help stabilize the
financial system by providing capital to viable
financial institutions of all sizes throughout the
nation. Without a viable banking system,
lending to businesses and consumers could have
frozen and the financial crisis might have
spiraled further out of control. Based on market
indicators at the time, it was clear that financial
institutions needed additional capital to absorb
losses and restart the flow of credit to businesses
and consumers to avert a potential collapse of
the system.

OFS invested a total of $40.0 billion in two
institutions – Bank of America (BofA) and
Citigroup – under the TIP. These investments
were made in addition to those that the banks
received under the CPP. Similar to the CPP,
OFS invested in preferred stock and received
warrants to purchase common stock in each
institution.

With the additional capital, CPP participants
were better equipped to undertake new lending
and continue to provide other services to
consumers and businesses, even while absorbing
write-downs and charge-offs on loans that were
not performing. OFS received preferred stock or
debt securities in exchange for the CPP
investments. Most financial institutions
participating in the CPP pay OFS a five percent
dividend on preferred shares for the first five
years and a nine percent rate thereafter. In
addition, OFS received warrants to purchase
common shares or other securities from the
banks at the time of the CPP investment. The
purpose of the additional securities was to
enable OFS to receive additional returns on its
investments as banks recover.

4	

The TIP investments provided for annual
dividends of eight percent, which was higher
than the initial CPP rate. The program also
imposed greater reporting requirements and
more onerous terms on the companies than
under the CPP terms, including restricting
common stock dividends to $0.01 per share per
quarter, restrictions on executive compensation,
restrictions on corporate expenses, and other
measures.

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
initial dividend or interest rate of two percent,
compared to the five percent rate offered under
the CPP. To encourage repayment while
recognizing the unique circumstances facing
CDFIs, the dividend rate increases to nine
percent after eight years, compared to after five
years under the CPP. CDFIs that participated in
the CPP and were in good standing were allowed
to exchange their CPP securities for securities
under the more favorable terms of this program.

Asset	Guarantee	Program	
Under the Asset Guarantee Program (AGP),
TARP commitments were used to support two
institutions – BofA and Citigroup. They were
selected because of the large number of illiquid
assets that both of them held at the time of the
financial crisis and the severe impact that their
failure would have had on the broader economy.
In January 2009, OFS, the Federal Reserve, and
the Federal Deposit Insurance Corporation
(FDIC) agreed in principle to share potential
losses on a $118 billion pool of financial
instruments owned by BofA. However, in May
2009, before the transaction was finalized, BofA
decided to terminate negotiations, and in
September 2009, the government and BofA
entered into an agreement under which the
bank agreed to pay a termination fee of $425
million to the government, $276 million of which
went to OFS. In January 2009, OFS, the
Federal Reserve, and the FDIC similarly agreed
to share potential losses on a $301 billion pool of
Citigroup's covered assets. The arrangement
was finalized and, as a premium for the
guarantee, OFS and the FDIC received $7.0
billion of Citigroup preferred stock of which $2.2
billion was OFS’s portion. OFS also received
warrants to purchase 66.5 million shares of
common stock.

Capital	Assistance	Program	(CAP)	and	the	
Supervisory	Capital	Assessment	Program	
(SCAP)	
In 2009, Treasury worked with federal banking
regulators to develop a comprehensive "stress
test" known as the Supervisory Capital
Assessment Program (SCAP). The purpose of the
SCAP was to determine the health of the
nation’s 19 largest bank holding companies with
unprecedented transparency and help restore
confidence in the banking system. In conjunction
with the SCAP, Treasury announced that it
would provide capital under TARP through the
Capital Assistance Program (CAP) to those
institutions that needed additional capital but
were unable to raise it through private sources.
The CAP closed on November 9, 2009, without
making any investments.

Community	Development	Capital	Initiative	

For additional information on the bank support
programs please visit the OFS website at:

OFS created the Community Development
Capital Initiative (CDCI) on February 3, 2010, to
help viable certified Community Development
Financial Institutions (CDFIs) and the
communities they serve cope with effects of the
financial crisis. It was put in place to help keep
day-to-day financing available to families and
businesses in hard-hit communities that are
underserved by traditional banks.

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/Pages/default.aspx

Credit	Market	Programs	(PPIP,	TALF,	SBA	
7(a))
As the financial crisis reached its peak, banks
were not making new loans to businesses, or
even to one another. As a result, many
businesses could not get loans for
new investments, municipalities and state
governments could not issue bonds at reasonable
rates, and families could not get credit. The
securitization markets—which provide financing

Since many CDFIs don’t have the same access to
capital markets as larger banks, the CDCI was
designed with more generous terms than the
CPP. Under this program, CDFI banks, thrifts,
and credit unions received investments
aggregating $570 million in capital with an

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

5 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
Under the TALF, the Federal Reserve Bank of
New York (FRBNY) provided non-recourse
funding to any qualified borrower that owned
eligible collateral. On fixed days each month,
borrowers were allowed to request three-year, or
in certain cases, five-year TALF loans. If the
borrower did not repay the loan, the FRBNY
would enforce its rights to the collateral and sell
it to TALF, LLC-a special purpose vehicle (SPV)
established specifically to purchase and manage
these assets. OFS initially committed $20.0
billion in subordinated loans to the SPV but did
not directly lend to TALF borrowers.

for credit cards, student loans, auto loans, and
other consumer loans as well as small business
loans—had basically stopped functioning. OFS
launched three programs in 2009 to help
unfreeze these markets and bring down the cost
of borrowing for families and businesses: the
Public-Private Investment Program (PPIP), the
Term Asset‐Backed Securities Loan Facility
(TALF), and the SBA 7(a) Securities Purchase
Program. Although the specific goals and
implementation methods of each program
differed, the overall goal of these three programs
was the same—to restart the flow of credit to
meet the critical needs of small businesses and
consumers.

Small	Business	Administration	7(a)	
Securities	Purchase	Program	

Public‐Private	Investment	Program	

OFS launched the Small Business
Administration (SBA) 7(a) Securities Purchase
Program to help facilitate the recovery of the
secondary market for small business loans, and
thus help free up credit for small businesses.
Under this program, OFS purchased securities
comprised of the guaranteed portion of SBA 7(a)
loans, which finance a wide range of small
business needs, including working capital,
machinery, equipment, furniture, and fixtures.
OFS invested approximately $367 million in 31
SBA 7(a) securities between March and
September 2010. These securities were
comprised of 1,001 loans from 17 different
industries, including retail, food services,
manufacturing, scientific and technical services,
healthcare, and educational services. Through
its purchases, OFS injected liquidity into this
market to help restart the flow of credit,
enabling pool assemblers to purchase additional
small business loans from loan originators.

On March 23, 2009, OFS launched the Legacy
Securities Public-Private Investment Program
(PPIP) to help restart the market for non-agency
residential mortgage-backed securities (RMBS)
and commercial mortgage-backed securities
(CMBS), thereby allowing banks and other
financial institutions to re-deploy capital and
extend new credit to households and businesses.
The purpose of PPIP was to draw new private
capital into the market for legacy RMBS and
CMBS by providing financing on attractive
terms as well as a matching equity investment
from OFS. Using up to $22.1 billion of TARP
funds alongside equity capital raised from
private investors, PPIP was designed to
generate significant purchasing power and
demand for troubled RMBS and CMBS. This in
turn would help to increase the amount of credit
available to consumers and small businesses.

Term	Asset‐Backed	Securities	Loan	Facility	

For additional information on the credit market
programs, please visit the OFS website at:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/credit-marketprograms/Pages/default.aspx

The Term Asset-Backed Securities Loan Facility
(TALF) is a joint OFS-Federal Reserve program
that was designed to restart the asset-backed
securities (ABS) and commercial mortgagebacked securities (CMBS) markets that had
ground to a virtual standstill during the early
months of the financial crisis.

6	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
on money market funds generally. The day after
that, AIG – one of the largest and most complex
financial firms in the world – was on the verge of
failure. Confidence was already fragile in the
financial system as a whole and firms were
trying to shore up their balance sheets by selling
risky assets, reducing exposure to other
financial institutions, and hoarding cash. At the
time, AIG was one of the most complex financial
firms in the world providing credit for other
financial products. When the financial crisis hit,
AIG had hundreds of billions of dollars in
commitments without the capital and liquid
assets to back them up. Millions of people
depended on AIG for their life savings and it had
a huge presence in many critical financial
markets, including municipal bonds. Therefore,
with AIG facing potentially fatal liquidity
problems and with the crisis threatening to
intensify and spread more broadly throughout
the economy, OFS and the Federal Reserve
provided assistance to AIG. This assistance was
provided because the consequences of a company
of AIG’s size and scope failing at that time, in
those circumstances, would have had farreaching and catastrophic effects for the
economy and for American families and
businesses.

Automotive	Industry	Financing	Program	
(AIFP)	
The Automotive Industry Financing Program
(AIFP) was launched in December 2008 to help
prevent the disorderly liquidations of General
Motors (GM) and Chrysler, and thus significant
disruption of the U.S. auto industry. The
potential for such a disruption at that time
posed a significant risk to financial market
stability and threatened the overall economy. It
could have also had disastrous consequences for
other auto manufacturers and the many
suppliers and other businesses that depended on
the automotive industry. This could have led to a
loss of as many as one million American jobs.
Recognizing that both GM and Chrysler were on
the verge of collapse, OFS extended loans to both
companies and their financing entities.
In 2009, OFS agreed to provide additional funds
conditioned on each company and its
stakeholders participating in a fundamental
restructuring. Sacrifices were made by unions,
dealers, creditors and other stakeholders, and
the restructurings were achieved through
bankruptcy court proceedings in record time. In
total OFS disbursed $79.7 billion in loans and
equity investments to GM, Chrysler, and
General Motors Acceptance Corporation (now
known as Ally Financial). As a result, General
Motors Company (New GM), Chrysler Group
LLC (New Chrysler), and Ally are more
competitive and viable companies, supporting
American jobs and the economy. Operating
results have improved, the industry added jobs,
and TARP investments are being repaid.

During this time, the Federal Reserve and OFS
took a series of steps to prevent AIG’s disorderly
failure and mitigate the systemic risks. The
initial assistance to AIG was provided by the
FRBNY before the passage of EESA and the
creation of TARP. After EESA became law,
OFS and the FRBNY continued to work together
to address the challenges posed by AIG. In 2008
and 2009, OFS funds were used to provide
further support to AIG. In fiscal year 2011,
OFS, the FRBNY, the trustees of the AIG Credit
Facility Trust (the Trust)1 and AIG completed a
restructuring of the assistance provided by OFS

For additional information on the AIFP, please
visit the OFS website at:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/automotiveprograms/Pages/default.aspx 

American	International	Group,	Inc.	(AIG)	
Investment	Program	

                                                            
The independent trust established to manage the
Department of the Treasury’s beneficial interest in
Series C preferred AIG shares.

1

On September 15, 2008, Lehman Brothers filed
for bankruptcy. This triggered the start of a run

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

7 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
living situation. In most cases, this means
making their monthly mortgage payments more
affordable and sustaining those new mortgage
terms over time so homeowners can avoid the
pain and substantial cost of foreclosure. At the
same time, MHA protects the interests of
taxpayers by disbursing funds only when
transactions are completed and only as long as
those contracts remain in place. Therefore, funds
will be disbursed over many years.

and the FRBNY. A series of integrated
transactions and corporate actions were
executed to accelerate the repayment of U.S.
taxpayer funds and to promote AIG’s transition
from a majority government owned and
supported entity to a financially sound and
independent entity. Following the
restructuring, OFS’s total investment in AIG
was $67.8 billion.
For additional information on the AIG
Investment Program, please visit the Office of
Financial Stability website at:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/aig/Pages/default.aspx

The cornerstone of MHA is the Home Affordable
Modification Program (HAMP), which provides
eligible homeowners the opportunity to reduce
their monthly mortgage payments to more
affordable levels. OFS also introduced
additional programs under MHA to help
homeowners who are unemployed, “underwater”
on their loan (those who owe more on their home
than it is currently worth), or are struggling
with a second lien. It also includes options for
homeowners who would like to transition to a
more affordable living situation through a short
sale or deed-in-lieu of foreclosure. In early 2012,
the Administration announced important
enhancements to MHA that expanded the pool of
eligible borrowers. Extending the reach of
HAMP will assist a broader pool of struggling
homeowners, offer support for tenants at risk of
displacement due to foreclosure, and provide
more robust relief to those who participate. On
May 30, 2013, the Administration extended the
application deadline for MHA programs to
December 31, 2015. Extending the program for
two years will benefit many additional families
while maintaining clear standards and
accountability for the mortgage industry. Taken
together, these enhancements will help the
housing market recover faster from an
unprecedented crisis.

Housing	Programs	
OFS established several housing programs
under TARP to address the historic housing
crisis and help struggling homeowners avoid
foreclosure wherever possible. These programs
have helped homeowners avoid foreclosure and
introduced important new reforms for the
mortgage servicing industry to help make
mortgage modifications become more
sustainable and affordable.

Making	Home	Affordable	(MHA)	

	

In early 2009, OFS launched the Making Home
Affordable® Program (MHA) to help struggling
homeowners avoid foreclosure and stabilize the
housing market. MHA is only one part of the
Administration’s broader efforts to strengthen
the housing market. Since its inception, MHA
has helped homeowners avoid foreclosure by
providing a variety of solutions to modify or
refinance their mortgages, get temporary
forbearance if they are unemployed, or
transition out of homeownership through a short
sale or a deed-in-lieu of foreclosure. OFS has
committed $29.9 billion under the MHA
program.

In addition to HAMP, MHA includes several
additional programs to help homeowners
refinance or address specific types of mortgages,
in conjunction with the Federal Housing
Administration (FHA), the United States

MHA is aimed at helping homeowners who are
experiencing financial hardships to remain in
their homes until their financial position
improves or they relocate to a more sustainable

8	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
homeowners to a broader-based $7.6 billion
initiative encompassing 18 states and the
District of Columbia (DC).

Department of Agriculture (USDA), and the
Department of Veterans Affairs (VA).

Housing	Finance	Agency	(HFA)	Innovation	
Fund	for	the	Hardest	Hit	Housing	Markets	
(Hardest	Hit	Fund)	

Hardest Hit Fund programs vary state to state,
but may include such programs as mortgage
payment assistance for unemployed or
underemployed homeowners, principal reduction
to help homeowners get into more affordable
mortgages, funding to eliminate homeowners’
second lien loans, funding for blight elimination
activities, and help for homeowners who are
transitioning out of their homes and into more
affordable living situations.

The Administration established the Hardest Hit
Fund in February 2010 to provide targeted aid
to homeowners in states hit hardest by the
economic and housing market downturn. As part
of the Administration’s overall strategy for
restoring stability to housing markets, the
Hardest Hit Fund provides funding for state
Housing Finance Agencies (HFAs) to develop
locally-tailored foreclosure prevention solutions
in areas that have been hardest hit by home
price declines and high unemployment. From its
initial announcement, this program evolved from
a $1.5 billion initiative focused on HFAs in the
five states with the steepest home price declines
and the vast majority of underwater

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

For additional information on the housing
programs, please visit the OFS website at:
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/Pages/default.aspx 

 

	

	

9 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 

OFS	Operational	Goals	

	
billion in CPP repayments/sales, along with
$12.0 billion in dividends and interest, and $14.7
billion of proceeds in excess of cost totaling
$224.7 billion. As of September 30, 2013, $3.1
billion in CPP gross investments remained
outstanding, including 24 institutions that are
in bankruptcy or receivership, representing an
aggregate investment of $771 million that is
currently not collectible.

OFS’s Operational Goals were developed by
management to achieve our strategic goal to
ensure the overall stability and liquidity of the
financial system, prevent avoidable foreclosures,
and preserve homeownership. The following
discussion of OFS operational goals focuses
largely on the significant events that occurred
during fiscal years 2013 and 2012. A more
comprehensive discussion of each program,
including its development and prior years’
performance, can be found in the TARP Four
Year Retrospective which is available at:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx

Under this program, OFS provided capital to
707 financial institutions in 48 states, Puerto
Rico, and DC, including more than 450 small
and community banks and 22 CDFIs. The
largest investment was $25.0 billion and the
smallest was $301,000.

Operational	Goal	One:	Complete	the	
Wind‐down	of	the	Investment	
Programs	

OFS received preferred stock or debt in each
bank in which it made an investment, as well as
warrants. Under the terms of the CPP,
participating financial institutions may repay
the funds they received at any time, so long as
they have the approval of their regulators. OFS
cannot demand repayment of CPP preferred
stock, nor is OFS’s approval required for
financial institutions to repay.

Banking	Support	Programs	
OFS disbursed a total of $245.5 billion under the
various TARP bank programs. As of September
30, 2013, OFS has collected more than $273.4
billion through repayments, dividends, interest,
warrant sales, and other income, representing
$27.9 billion in excess of disbursements. No
more taxpayer money is being invested in banks
under TARP. The final investment under the
CPP – the largest bank program under TARP –
was made in December 2009. OFS is focused on
recovering TARP funds in a manner that
continues to promote the nation’s financial
stability while maximizing returns on behalf of
the taxpayers.

OFS announced a three-pronged exit strategy for
the program on May 3, 2012. That strategy
includes waiting for those banks that are
capable of repaying in the near future to repay
at par, selling banking investments to private
investors through auctions in cases where the
bank is not expected to be able to repay in the
near future, and, in a limited number of cases,
restructuring investments. Throughout fiscal
year 2013, OFS continued to implement that exit
strategy by periodically selling preferred stock
and subordinated debt in CPP participants
through both public and private auctions. OFS
held 14 auctions with combined proceeds of $1.5
billion during fiscal year 2013 compared to 6
auctions with $1.3 billion in proceeds in fiscal
year 2012. During fiscal year 2013 and 2012,

Capital	Purchase	Program	
In fiscal year 2013, OFS made substantial
progress winding down the CPP according to the
three-pronged exit strategy announced in May
2012 and described in further detail below.
From inception of the program through
September 30, 2013, OFS has received $197.9

10	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
fiscal year 2010 for $1.2 billion and the
Citigroup warrant in fiscal year 2011 for $190
million. Additional information on TIP,
including details on the programs purpose,
overview, and status can be found at the
following website:

173 and 96 investments were repaid or sold for a
total of $4.8 billion and $8.2 billion, respectively.
Another component of OFS’s exit strategy for the
CPP is to restructure certain investments in
limited cases when the terms result in the best
return for taxpayers. This is typically done in
connection with a merger or the bank’s plan to
raise new capital and is generally proposed by
the bank. OFS agrees to receive cash (sometimes
at a discount to the original par value of the
investment) or other securities, which can be
more easily sold.

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/tip/Pages/default.aspx

Asset	Guarantee	Program	
As of September 30, 2013, OFS has fully wound
down the AGP and received more than $4.1
billion in proceeds from the AGP without
disbursing any claim payments. Additional
information on the AGP, including details on the
programs purpose, overview, and status can be
found at the following website:

Under the CPP, OFS has also received warrants
to purchase common shares or other securities
from the banks. OFS has followed a policy of
disposing of warrants as soon as practicable if no
agreement is reached on a repurchase. As of
September 30, 2013, OFS has collected $7.9
billion in net proceeds from the sale of warrants
since inception. OFS periodically releases a
Warrant Disposition Report that provides detail
about its sale of warrants. These reports can be
found at:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/agp/Pages/default.aspx

Community	Development	Capital	Initiative	
Unlike the CPP, OFS did not take substantial
actions during fiscal year 2013 to wind-down the
CDCI because of the unique circumstances
facing participating institutions. In particular,
many CDCI participants lack the same access to
capital markets that CPP institutions have,
making it more challenging for them to repay
their investments.

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Warrant-DispositionReports.aspx
Additional information on the CPP, including
details on the programs purpose, overview, and
status can be found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/cap/Pages/default.aspx

OFS completed funding through this program in
September 2010 with a total investment amount
of $570 million for 84 institutions. Of this
amount, $363 million (nearly $356 million from
principal and nearly $8 million from warrants)
represented exchanges by 28 CPP institutions
converting into the CDCI. During fiscal years
2013 and 2012, OFS collected a total of $97
million and $14 million, respectively, in
repayments, dividends and interest from
institutions in the CDCI program. As of
September 30, 2013, $475 million in CDCI
investments remained outstanding.

Targeted	Investment	Program	
OFS completed the wind-down of the TIP in
December 2009 when both BofA and Citigroup
repaid their TIP investments in full. This
resulted in net proceeds of $4.4 billion in excess
of disbursements. OFS received $3.0 billion in
total TIP dividends during the life of the
program. OFS also received warrants from each
institution which provided additional returns on
the investments. OFS sold the BofA warrants in

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

11 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
OFS will continue to closely monitor the
performance of the CDCI and make decisions
regarding the program’s wind-down at a later
date. Additional information on CDCI, including
details on the program’s purpose, overview, and
status can be found at the following website:

Term	Asset‐Backed	Securities	Loan	Facility	
OFS originally committed to provide credit
protection of up to $20.0 billion in the form of a
subordinated loan commitment to TALF, LLC to
support up to $200.0 billion of lending by the
FRBNY. OFS’s commitment was later reduced to
$4.3 billion in July 2010 after the program
closed to new lending. In June 2012, the Federal
Reserve Board and OFS agreed that it was
appropriate to further reduce the credit
protection OFS provides the TALF, LLC to $1.4
billion from $4.3 billion as the underlying TALF
loan portfolio decreased through scheduled and
voluntary payments. During 2013 this amount
was further reduced to $100 million – the initial
loan amount disbursed to fund the TALF, LLC.

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/cdci/Pages/default.aspx

Credit	Market	Programs  
OFS has now substantially completed the winddown of all three credit market programs that
were launched under TARP. A total of $19.1
billion was disbursed through these programs
and a total of $23.5 billion has been collected
through September 30, 2013.

During fiscal year 2013, OFS’s original
disbursed investment through the program was
fully repaid with interest. As of September 30,
2013, the balance of outstanding TALF loans
provided by FRBNY had declined to $101 million
from $1.5 billion on September 30, 2012, due to
scheduled and voluntary prepayments by
borrowers. All loans that have not been repaidin-full are current in their payments of principal
and interest and are fully collateralized by the
residual balance held by the TALF, LLC. As of
September 30, 2013, accumulated income earned
from investments in TALF, LLC totaled $583
million, all of which occurred during fiscal year
2013.

Public	Private	Investment	Program	
During fiscal year 2013, OFS completed the
wind-down of the PPIP. During fiscal year 2013
and 2012, 6 and 2 PPIFs wound down, repaying
$5.7 billion and $5.6 billion in debt and $4.1
billion and $1.7 billion in equity capital invested
by OFS, respectively. In addition, during fiscal
years 2013 and 2012, OFS received $271 million
and $1.4 billion in interest and investment
income and $1.2 billion and $223 million in net
proceeds in excess of costs, respectively from
these PPIFs. The final outstanding equity
repayment was made in June 2013. As of
September 30, 2013, no debt or equity
investments are outstanding.

Additional information on TALF, including
details on the programs purpose, overview, and
status can be found at the following website:

The latest PPIP Quarterly Report includes a
summary of PPIP capital activity, portfolio
holdings and current pricing, and program and
fund performance through September 30, 2013.
OFS has published 16 quarterly reports on PPIP
to date and expects to provide additional
information as the program completes its winddown. These reports can be found at the
following website:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/credit-marketprograms/talf/Pages/default.aspx

Small	Business	Administration	7(a)	
Securities	Purchase	Program	
During fiscal year 2012, OFS completed the fifth
and final disposition of securities within the
SBA 7(a) Securities Purchase Program, marking
the successful wind-down of the program. OFS

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Public-PrivateInvestment-Program-Quarterly-Report.aspx

12	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
OFS invested $16.3 billion in Ally Financial
(Ally) under TARP. As of September 30, 2013,
OFS’s outstanding investment in Ally stood at
$13.7 billion. Ally made substantial progress in
completing the two strategic initiatives OFS
previously said were critical to maximize
recovery of the investment – the Chapter 11
proceeding of Ally’s mortgage subsidiary,
Residential Capital LLC (“ResCap”), to address
Ally’s legacy mortgage liabilities and the sale of
its international auto finance operations. During
fiscal 2013, Ally, ResCap, and ResCap’s major
creditors agreed on terms for a plan of
reorganization and the settlement of certain
claims against Ally. The bankruptcy court has
approved this agreement and is expected to rule
on the plan of reorganization in early fiscal year
2014. Ally also sold or entered into agreements
to sell all of its international auto finance
operations for a total of $9.2 billion.

collected a total of $376 million through the
program. This includes $334 million in sales,
$29 million in principal payments, and $13
million in interest payments over the life of the
program. These cash collections exceeded OFS’s
original investment amount by $9 million,
excluding purchased accrued interest.
Additional information on SBA 7(a), including
details on the program’s purpose, overview, and
status can be found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/credit-marketprograms/sba7a/Pages/default.aspx 

Automotive	Industry	Financing	Program		
OFS made substantial progress in the winddown of the AIFP during fiscal year 2013. In
total, OFS disbursed $79.7 billion in loans and
equity investments to the auto industry through
the AIFP. As of September 30, 2013, OFS has
collected $53.3 billion through sales,
repayments, dividends and interest under this
program.

On August 19, 2013, Ally entered into private
placement agreements with investors of Ally
common stock for an aggregate price of $1.0
billion (later increased to $1.3 billion in
November 2013). Concurrently, Ally also entered
into agreements with OFS to repurchase all of
the outstanding MCP stock and terminate the
MCP’s Share Adjustment Right (SAR), which
provided OFS with the right to receive
additional common stock of Ally under certain
circumstances if certain events occurred prior to
December 30, 2016. Ally repurchased all of its
MCP stock from OFS for $5.2 billion in
November 2013. In addition, OFS received an
additional $725 million for the elimination of the
SAR. OFS is actively seeking to wind-down the
remaining investment in Ally, which represents
approximately 63 percent of Ally’s common stock
after Ally’s private placement completed in
November 2013.

In December 2012, OFS announced its intent to
fully exit its investment in GM within the next
12-15 months. Concurrently with that
announcement, GM purchased 200 million
shares of GM common stock from OFS, for
proceeds of $5.5 billion. In early 2013, OFS
commenced the disposition of its remaining 300
million common shares of GM common stock
through a series of pre-arranged written trading
plans. In June 2013, OFS sold an additional 30
million shares of GM common stock in an
underwritten sale in connection with the
inclusion of GM common stock in the S&P 500
index for proceeds of $1.0 billion. The total
amount collected for fiscal year 2013 was $12.0
billion. As of September 30, 2013, 101 million
common shares remained outstanding valued at
$3.6 billion. OFS expects to complete the
disposition of all remaining shares by the end of
2013.

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

Additional information on the AIFP, including
details on the programs purpose, overview, and
status can be found at the following website:

	

13 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/automotiveprograms/Pages/default.aspx

to OFS from such common stock sales were $9.9
billion less than cost.
During fiscal year 2013, OFS sold its and
Treasury’s remaining 234 million shares of AIG
common stock in two underwritten public
offerings for aggregate proceeds of
approximately $7.6 billion. The proceeds from
these sales consisted of $5.0 billion to OFS and
additional proceeds to the Treasury for
additional Treasury shares of $2.6 billion. On
March 1, 2013, AIG repurchased warrants
issued to OFS in 2008 and 2009 for
approximately $25 million. OFS disbursed a
total of $67.8 billion to AIG, and following this
sale, OFS’s cumulative net proceeds from
repayments, sales, dividends, interest, and other
income related to AIG assets totaled $55.3
billion, and OFS has no residual interest in AIG.

American	International	Group	(AIG)	
Investment	Program
In fiscal year 2013, OFS exited all remaining
holdings in AIG. During the financial crisis, the
OFS’s and the FRBNY’s peak support for AIG
totaled $182.3 billion. That included $69.8
billion that OFS committed and $112.5 billion
committed by the FRBNY, including $22.1
billion of these commitments which were later
cancelled. As a result of the combined efforts of
AIG, OFS, and the Federal Reserve, $22.7 billion
in excess of the total of funds disbursed has been
recovered through sales and other income.
In fiscal year 2011, Treasury, including OFS, the
FRBNY, the trustees of the AIG Facility Trust
(Trust)2 and AIG completed a restructuring of
government investments in AIG. As part of the
restructuring, Treasury received 1.7 billion AIG
shares (1.1 billion TARP shares and 563 million
additional Treasury shares from the trust
established by the FRBNY for the benefit of
Treasury). Since the restructuring, OFS
managed both the TARP and additional
Treasury shares and sold them on a pro-rata
basis.

OFS sold all the TARP and additional Treasury
shares at an average price of $31.18 per share.
Because the additional Treasury shares came
from the trust, the additional Treasury shares
were provided to Treasury at no cost and are not
included in the OFS financial statements. The
TARP shares had a cost basis of $43.53 per
share. However, the figure of $28.73 per share
was often referred to as Treasury’s “break-even”
price for AIG common stock sales in order for
Treasury to recover the TARP AIG investment
because that number averages the cost over the
TARP shares and the additional Treasury
shares. Thus, the average price realized was in
excess of that break-even price. While TARP
recovered less than its total investment, this was
offset by the proceeds from the additional
Treasury shares of AIG, resulting in overall
proceeds exceeding disbursements for Treasury.

During fiscal year 2012, AIG completed the
repayment of OFS’s preferred interests in the
AIG SPVs for proceeds of $9.6 billion. In
addition, OFS conducted four offerings that sold
a total of 1.2 billion shares of AIG common stock
(including 806 million TARP shares) at prices
that ranged from $29.00 per share to $32.50 per
share. Total proceeds from these sales
amounted to $38.2 billion, consisting of $25.2
billion in proceeds to OFS and additional
proceeds to the Treasury for the additional
Treasury shares of $13.0 billion. The proceeds

                                                            
The independent trust established to manage the
Treasury’s beneficial interest in preferred AIG shares
from the FRBNY.

2

14	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
reduced monthly mortgage payments that are
affordable and sustainable over the long-term.

Operational	Goal	Two:	Continue	
Helping	Families	in	Need	to	Avoid	
Foreclosure	

As of September 30, 2013, approximately 1.3
million homeowners have received permanent
modifications through HAMP.3 This includes
modifications on both non-GSE loans (for which
the cost is paid by TARP) and GSE loans (for
which the cost is paid by the GSEs).
Homeowners participating in HAMP have
collectively experienced nearly a 40 percent
median reduction in their mortgage payments—
representing more than $546 per month. MHA
has also encouraged the mortgage industry to
adopt similar programs that have helped
millions more at no cost to taxpayers by
establishing standards and best practices for
loss mitigation evaluations. As of September 30,
2013, homeowners in HAMP have had their
principal reduced by an estimated $22.3 billion.

Making	Home	Affordable	(MHA)	
Consistent with OFS’s goal of continuing to help
struggling homeowners find solutions to avoid
foreclosure wherever possible, OFS is continuing
to implement the MHA program and to reach as
many homeowners as possible. As of September
30, 2013, 91 non-GSE servicers are participating
in MHA. As of September 30, 2013, OFS has
commitments to fund up to $29.9 billion in MHA
payments and has disbursed $6.5 billion since
inception.
OFS publishes quarterly assessments of servicer
performance containing data on compliance with
program guidelines as well as program results
metrics. OFS believes that these assessments
have set the standard for transparency about
mortgage servicer efforts to assist homeowners
and encourage servicers to improve processes
and performance for foreclosure prevention
activities.

On May 30, 2013, the Administration extended
the application deadline for MHA programs
through December 2015 to provide struggling
homeowners additional time to access
sustainable mortgage relief, and to align the end
dates for key assistance programs. OFS and the
U.S. Department of Housing and Urban
Development (HUD) announced that the new
deadline was determined in coordination with
the Federal Housing Finance Agency (FHFA) to
align with extended deadlines for the Home
Affordable Refinance Program (HARP) and the
Streamlined Modification Initiative for
homeowners with loans owned or guaranteed by
Fannie Mae and Freddie Mac.

MHA performance highlights for fiscal year 2013
can be found at:

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Making-HomeAffordable-Program-Performance-Report.aspx.  
Additional information on MHA, including
details on the programs purpose, overview, and
status can be found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/mha/Pages/default.aspx

Housing	Finance	Agency	Innovation	Fund	
for	the	Hardest	Hit	Housing	Markets	
(Hardest	Hit	Fund)	

Home	Affordable	Modification	Program	
(HAMP)	

In addition to MHA, OFS also operates the
Hardest Hit Fund, which allows participating
HFAs in the nation’s hardest hit housing and
unemployment markets to design innovative,

The largest program within MHA is the Home
Affordable Modification Program (HAMP).
HAMP offers responsible homeowners who are
at risk of foreclosure the opportunity to obtain

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

                                                            
3

	

667,093 of these modifications were OFS funded.

15 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
locally-targeted foreclosure prevention
programs. As of September 30, 2013, all 19
HFAs are fully operational and have created
extensive infrastructures to operate these
programs, including selecting and training
networks of housing counselors to assist with
applications, creating homeowner portals to aid
homeowners in applying for assistance, and
hiring underwriters and other staff to review
and approve applications. The five largest
servicers (Bank of America, JPMorgan Chase,
Wells Fargo, Citibank, and GMAC) are currently
participating in programs in all 19 jurisdictions,
primarily through mortgage payment assistance
and mortgage loan reinstatement assistance.

FHA	Refinance	Program		
On March 26, 2010, the Department of Housing
and Urban Development (HUD) and Department
of the Treasury announced enhancements to the
Federal Housing Administration Refinance
Program (FHA Refinance), designed to make
homeownership more affordable for borrowers
whose homes are worth less than the remaining
amounts on their mortgage loans (negative
equity). TARP funds were made available by
OFS through an $8.0 billion letter of credit
facility, in order to fund a share of the losses
experienced by FHA associated with this
program (subsequently reduced to $1.0 billion in
fiscal year 2013 due to low utilization). As of
September 30, 2013, FHA guaranteed 3,015
Refinance loans with a total face value of almost
$489 million covered under OFS’s letter of credit
facility. One default has been realized resulting
in $47,840 in claim payments by OFS.

As of September 30, 2013, the 19 HFAs have
collectively drawn approximately $2.9 billion
(38.3 percent) of the $7.6 billion allocated under
the program. For fiscal years 2013 and 2012,
this program has disbursed $1.4 billion and $861
million, respectively. Each state draws down
funds as they are needed, but must have no
more than five percent of their allocation on
hand before they can draw down additional
funds. States have until December 31, 2017, to
have entered into agreements with borrowers.

Operational	Goal	Three:	Minimize	
Cost	to	Taxpayer	
 
OFS manages TARP investments to minimize
costs to taxpayers by managing the timely exit of
these investments to reduce taxpayers’ exposure,
return TARP funds to reduce the federal debt,
and continue to replace government assistance
with private capital in the financial system. OFS
has taken a number of steps during fiscal years
2013 and 2012 to dispose of OFS’s outstanding
investments in a manner that balances the need
to exit these investments as quickly as
practicable with maximizing returns for
taxpayers. OFS also takes steps to ensure that
TARP recipients comply with any TARP-related
statutory or contractual obligations such as
executive compensation requirements and
restrictions on dividend payments.

Each HFA submits a quarterly report on the
progress of its program. These reports include
the states’ performance on metrics set by OFS on
various aspects of their programs. Direct links
to each state’s most recent performance report
can be found at:
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/Pages/ProgramDocuments.aspx.
Additional information on the Hardest Hit Fund,
including details on the program’s purpose,
overview, and status can be found at the
following website:

OFS’s exit strategies for TARP investment
programs depend on each investment and are
subject to market conditions. In disposing of
TARP investments, OFS takes a disciplined
portfolio approach – reviewing each investment

http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/hhf/Pages/default.aspx

16	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
compliance reviews performed by OFS’s
compliance agent, Making Home AffordableCompliance (MHA-C), a separate, independent
division of Freddie Mac, to ensure that servicers’
obligations under MHA requirements are being
met. In fiscal year 2011, OFS began publishing
quarterly assessments of the largest servicers
comprising approximately 89% of the HAMP
mortgage servicing market and continued
publishing these quarterly assessments
throughout fiscal year 2013. These assessments
have helped force the industry to improve its
practices.

and closely monitoring risk and performance. In
addition to repayments by participants, OFS has
disposed of investments to third parties through
public and private offerings and auctions.
Utilizing auctions promotes competition and
produces prices that are market-driven.

Risk	Assessment	
OFS has developed procedures to identify and
mitigate investment risk. These procedures are
designed to identify TARP recipients that face a
heightened financial risk and determine
appropriate responses to preserve OFS’s
investment on behalf of taxpayers, while
maintaining financial stability. Specifically,
OFS’s external asset managers review publicly
available information to identify recipients for
which pre-tax, pre-provision earnings and
capital may be insufficient to offset future losses
and maintain required capital. For certain
institutions, OFS and its external asset
managers engage in heightened monitoring and
due diligence that reflects the severity and
timing of the challenges.

Operational	Goal	Four:	Continue	to	
Operate	with	the	Highest	Standards	
of	Transparency,	Accountability,	and	
Integrity	
 
To protect taxpayers and help ensure that every
dollar is directed toward promoting financial
stability, OFS established comprehensive
accountability and transparency measures. OFS
is committed to operating its investment and
housing programs in full view of the public. This
includes providing regular and comprehensive
information about how TARP funds are being
spent, who has received them and on what
terms, and how much has been collected to date.

Compliance		

OFS also takes steps to ensure that TARP
recipients comply with their TARP-related
statutory and contractual obligations. Statutory
obligations include executive compensation
restrictions. Contractual obligations vary by
investment type. For most of OFS’s preferred
stock investments, TARP recipients must comply
with restrictions on payment of dividends and on
repurchases of junior securities. Recipients of
exceptional assistance (currently GM and Ally)
must comply with additional restrictions on
executive compensation, lobbying, corporate
expenses and internal controls and must provide
quarterly compliance reports.

All of this information, along with numerous
reports of different frequencies is posted on the
Financial Stability section of the Treasury.gov
website, which can be found at:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx
These reports include:


In addition, all mortgage servicers participating
in MHA are subject to program guidelines,
which require the servicer to offer MHA
assistance to all eligible borrowers and to have
systems that can process all MHA-eligible loans.
Servicers are subject to periodic, on-site

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

A Daily TARP Update, which features
detailed financial data related to each
TARP investment program including the
status of disbursements and all
collections by category;

17 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 











http://www.treasury.gov/initiatives/financialstability/reports/Pages/Annual-AgencyFinancial-Reports.aspx

A monthly report to Congress that
details how TARP funds have been used,
the status of recovery of such funds by
program, and information on the
estimated cost of TARP;
A monthly report on dividend and
interest payments;
A monthly report on Making Home
Affordable;
A report of each transaction (such as an
investment or repayment) within two
business days of each transaction;
A quarterly report on the Hardest Hit
Fund;
A quarterly report on PPIP that provides
detailed information on the funds, their
investments, and returns. It is typically
released within one month after the end
of each quarter; and
A semi-annual report on warrant
dispositions.

In its five years of operation, TARP’s financial
statements have received five unmodified audit
opinions from its auditor, the GAO. OFS also
received a Certificate of Excellence in
Accountability Reporting (CEAR) from the
Association of Government Accountants for
fiscal years 2012, 2011, 2010 and the period
ending September 30, 2009.

TARP	Retrospective	Reports	and	the	TARP	
Tracker	

In March 2013, OFS published the Troubled
Asset Relief Program Four Year Retrospective
Report - An Update on The Wind-Down of
TARP. This serves as an update to OFS’s TARP
Three-Year Anniversary report, which was
published in October 2011. In October 2010,
OFS published the TARP Two Year
Retrospective, which contains a comprehensive
history of each TARP program. These reports
include information on TARP programs and the
effects of TARP and additional emergency
measures taken by the federal government to
stabilize the financial system following the 2008
crisis.

In addition, OFS regularly publishes data files
related to MHA and transaction reports that
show activity related to MHA and HHF. The
release of the data file fulfills a requirement
within the Dodd-Frank Act to make available
loan-level data about the program. OFS updates
the file monthly and will expand reporting to
include newer initiatives that are part of MHA.
Researchers interested in using the MHA Data
File can access the file and user guide at:

In addition, during fiscal year 2013, OFS
launched an expanded version of its existing
TARP Tracker, which is an online, interactive
tool that allows users to track the flow of TARP
funds in greater detail over the lifetime of each
individual TARP investment area. The expanded
capability allows users to view each investment
area separately to get a clearer sense of what
has occurred in a particular program, including
a scroll of events, major transactions, and
legislative actions that have impacted the
program.

http://www.treasury.gov/initiatives/financialstability/reports/Pages/mha_publicfile.aspx.

Audited	Financial	Statements			

OFS prepares separate financial statements for
TARP on an annual basis. This is the fifth OFS
Agency Financial Report (AFR), and includes the
audited financial statements for the fiscal years
ended September 30, 2013 and September 30,
2012. Additional reports for prior periods are
available at:

Readers are invited to refer to these documents
at: http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx

	

18	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
audits and reports that focus on the many
aspects of TARP. Individually and collectively,
the oversight bodies’ audits and reports have
made and continue to make important
contributions to the development, strengthening,
and transparency of TARP programs.

Oversight	by	Four	Separate	Agencies	

Congress also established four avenues of
oversight for TARP:





The Financial Stability Oversight Board,
established by EESA Section 104;
Specific responsibilities for the GAO as
set out in EESA Section 116;
The Special Inspector General for TARP,
established by EESA Section 121; and
The Congressional Oversight Panel
(COP), established by EESA Section 125.
COP concluded its operations in
accordance with EESA on April 3, 2011.

Congressional	Hearings	and	Testimony	
OFS officials have testified in numerous
Congressional hearings since TARP was created.
Copies of their written testimony are available
at:
http://www.treasury.gov/initiatives/financialstability/news-room/Pages/default.aspx.

OFS has productive working relationships with
all of these bodies, and cooperates with each
oversight agency’s effort to produce periodic

	
 
 

 

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

19 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 

Fiscal	Year	2012	and	2013	Financial	Summary	and	Cumulative	Net	
Income	
 
Over time the cost of TARP programs will
change. As described later in the OFS audited
financial statements, these estimates are based
in part on currently projected economic factors.
These economic factors will likely change, either
increasing or decreasing the lifetime cost of
TARP.

OFS’s fiscal year 2013 net income from
operations of $7.7 billion includes the reported
net income related to loans, equity investments,
and other credit programs. For the fiscal year
ended September 30, 2013, OFS reported net
subsidy income for six programs –CPP, CDCI,
TALF, PPIP, AGP, and AIFP. These programs
collectively reported net subsidy income of $11.9
billion. Also, for the fiscal year ended
September 30, 2013, OFS experienced net
subsidy cost for two programs – AIG and FHA
Refinance Program totaling $34 million. Fiscal
year 2013 expenses for the Treasury housing
programs under TARP of $4.0 billion and
administrative costs of $248 million bring the
total reported fiscal year net income from
operations to $7.7 billion. For the fiscal year
ended September 30, 2012, the net income from
operations was $7.7 billion. These net income
amounts reported in the financial statements
reflect only transactions through September 30,
2013 and September 30, 2012, respectively, and
therefore are different than lifetime cost
estimates made for budgetary purposes.

20	

TARP	Program	Summary	
Table 1 provides a financial summary for TARP
programs since its inception on October 3, 2008,
through September 30, 2013. For each program,
the table provides utilized TARP authority
(which includes purchases made, legal
commitments to make future purchases, and
offsets for guarantees made), the amount
actually disbursed, repayments to OFS from
program participants or from sales of the
investments, write-offs and losses, net
outstanding balance as of September 30, 2013,
and cash inflows on the investments in the form
of dividends, interest or other fees. As of
September 30, 2013, $30 billion of the $456.6
billion in purchase and guarantee authority
remained unused.

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Table 1: TARP Summary1 
From TARP Inception through September 30, 2013 
(Dollars in billions) 
  

Bank Support Programs 

Purchase Price 
or Guarantee 
Amounts 
 

Investment 
Sales and 
Repayments 
 

Total $ 
Disbursed 
 

Write‐offs 
and 
Losses3 
 

Received 
from 
Invest‐
ments 
 

Out‐
standing 
Balance4 
 

$   204.9 

$   204.9 

$   (197.9)6 

$   (3.9) 

$   3.1 

$   26.8 

40.0 

40.0 

(40.0) 

‐ 

‐ 

4.4 

Asset Guarantee Program 

5.0 

‐ 

‐ 

‐ 

‐ 

4.1 

Community Development 
Capital Initiative 

0.6 

0.6 

(0.1) 

‐ 

0.5 

‐ 

 

 

 

 

 

 

19.6 

18.6 

(18.6) 

‐ 

‐ 

3.8 

Term Asset‐Backed Securities 
Loan Facility 

0.1 

0.1 

(0.1) 

‐ 

‐ 

0.6 

SBA 7(a) Securities Purchase 
Program 
Other Programs 
Automotive Industry Financing 
Program 

0.4 

0.4 

(0.4) 

‐ 

‐ 

‐ 

 

 

 

 

 

 

79.7 

79.7 

(47.1) 

(12.7) 

19.9 

6.2 

67.8 

67.8 

(54.3) 

(13.5) 

‐ 

1.0 

418.1 

412.1 

(358.5) 

(30.1) 

23.5 

46.9 

38.57 

9.5 

N/A 

N/A 

N/A 

N/A 

Capital Purchase Program5 
Targeted Investment Program 

Credit Market Programs 
Public‐Private Investment 
Program 

American International Group 
Investment Program2 
Sub‐total for Investment 
Programs 
Treasury Housing Programs 
under TARP 

$   456.6 
$   421.6 
$   (358.5) 
$   (30.1) 
$   23.5 
$  46.9 
Total for TARP Program 
1
This table shows TARP activity for the period from inception through September 30, 2013, on a cash basis. Received from 
investments includes dividends and interest income reported in the Statement of Net Cost, and proceeds from sale and 
repurchases of assets in excess of costs.   
2
The amounts for AIG reflect only the operations of TARP and do not reflect proceeds received from the sale of shares of AIG 
common stock held by Treasury outside of TARP (additional Treasury shares). For further details, see the discussion of the 
American International Group Investment Program, beginning on page 14. 
3 
Losses represent proceeds less than cost on sales of assets which are reflected in the financial statements within “net 
proceeds from sales and repurchases of assets in excess of (less than) cost.” 
4
 Total disbursements less repayments, write‐offs and losses do not equal the total outstanding balance because the 
disbursements for the Treasury housing programs under TARP generally do not require (and OFS does not expect) repayments. 
5
OFS received $31.9 billion in proceeds from sales of Citigroup common stock, of which $25.0 billion is included at cost in 
investment sales, and $6.9 billion of net proceeds in excess of cost is included in Received from Investments. 
6
Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI exchanges from CPP of $363 million. 
7
 Individual obligation amounts are $29.9 billion for the Making Home Affordable Program, $7.6 billion for the Hardest Hit Fund, 
and $1.0 billion committed for the FHA Refinance Program. 

 
 

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

21 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
agreed upon values and (ii) $5.5 billion from
auctions. TARP’s Warrant Disposition Report is
posted on the OFS website at the following link:

Most TARP funds were used to make
investments in preferred stock or to make loans.
OFS has generally received dividends on the
preferred stock and interest payments on the
loans from the institutions participating in
TARP programs. These payments represent
additional proceeds received on OFS’s TARP
investments. From inception through
September 30, 2013 OFS received a total of
$24.2 billion in dividends and interest.

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Warrant-DispositionReports.aspx. 

Summary	of	TARP	Equity	
Investments	

OFS has conducted several sales of its
investments in banking institutions as part of its
exit strategy for winding down TARP. OFS plans
to continue to sell its investments in banks that
are not expected to repay OFS in the foreseeable
future. These sales are being conducted over
time and in stages and include both common and
preferred stock and debentures. During fiscal
years 2013 and 2012, OFS sold its investments
in 113 and 40 banks for combined proceeds of
$1.5 billion and $1.3 billion, respectively,
through individual public and private auctions.
These auctions resulted in net proceeds less
than cost of $455 million and $180 million for
those investments, respectively.

Table 2 provides information on the estimated
values of TARP direct loan and equity
investments by program, as of the end of fiscal
years 2013 and 2012. OFS housing programs
under TARP are excluded from the chart
because no repayments are expected. The
Outstanding Balance column represents the
amounts disbursed by OFS relating to the loans
and equity investments that were outstanding
as of September 30, 2013 and 2012. The
Estimated Value of the Investment column
represents the present value of net cash inflows
that OFS estimates it will receive from the loans
and equity investments. These estimates include
market risk assumptions. For equity securities,
this amount represents fair value. The total
difference of $5.6 billion (2013) and $22.9 billion
(2012) between the two columns is considered
the “subsidy cost allowance” under the Federal
Credit Reform Act methods OFS follows for
budget and accounting purposes.

OFS also received warrants in connection with
most of its investments, which provides an
opportunity for OFS on behalf of taxpayers to
realize additional proceeds on investments.
Since the program’s inception, through
September 30, 2013, OFS has received $9.5
billion in gross proceeds from the disposition of
warrants associated with 204 CPP investments,
both TIP investments, AGP, and AIG, consisting
of (i) $4.0 billion from issuer repurchases at

22	

See Note 6 in the financial statements for
further discussion.

 

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Table 2:  Summary of TARP Direct Loans and Equity Investments 
(Dollars in billions) 
Estimated 
Outstanding 
Value of 
Balance as 
Investment 
of 
as of 
September 
September 
Program 
30, 20131 
30, 2013 
Bank Support Programs 
 
 
Capital Purchase Program 
$   3.1 
$   1.8 
Community Development 
       0.5   
       0.4   
Capital Initiative 
Credit Market Programs 
 
 
Public‐Private Investment 
0.0 
0.0 
Program 
Term Asset‐Backed 
0.0 
0.1 
Securities Loan Facility 
 
 
 
Other Programs 
Automotive Industry 
Financing Program 
American International 
Group Investment 
Program 
Total  
1
 Before subsidy cost allowance. 

Outstanding 
Balance as 
of 
September 
30, 20121 
 
$   8.7 
       0.6   

Estimated 
Value of 
Investment 
as of 
September 
30, 2012 
 
$   5.7 
       0.4   

 

 

9.8 

10.8 

0.1 

0.7 

 

 

 

 

 

 

       19.9 

       15.6 

       37.2  

       17.5 

0.0 

0.0 

6.7 

5.1 

$   23.5 

$   17.9 

$   63.1 

$   40.2 

 
and prepayments. Wherever possible, OFS uses
market prices of tradable securities to estimate
the fair value of TARP investments. Use of
market prices was possible for TARP
investments that trade in public markets or are
closely related to tradable securities. For those
TARP investments that do not have direct
analogs in private markets, OFS uses internal
market-based models to estimate the market
value of these investments. All future cash flows
are adjusted for market risk. Further details on
asset valuation can be found in Note 6 of the
Financial Statements.

The ultimate cost of TARP will not be known for
some time, but it is not expected to change
significantly as only a few investment programs
remain open with much of the original disbursed
investments repaid. The financial performance
of the remaining programs will depend on many
factors, such as future economic and financial
conditions, and the business prospects of specific
institutions. The cost estimates are sensitive to
slight changes in model assumptions, such as
general economic conditions, specific stock price
volatility of the entities in which OFS has an
equity interest, estimates of expected defaults,

	
	
	
	
	
	
	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

23 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
disbursements for Treasury housing programs
under TARP are completed, and adhere to
general government budgeting guidance. This
table will not tie to the financial statements
since it includes repayments and disbursements
expected to be made in the future. Table 3 is
consistent with the estimated TARP lifetime cost
disclosures on the OFS web site at:

Comparison	of	Estimated	Lifetime	TARP	
Costs	Over	Time	
Market conditions and the performance of
specific financial institutions are critical
determinants of TARP’s estimated lifetime cost.
The changes in OFS estimates since TARP’s
inception through September 30, 2013, provide a
good illustration of this impact. Table 3 provides
information on how OFS’s estimated lifetime
cost of TARP has changed over time. These
costs for the non-housing programs fluctuate in
large part due to changes in the market prices of
common stock for AIG and GM and the
estimated value of the Ally stock. This table
assumes that all expected investments and

http://www.treasury.gov/initiatives/financialstability/Pages/default.aspx.
The cost amounts in Table 3 are based on
assumptions regarding future events, which are
inherently uncertain.

Table 3:  Estimated Lifetime TARP Costs (Income)1 
 
(Dollars in billions) 
 
Estimated Lifetime Cost (Income) as of September 30 
20095
2010 
2011 
2012 
2013 
Program 
Bank Support Programs 
 
 
 
 
 
Capital Purchase Program 
$   ( 14.6) 
$   ( 11.2) 
$   ( 13.0) 
$   ( 14.9) 
$   (16.1) 
Targeted Investment Program 
( 1.9) 
( 3.8) 
( 4.0) 
( 4.0) 
( 4.0) 
Asset Guarantee Program2 
( 2.2) 
( 3.7) 
( 3.7) 
( 3.9) 
( 4.0) 
Community Development Capital 
0.4 
0.3 
0.2 
0.2 
0.1 
Initiative 
Credit Market Programs 
 
 
 
 
 
Public‐Private Investment Program 
1.4 
( 0.7) 
( 2.4) 
( 2.4) 
( 2.7) 
Term Asset‐Backed Securities Loan 
( 0.3) 
( 0.4) 
( 0.4) 
( 0.5) 
( 0.6) 
Facility 
SBA 7(a) Securities Purchase Program 
N/A 
‐‐‐ 
‐‐‐ 
‐‐‐ 
‐‐‐ 
Other Programs 
 
 
 
 
 
Automotive Industry Financing 
34.5 
14.7 
23.6 
24.3 
14.7 
Program 
American International Group 
56.8 
36.9 
24.3 
15.3 
15.2 
Investment Program3 
Subtotal  
74.1 
32.1 
24.6 
14.1 
2.6 
Treasury Housing Programs under 
50.0 
45.6 
45.6 
45.6 
37.7 
4
TARP  
 
Total 
$   124.1 
$   77.7 
$   70.2 
$   59.7 
$   40.3 
1
 Estimated program costs (+) or savings (in parentheses) over the life of the program, including interest on re‐estimates 
and excluding administrative costs. 
2
 Prior to the termination of the guarantee agreement, OFS guaranteed up to $5.0 billion of potential losses on a $301.0 
billion portfolio of loans. 
3
 The amounts for AIG reflect only the operations of TARP and do not reflect proceeds received from the sale of shares of 
AIG common stock held by Treasury outside of TARP (additional Treasury shares). For further details, see the discussion of 
 
the American International Group Investment Program, beginning on page 14.
4 
The estimated lifetime cost for Treasury Housing Programs under TARP represent the total commitment except for the 
FHA Refinance Program, which is accounted for under credit reform. The estimated lifetime cost of the FHA Refinance 
Program represents the total estimated subsidy cost associated with total obligated amount. 
5 
Estimated lifetime cost for 2009 includes funds for projected disbursements and anticipated obligations. 

24	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

Key	Trends/Factors	Affecting	TARP	Future	Activities	and	Ultimate	
Cost	
inception through September 30, 2013, $9.5
billion has been disbursed under these
programs, consisting of $6.5 billion for MHA,
$2.9 billion for the Hardest Hit Fund, and $0.1
billion for the FHA Refinance Program. If all
active modifications made as of September 30,
2013, in association with MHA were to remain
current and receive incentives for five years,
OFS estimates that $13.3 billion in incentive
fees will ultimately be disbursed for MHA
alone. The program is continuing to enter into
new modifications as the termination date
was extended to December 31, 2015.
Separately, $7.6 billion has been allocated for
the Hardest Hit Fund and $1.0 billion for the
FHA Refinance Program.

This section provides additional TARP
analytic information and enhanced sensitivity
analysis focusing on the remaining TARP
dollars/continued taxpayer exposure and what
is likely to affect the expected future return.
As of September 30, 2013, one TARP program
– the AIFP – has more than $5.0 billion still
outstanding and remains at the most risk of
additional taxpayer loss. Going forward, the
collections or costs from the AIFP and the
expenditures for Treasury housing programs
under TARP are expected to most significantly
affect changes to the lifetime cost of TARP.

Automotive	Industry	Financing	
Program	

Sensitivity	Analysis		

As of September 30, 2013, OFS’s gross AIFP
investments outstanding in GM and Ally
Financial totaled $19.9 billion, with an
estimated value of $15.6 billion. The future
value of OFS’s investment in GM will depend
on the market price of GM common stock,
which is affected by a variety of factors
specific to the financial condition and results
of operations of GM as well as factors
pertaining to the industry and the overall
economy, such as the competitiveness of U.S.
manufacturers, both domestically and
internationally, and macroeconomic conditions
(unemployment, Gross Domestic Product
growth, etc.) which affect the overall trends in
auto sales. The future value of OFS’s
investment in Ally will depend on industry
and macroeconomic factors as well as
company-specific factors, including in
particular the ability of the company to
resolve the bankruptcy of its subsidiary,
Residential Capital, LLC (ResCap), in a timely
and cost-effective manner, and the proceeds
realized from the sale of its international
operations.

The ultimate value of TARP investments will
only be known in time. Realized values will
vary from current estimates in part because
economic and financial conditions will change.
Many TARP investments do not have readily
observable values and their values can only be
estimated by OFS.
Sensitivity analysis is one way to get some
feel for the degree of uncertainty around the
OFS estimates. In the analysis reported here,
OFS focuses on the AIFP as it is the only
remaining program with outstanding
investments in excess of $5.0 billion.

AIFP	Analysis	
The most important inputs to the valuation of
OFS’s outstanding investments under the
AIFP are the market price of New GM
common stock and the change in the
estimated value of Ally Financial common
stock, which is based on the price paid by
private investors in November, 2013. Table 4
shows the change in estimated value of OFS
outstanding AIFP investments based on a 10
percent increase and 10 percent decrease in
the trading price of the New GM common
stock and separately a 10 percent increase

Treasury	Housing	Programs	Under	
TARP	
OFS committed $38.5 billion to fund Treasury
housing programs under TARP. From

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

	

25 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
and 10 percent decrease in the estimated
value of the Ally Financial common stock.
Figure A shows that the GM securities have

recently been trading within the range used in
the analysis as well as outside of this range,
illustrating the uncertainty around the cost
estimates.

Table 4: Impact on AIFP Valuation
September 30, 2013
Reported Value for
AIFP

Effect of 10%
Increase

Effect of 10%
Decrease

Impact of GM on AIFP

$15.60

$15.95

$15.25

% change from current

N/A

2.24%

(2.24)%

Impact of Ally (formerly
GMAC) on AIFP

$15.60

$16.79

$14.40

% change from current

N/A

7.66%

(7.66)%

(Dollars in billions)

 
Figure A shows the daily closing price of the
New GM common stock during fiscal years
2012 and 2013. The closing price for

September 30, 2013 was $35.97. The dashed
lines represent the high and low price used in
the sensitivity analysis.

Figure A: Daily Price of GM Common Stock
45
40
35

$ Price

30
25
20
15
10
5
0

Daily Closing  Price

Increase 10%

Decrease 10%

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

26	

 

AGENCY FINANCIAL REPORT | FISCAL YEAR 2013

Systems, Controls, and Legal Compliance
MANAGEMENT ASSURANCE STATEMENT
The Office of Financial Stability‘s (OFS) management is responsible for establishing
maintaining effective internal control and financial management systems that meet the
Federal Managers‘ Financial Integrity Act (FMFIA), 31 U.S.C. 3512(c),(d). OFS
evaluated its management controls, internal controls over financial reporting, and
the federal financial systems standards. As part of the evaluation process, we
the results of extensive documentation, assessment and testing of controls across
OFS, as well
the results of independent audits. We conducted our reviews of internal controls
in
with FMFIA and Office of Management and Budget (OMB) Circular
As a result of our reviews, management concludes that the management control
described below, taken as a whole, were achieved as of September
Specifically,
assurance is provided relative to Section 2 (internal controls) and 4 (systems controls)
OFS further assures that the financial management systems relied upon by OFS are in
compliance with the requirements imposed by the Federal Financial Management
Act
OFS‘ internal controls are designed to meet the management objectives established by
and listed
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)

Programs achieve their intended
Resources are used consistent with overall
Programs and resources are free from waste, fraud, and
Laws and regulations are
Controls are sufficient to minimize any improper or erroneous
Performance information is
System security is in substantial compliance with all relevant
Continuity of operations planning in critical areas is sufficient to reduce risk
reasonable levels;
(i) Financial management systems are in compliance with federal financial
standards, i.e., FMFIA Section 4 and
In addition, OFS management conducted its assessment
effectiveness of internal
over financial reporting, which includes safeguarding of assets and compliance with
laws and regulations, in accordance with OMB Circular A-123,
for Internal Control, Appendix A, Internal Control over Financial Reporting. Based on
results of this evaluation, OFS provides unqualified assurance that internal control over
reporting is appropriately designed and operating effectively as of September 30, 2013,
related material weaknesses
with
Sincerely,

Timothy G. Massad
Assistant Secretary for Financial Stability

MANAGEMENT’S DISCUSSION AND ANALYSIS

27

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
first full year of operation. OFS continues to
refine its internal controls assessment process
to ensure that management can identify risks
and deficiencies and make timely corrective
actions. The OFS fiscal year 2013 selfassessment of its system of internal controls
did not identify any significant deficiencies or
material weaknesses.

Internal	Control	Program		
	

OFS continues to have a high performing
internal control program in compliance with
the Federal Managers’ Financial Integrity Act
(FMFIA). FMFIA and OMB Circular A-123,
Management’s Responsibility for Internal
Control, require agencies to evaluate and
report on internal controls in place to ensure
effectiveness and efficiency of operations,
compliance with applicable laws and
regulations, and reliability of financial
reporting. OFS has completed these rigorous
assessments since fiscal year 2009.

Information	Technology	Systems	
	

In fiscal year 2013, OFS continued to utilize
and improve the Core Investment Transaction
Flow (CITF), TARP’s system of record and
accounting translation engine. OFS finetuned several standardized management
reports from CITF to improve their usefulness
to management decision-making and added
functionality to capture key data elements for
use in preparing the financial statements and
associated notes.

OFS has a Senior Assessment Team (SAT) to
guide the organization’s efforts to meet the
statutory and regulatory requirements
surrounding a sound system of internal
control. OFS’s internal control framework is
based on the principles of the Committee of
Sponsoring Organizations of the Treadway
Commission (COSO). The SAT leverages this
framework in communicating control
objectives across OFS and its third-party
service providers. Furthermore, managers
throughout OFS are responsible for ensuring
that effective internal controls are
implemented in their areas of responsibility.
Senior management throughout OFS provides
assurance statements annually concerning
whether there is reasonable assurance that
the objectives of internal control are met.
Senior management also reports on and takes
steps to correct control weaknesses and tracks
those weaknesses through resolution.

Other financially relevant systems are
supported by financial agents, which provide
services to OFS. The financial agency
agreements maintained by the Treasury
Office of the Fiscal Assistant Secretary in
support of OFS require financial agents to
design and implement suitably robust security
plans and internal control programs, to be
reviewed and approved by OFS at least
annually.
In addition, OFS utilizes financial systems
maintained by Treasury Departmental Offices
and various Treasury bureaus. These systems
are in compliance with federal financial
management systems standards and undergo
regular independent audits.

OFS management believes that maintaining
integrity and accountability in all programs
and operations is critical to its mission and
demonstrates responsible stewardship over
assets and resources. It also promotes
responsible leadership and maximizes desired
program outcomes. OFS has received
unmodified opinions from the GAO on its
financial statements and internal control over
financial reporting since fiscal year 2009, its

28	

Compliance	with	the	Improper	
Payments	Elimination	and	
Recovery	Act	(IPERA)	
	
The Improper Payments Elimination and
Recovery Act of 2010 (IPERA) requires

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
other compliance activities to corroborate risk
assessment results, as well as the Bureau of
the Fiscal Service’s testing results over
administrative disbursements.

agencies to review their programs and
activities annually to identify those
susceptible to significant improper payments.
IPERA significantly increases agency
payment recapture efforts by requiring
reviews of all programs with annual payments
of $1 million or more, if cost-effective. IPERA
requires agencies to report information on
their significant improper payments and
recapture audit programs to the President and
Congress annually.

On April 12, 2012, OMB issued Memorandum
M-12-11 “Reducing Improper Payments
through the ‘Do Not Pay List,’” based on a
Directive provided by the President in June
2010. The President directed agencies to
“review current pre-payment and pre-award
procedures and ensure that a thorough review
of available databases with relevant
information on eligibility occurs before the
release of any Federal funds.” In order to
achieve this mission, the President directed
the creation of a single point of entry through
which agencies would access relevant data
before determining eligibility for Federal
funding commonly referred to as the “Do Not
Pay List.” Prior to the release of this
Directive, OFS already had strong controls in
place to help ensure payment eligibility.
During fiscal year 2013, OFS implemented the
“Do Not Pay List” solution to monitor
administrative disbursements and, to date;
the “Do Not Pay” Business Center has not
identified any potential OFS improper
payments. Going forward, OFS will, as
appropriate, integrate additional “Do Not Pay
List” functionality into its operations.

The elimination of improper payments is a
major focus of OFS senior management.
Managers are held accountable for developing
and strengthening financial management
controls to detect and prevent improper
payments, and thereby better safeguard
taxpayer dollars. OFS carried out its fiscal
year 2013 IPERA review per Treasury-wide
guidance and did not assess any programs or
activities as susceptible to significant
erroneous payments. However, management
did identify a number of Making Home
Affordable (MHA) investor cost share
payments that were erroneously calculated
due to data discrepancies between servicer
files and the MHA system of record. Data
that servicers upload to the MHA system of
record is used to calculate these incentive
payments. The overall impact of the data
errors on incentive payments was immaterial.

Areas	for	Improvement	
	

In fiscal year 2012 and again in fiscal year
2013, OFS concluded that a payment
recapture audit was not cost-effective as all
programs were deemed to have a low risk of
significant improper payments. For many
programs, OFS already has procedures in
place to review payments for completeness
and accuracy prior to and after disbursement.
For the MHA program, nearly 2,000 business
rules have been integrated into the MHA
system of record to ensure the eligibility,
accuracy and appropriateness of incentive
payments. Management leverages OFS’s
extensive internal control testing results or

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

Over the next year, OFS management will
focus on maintaining its internal control
environment in several key areas as follows:
•

	

As programs continue to winddown, OFS will remain vigilant to
maintain effective processes and
controls. OFS management will
take steps to sustain adequate
segregation of duties and the right
level of institutional knowledge
among remaining staff as the size
of the organization decreases.

29 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
•

•

SAT to ensure that any resulting
risk is minimal and controlled.

Third-party service providers will
continue to support critical
services as programs continue to
wind-down. OFS will oversee and
monitor closely these third parties
to safeguard OFS resources and
help ensure the operational
efficiency of programs and
processes.

•

As OFS programs conclude and
staff continues to decrease, OFS
plans to streamline the number
and depth of policies and
procedures to make them more
efficient and reduce the
maintenance burden. OFS will
manage this process through the

OFS has developed information
technology capabilities to increase
efficiency and automate manual
processes. Continuing to leverage
existing information technology
assets will help reduce risks
associated with human error. In
fiscal year 2014, OFS will work to
right-size the information
technology environment to better
align with the decreasing level of
activity due to the ongoing wind
down of OFS programs.

Limitations	of	the	Financial	Statements	
 
prescribed by OMB, the statements are in
addition to the financial reports used to
monitor and control budgetary resources
which are prepared from the same books and
records.

The principal financial statements have been
prepared to report the financial position and
results of operations of OFS’s TARP programs,
consistent with the requirements of 31 U.S.C.
3515(b). While the statements have been
prepared from the books and records of OFS
and the Department of the Treasury in
accordance with section 116 of EESA and
Generally Accepted Accounting Principles
(GAAP) for Federal entities and the formats

 

30	

The statements should be read with the
realization that they are for a component of
the U.S. Government, a sovereign entity.

 

	

	

MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	
R

 

 

	

MESSAGE	FR
ROM	THE	CHIEF FINANCIAL	OFF
FICER

31 

THE	DEPAR
RTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY

 

 

Part	2:	Financial	Report	
 

32	

	

MANA GEMENT‘S	DISCUSSION	AND	ANALYSIS	
A
U
N

 

AGENCY	FI NANCIAL	REPOR
RT	|	FISCAL	YEAR	2013	

 

MESSA
AGE	FROM	THE	C
CHIEF	FIN
NANCIAL
L	OFFICER	(CF0)		
The Office of Financial Stability’s (OF Agency Fin
e
S
FS)
nancial Report for fiscal year 2013 provide readers
t
r
es
informatio on financial results relating to the Trou
on
l
ubled Asset Re
elief Program (
(TARP) as req
quired by the
Emergency Economic St
y
tabilization Ac (EESA) of 20 and other laws. It is a cr
ct
008
ritical part of our efforts to
ensure the highest level of transparen and accoun
e
ncy
ntability to the American people.
e
y
e
y
)
s
For fiscal year 2013, the Government Accountability Office (GAO) provided OFS unmodified audit opinions on
the fair presentation of our financial statements and the effective
o
s
d
eness of our int
ternal control over financial
l
reporting. In addition, th auditors de
he
etermined that we had no m aterial weakn
t
nesses or signif
ficant deficiencies
o
ccounting and financial repo
orting processe Since the i
es.
inception of TA
ARP
relating to internal control over our ac
in 2009, th program ha consistently received unm
he
as
modified audit o
opinions – a re
emarkable ach
hievement for a
start-up or
rganization wi complex pr
ith
rograms.
I would lik to acknowle
ke
edge senior ma
anagement’s co
ommitment to good governa
o
ance as well as the discipline
s
e,
transparen
ncy, and care exhibited by OFS employees in creating an executing o organizati
e
O
s
nd
our
ion’s policies and
procedures We were hon
s.
nored to have received the Certificate of E
C
Excellence in A
Accountability Reporting (CE
EAR)
award from the Associat
m
tion of Government Account
tants for each o the four per
of
riods from ince
eption through the
h
fiscal year 2012.
r
For fiscal year 2013, net income from operations wa $7.7 billion, resulting in a cumulative n cost of
y
t
as
net
operations of $12.6 billio since incept
s
on
tion. Cumulati net cost of operations con
ive
f
nsists of (1) to
otal net subsid cost
dy
of $1.6 bill
lion, and (2) ho
ousing costs an administra
nd
ative costs of $ 9.7 billion and $1.3 billion, r
d
respectively. T
Total
cumulative net subsidy cost consists of net subsidy income from th CPP, TIP, A
c
o
i
he
AGP, PPIP, SB and TALF
BA
investmen totaling $27 billion, offs primarily by net subsidy cost from inv
nts
7.4
set
b
y
vestments in A of $15.2 billion,
AIG
and autom
mobile company investments of $13.7 billio
y
s
on.
During fiscal year 2013, OFS collected a total of $35 billion thro
d
5.9
ough repaymen sales, divi
nts,
idends, and other
receipts. OFS’s gross out
O
tstanding loan and equity in
n
nvestment bala
ance as of Sep
ptember 30, 20 was $23.5
013
billion, com
mprising $19.9 billion in AIF $3.1 billion in CPP, and the remainde in CDCI and TALF. OFS i
9
FP,
n
er
d
is
committed to exiting inv
d
vestments in a timely manne while maxim
er
mizing collecti
ions on behalf of the taxpaye
f
er.
In fiscal ye 2013, OFS continued to maintain rigor
ear
S
rous internal c
control proces
sses around tra
ansaction
processing disbursemen collections and financia reporting. OF further sta
g,
nts,
s,
al
FS
andardized and automated i
its
subsidiary ledger report
y
ting supporting the validatio and reconci
g
on
iliation of finan
ncial data and continued
d
enhancements to various financial rep
ports. In the up
pcoming fiscal year, OFS wi seek to streamline and
l
ill
simplify in
nternal control processes in order to accom
l
o
mmodate the co
ontinued wind
d-down of TAR investment
RP
programs.
This organizat
unate to play a role in the continuing tradi
ition of sound fiscal steward
dship at OFS. T
tion
I feel fortu
recognizes the importan of a robust control enviro
s
nce
onment and wi continue to uphold the hi
ill
ighest standar of
rds
integrity as we carry out our fiduciary responsibiliti to the Ame
a
t
y
ies
erican people.
Sincerely,

Lorenzo Rasetti
Chief Fina
ancial Officer

MESSAGE	FR
ROM	THE	CHIEF FINANCIAL	OFF
FICER

33 

THE	DEPAR
RTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY

 

GOVER
RNMENT
T	ACCOUN
NTABILITY	OFFIC
CE	AUDIT
TOR’S	RE
EPORT	

441 G St. N.W.
Washing
gton, DC
20548

Independe Auditor’s Report
ent
s

To the As
ssistant Sec
cretary for Fin
nancial Stab
bility
In our audits of the fis
scal years 2013 and 201 financial s
12
statements o the Troubled Asset Re
of
elief
Program (TARP), wh
hich is implem
mented by th Office of Financial Stability (OFS),1 we found
he




th OFS finan
he
ncial stateme
ents for TAR as of and for the fisca years ende Septemb
RP
al
ed
ber
30, 2013, and 2012, are presented fa
d
p
airly, in all ma
aterial respe
ects, in accordance with U.S.
generally acc
cepted accou
unting princip
ples;
OFS maintain
O
ned, in all ma
aterial respe
ects, effective internal co
e
ontrol over fin
nancial repo
orting
fo TARP as of Septembe 30, 2013; and
or
o
er
no reportable noncomplia
e
ance for fisca year 2013 with provisiions of applic
al
3
cable laws,
egulations, contracts, an grant agre
c
nd
eements we tested.
re

The follow
wing section discuss in more detail (1) our repo on the fin
ns
n
l
ort
nancial statements and o
on
internal control over financial rep
c
f
porting, which includes tw emphasis of matters related to ce
h
wo
s
ertain
factors af
ffecting the valuation of TARP direct loans, equi ty investmen and asse guarantee
v
t
nts
et
e
program and the TAR reporting entity, and required sup
RP
g
pplementary information (RSI) and o
y
n
other
information included with the fina
ancial statem
ments; (2) ou report on c
ur
compliance w laws,
with
regulations, contracts and grant agreements and (3) ag
s,
s;
gency comments. In addition to our
responsibility to audit OFS’s annual financial statements for TARP, w also are r
t
we
required und
der
the Emer
rgency Econ
nomic Stabilization Act of 2008 (EES 2 to repor at least eve 60 days on
f
SA)
rt
ery
the findin resulting from our ov
ngs
versight of th actions ta ken under T
he
TARP.3 This report respo
onds
to both of these requirements. We have issue numerou other repo on TARP in connection
W
ed
us
orts
P
orting respon
nsibility, whic can be fou on GAO website a
ch
und
O’s
at
with this 60-day repo
http://ww
ww.gao.gov.

1

Section 10 of the Emer
01
rgency Econom Stabilization Act of 2008, Pub. L. No. 110-343, div. A, 1 Stat 3765,
mic
n
122
3767 (Oct. 3, 2008), class
sified at 12 U.S
S.C. § 5211, established OFS within the Depa
artment of the T
Treasury (Treas
sury)
to implement TARP.
2

EESA is classified, in pa as amended as sections 5201 through 5
c
art,
d,
5
5261 of Title 31 of the United S
States Code. Se
ection
116(b) of EESA, 12 U.S.C § 5226(b), re
E
C.
equires that Treasury annually prepare and su
ubmit to Congre and the
ess
public audit fiscal year financial statements for TARP that are prepare in accordanc with general accepted
ted
f
red
ce
lly
accounting principles. Sec
ction 116(b) further requires tha GAO audit TA
at
ARP’s financiall statements annually in
e
y
ting standards.
accordance with generally accepted audit
3

EESA § 116(a)(3), 12 U.S.C. § 5226(a)
)(3).

34	

AUDITOR’S	R
REPORT	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Report on the Financial Statements and on Internal Control over Financial Reporting
In accordance with EESA, we have audited the OFS financial statements for TARP. The OFS
financial statements for TARP comprise the balance sheets as of September 30, 2013, and
2012; the related statements of net cost of operations, changes in net position, and budgetary
resources for the fiscal years then ended; and the related notes to the financial statements. We
also have audited OFS’s internal control over financial reporting for TARP as of September 30,
2013, based on criteria established under 31 U.S.C. § 3512(c), (d), commonly known as the
Federal Managers’ Financial Integrity Act (FMFIA).
We conducted our audits in accordance with U.S. generally accepted government auditing
standards. We believe that the audit evidence we obtained is sufficient and appropriate to
provide a basis for our audit opinions.
Management’s Responsibility
OFS management is responsible for (1) the preparation and fair presentation of these financial
statements in accordance with U.S. generally accepted accounting principles; (2) preparing,
measuring, and presenting the RSI in accordance with U.S. generally accepted accounting
principles; (3) preparing and presenting other information included in documents containing the
audited financial statements and auditor’s report, and ensuring the consistency of that
information with the audited financial statements and the RSI; (4) maintaining effective internal
control over financial reporting, including the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error; (5) evaluating the effectiveness of internal
control over financial reporting based on the criteria established under FMFIA; and (6) providing
its assertion about the effectiveness of internal control over financial reporting as of September
30, 2013, based on its evaluation, included in the accompanying Management’s Report on
Internal Control over Financial Reporting in appendix I.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements and an opinion on OFS’s
internal control over financial reporting for TARP based on our audits. U.S. generally accepted
government auditing standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free from material misstatement, and
whether effective internal control over financial reporting was maintained in all material respects.
We are also responsible for applying certain limited procedures to the RSI and other information
included with the financial statements.
An audit of financial statements involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures selected depend on the
auditor’s judgment, including the auditor’s assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit of financial statements also involves evaluating the appropriateness of
the accounting policies used and the reasonableness of significant accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements. An
audit of internal control over financial reporting includes obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, evaluating the
design and operating effectiveness of internal control over financial reporting based on the

AUDITOR’S	REPORT	

	

35 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
assessed risk, and testing relevant internal control over financial reporting. Our audit of internal
control also considered the entity’s process for evaluating and reporting on internal control over
financial reporting based on criteria established under FMFIA. Our audits also included
performing such other procedures as we considered necessary in the circumstances.
We did not evaluate all internal controls relevant to operating objectives as broadly established
under FMFIA, such as those controls relevant to preparing performance information and ensuring
efficient operations. We limited our internal control testing to testing controls over financial
reporting. Our internal control testing was for the purpose of expressing an opinion on whether
effective internal control over financial reporting was maintained, in all material respects.
Consequently, our audit may not identify all deficiencies in internal control over financial reporting
that are less severe than a material weakness.4
Definitions and Inherent Limitations of Internal Control over Financial Reporting
An entity’s internal control over financial reporting is a process effected by those charged with
governance, management, and other personnel, the objectives of which are to provide
reasonable assurance that (1) transactions are properly recorded, processed, and summarized
to permit the preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and assets are safeguarded against loss from unauthorized acquisition,
use, or disposition, and (2) transactions are executed in accordance with laws governing the use
of budget authority and with other applicable laws, regulations, contracts, and grant agreements
that could have a direct and material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or
detect and correct, misstatements due to fraud or error. We also caution that projecting any
evaluation of effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Opinion on Financial Statements
In our opinion, OFS’s financial statements for TARP present fairly, in all material respects,
TARP’s financial position as of September 30, 2013, and 2012, and its net cost of operations,
changes in net position, and budgetary resources for the fiscal years then ended in accordance
with U.S. generally accepted accounting principles.
Emphasis of Matters
Valuation of TARP’s Direct Loans, Equity Investments, and Asset Guarantee Program
As discussed in notes 2 and 6 to OFS’s financial statements for TARP, the valuation of TARP’s
direct loans, equity investments, and asset guarantee program is based on estimates using
economic and financial credit subsidy models. The estimates use entity-specific as well as
relevant market data as the basis for assumptions about future performance, and incorporate an

4

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be
prevented, or detected and corrected, on a timely basis. A deficiency in internal control exists when the design or
operation of a control does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, misstatements on a timely basis.

36	

	

AUDITOR’S	REPORT	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
adjustment for market risk to reflect the variability around any unexpected losses. In valuing the
direct loans, the equity investments, and the asset guarantee program, OFS management
considered and selected assumptions and data that it believed provided a reasonable basis for
the estimated subsidy allowance and related subsidy cost or income reported in the financial
statements.5 However, there are numerous factors that affect these assumptions and estimates,
which are inherently subject to substantial uncertainty arising from the likelihood of future
changes in general economic, regulatory, and market conditions. The estimates have an added
uncertainty resulting from the unique nature of certain TARP assets. As such, there will be
differences between the net estimated values of the direct loans, equity investments, and asset
guarantee program as of September 30, 2013, and 2012 (which totaled $17.9 billion and $41.2
billion, respectively) and the amounts that OFS will ultimately realize from these assets, and such
differences may be material. These differences will also affect TARP’s ultimate cost. Further,
TARP’s ultimate cost will change as OFS continues to incur costs relating to its Treasury
Housing Programs.6
TARP Reporting Entity
As discussed in note 1 to the financial statements, while OFS’s financial statements for TARP
reflect activity of OFS in implementing TARP, including providing resources to various entities to
help stabilize the financial markets, the statements do not include the assets, liabilities, or results
of operations of these entities in which OFS has a significant equity interest. According to OFS
officials, OFS’s investments were not made to engage in the business activities of the respective
entities, and OFS has determined that none of these entities meet the criteria for a federal entity.
Our opinion on OFS’s financial statements for TARP is not modified with respect to these
matters.
Opinion on Internal Control over Financial Reporting
In our opinion, OFS maintained, in all material respects, effective internal control over financial
reporting for TARP as of September 30, 2013, based on criteria established under FMFIA.
During our fiscal year 2013 audit, we identified deficiencies in OFS’s internal control over
financial reporting that we do not consider to be material weaknesses or significant deficiencies.7
Nonetheless, these deficiencies warrant OFS management’s attention. We have communicated
these matters to OFS management and, where appropriate, will report on them separately.
5

The subsidy cost or income is composed of (1) the change in the subsidy cost allowance, net of write-offs; (2) net
intragovernmental interest cost; (3) certain inflows from the direct loans and equity investments (e.g., dividends,
interest, net proceeds from sales and repurchases of assets in excess of cost, and other realized fees); and (4) the
change in the estimated discounted net cash flows related to other credit programs (asset guarantee program and
Federal Housing Administration refinance program).
6

The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, title XIII, § 1302, 124 Stat.
1376, 2133 (July 21, 2010), (1) limited Treasury’s authority to purchase or guarantee troubled assets to a maximum
of $475 billion; (2) changed this limit to a cap on all purchases and guarantees made without regard to subsequent
sale, repayment, or cancellation of assets or guarantees; and (3) prohibited Treasury, under EESA, from incurring
any obligations for a program or initiative unless the program or initiative had already been initiated prior to June 25,
2010.
7

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.

AUDITOR’S	REPORT	

	

37 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
Other Matters
Required Supplementary Information
U.S. generally accepted accounting principles issued by the Federal Accounting Standards
Advisory Board (FASAB) require that RSI be presented to supplement the financial statements.8
Although not a part of the financial statements, FASAB considers this information to be an
essential part of financial reporting for placing the financial statements in appropriate
operational, economic, or historical context. We have applied certain limited procedures to the
RSI in accordance with U.S. generally accepted government auditing standards, which consisted
of inquiries of management about the methods of preparing the RSI and comparing the
information for consistency with management’s responses to the auditor’s inquiries, the financial
statements, and other knowledge we obtained during the audit of the financial statements, in
order to report omissions or material departures from FASAB guidelines, if any, identified by
these limited procedures. We did not audit and we do not express an opinion or provide any
assurance on the RSI because the limited procedures we applied do not provide sufficient
evidence to express an opinion or provide any assurance.
Other Information
OFS’s other information contains a wide range of information, some of which is not directly
related to the financial statements.9 This information is presented for purposes of additional
analysis and is not a required part of the financial statements or RSI. We read the other
information included with the financial statements in order to identify material inconsistencies, if
any, with the audited financial statements. Our audit was conducted for the purpose of forming
an opinion on OFS’s financial statements for TARP. We did not audit and do not express an
opinion or provide any assurance on the other information.
Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements
In connection with our audits of OFS’s financial statements for TARP, we tested compliance
with selected provisions of applicable laws, regulations, contracts, and grant agreements
consistent with our auditor’s responsibility discussed below. We caution that noncompliance
may occur and not be detected by these tests. We performed our tests of compliance in
accordance with U.S. generally accepted government auditing standards.
Management’s Responsibility
OFS management is responsible for complying with laws, regulations, contracts, and grant
agreements applicable to OFS.

8

RSI is comprised of “Management’s Discussion and Analysis” and the “Combined Statement of Budgetary
Resources” that are included with the financial statements.
9

Other information is comprised of information included with the financial statements, other than RSI and the
auditor’s report.

38	

	

AUDITOR’S	REPORT	

 

AGENCY	FI NANCIAL	REPOR
RT	|	FISCAL	YEAR	2013	

 
Auditor’s Responsibility
s
Our resp
ponsibility is to test comp
pliance with selected pro
s
ovisions of la
aws, regulations, contrac
cts,
and gran agreemen applicable to OFS tha have a dire effect on the determination of
nt
nts
e
at
ect
n
material amounts an disclosure in the TAR financial statements, and perform certain oth
nd
es
RP
,
m
her
limited procedures. Accordingly, we did not test complia nce with all laws, regula
p
A
t
ations, contra
acts,
and gran agreemen applicable to OFS.
nt
nts
e
Results of Our Tests for Complia
o
s
ance with La
aws, Regulat
tions, Contra
acts, and Gra Agreeme
ant
ents
Our tests for complia
s
ance with selected provis
sions of app
plicable laws, regulations contracts, and
s,
grant agreements dis
sclosed no instances of noncomplia nce for fisca year 2013 that would b
al
be
reportab under U.S generally accepted go
ble
S.
a
overnment au
uditing stand
dards. Howe
ever, the
objective of our tests was not to provide an opinion on co
e
s
o
ompliance w laws, reg
with
gulations,
contracts and grant agreements applicable to OFS. Acc
s,
s
cordingly, we do not express such an
e
n
opinion.
Intended Purpose of Report on Compliance with Laws, R
d
f
C
Regulations, Contracts, a Grant
,
and
Agreeme
ents
The purp
pose of this report is sole to describ the scope of our testiing of compliance with
r
ely
be
e
selected provisions of applicable laws, regulations, contr
o
e
racts, and gr
rant agreements, and the
results of that testing and not to provide an opinion on c
o
g,
compliance. This report i an integra part
is
al
of an aud performed in accorda
dit
ance with U.S generally accepted go
S.
overnment a
auditing
standard in conside
ds
ering complia
ance. Accord
dingly, this re
eport on com
mpliance with laws,
regulatio
ons, contract and grant agreements is not suita
ts,
t
s
able for any o
other purpos
se.
Agency Comments
s
In comm
menting on a draft of this report, the Assistant Se cretary for F
A
Financial Sta
ability stated that
OFS is proud to rece
p
eive unmodif
fied opinions on its finan
s
ncial stateme
ents and its internal cont
trol
over fina
ancial reporti
ing. He also stated that OFS is comm
O
mitted to ma
aintaining the high standa
e
ards
and transparency ref
flected in the audit res
ese
sults. The co
omplete text of OFS’s co
omments is
d
ety
dix
reprinted in its entire in append II.

E
Gary T. Engel
Director
al
ent
urance
Financia Manageme and Assu
Decemb 5, 2013
ber
 

AUDITOR’S	REPORT	

 

39 

THE	DEPAR
RTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY

 

Appen
ndix	I:	Ma
anagement’s	Repo
ort	on	Int
ternal	Co
ontrol	Ov
ver	
Financ
cial	Repo
orting	
DE
EPARTMENT OF THE T
T
TREASURY
                                                              WASHINGTON, D.C. 20220
W

 

ASSISTANT SE
ECRETARY        

Mana
agement’s Re
eport on Inter
rnal Control Over Financ Reporting
cial

The Offic of Financia Stability’s (OFS) intern control ov financial reporting (fo TARP) is a
ce
al
nal
ver
or
process ef
ffected by tho charged with governa
ose
w
ance, manage
ement, and o
other personn the objectives
nel,
sed,
of which are to provid reasonable assurance that (1) trans
a
de
e
sactions are p
properly reco
orded, process
and summ
marized to pe
ermit the pre
eparation of financial stat
f
tements in ac
ccordance wi U.S. gene
ith
erally
accepted accounting principles, an assets are safeguarded against loss from unauth
p
nd
d
s
horized
acquisitio use, or dis
on,
sposition; an (2) transac
nd
ctions are exe
ecuted in acc
cordance with laws govern
h
ning
the use of budget auth
f
hority and wi other app
ith
plicable laws, regulations, contracts, a grant
,
and
agreemen that could have a dire and mater effect on the financia statements
nts
d
ect
rial
al
s.
OFS man
nagement is responsible fo maintainin effective i
r
or
ng
internal cont
trol over financial reportin
ng,
including the design, implementat
g
tion, and mai
intenance of internal con
ntrol relevant to the
t
hat
preparati and fair presentation of financial statements th are free f
ion
p
s
from materia misstatem
al
ment,
whether due to fraud or error. OF manageme evaluated the effectiv
d
FS
ent
d
veness of OFS internal
S’s
control ov financial reporting as of Septembe 30, 2013, b
ver
er
based on the criteria estab
blished unde 31
er
U.S.C. 35
512(c), (d) (commonly known as the Fe
ederal Manag
gers’ Financi Integrity A
ial
Act).
Based on that evaluat
tion, we conclude that, as of Septembe 30, 2013, O
s
er
OFS’s internal control ove
er
financial reporting wa effective.
as

Office of Financial Sta
F
ability

Timothy G. Massad
G
Assistant Secretary fo Financial Stability
t
or
S

R
Lorenzo Rasetti
Chief Fin
nancial Officer
December 5, 2013
r

40	

AUDITOR’S	R
REPORT	

 

AGENCY	FI NANCIAL	REPOR
RT	|	FISCAL	YEAR	2013	

 

Appen
ndix	II:	OF
FS	Respo
onse	to	A
Auditor’s	Report	
DE
EPARTMENT OF THE T
T
TREASURY
WASHIN
NGTON, D.C. 20
0220

              ASSISTANT SECRETARY

December 5, 201 3

y
Mr. Gary T. Engel
Director, Financial Management and Assuran
,
M
nce
U.S. Gov
vernment Ac
ccountability Office
y
441 G St
treet, N.W.
Washing
gton, DC 205
548
Dear Mr. Engel:
.
We have reviewed th Independe Auditor’s Report con
he
ent
ncerning you audit of th Office of
ur
he
Financial Stability’s (OFS) fiscal year 2013 financial stat
l
l
f
tements. OF is proud t receive
FS
to
unmodifi opinions on our finan
ied
ncial stateme and our internal con
ents
r
ntrols over fi
financial
reporting
g.
We appre
eciate the pr
rofessionalism and comm
m
mitment dem
monstrated by your staff t
y
throughout t
the
audit pro
ocess. The process was valuable for us and resul in concr improve
v
lted
rete
ements in our
r
operation and financ managem efforts.
ns
cial
ment
ommitted to maintaining the high sta
g
andards and transparenc reflected i these audi
cy
in
it
OFS is co
results as we carry ou our respon
s
ut
nsibilities fo managing the Troubled Asset Reli Program.
or
ief
.
erely,
Since

Timot G. Mass
thy
sad
Assist
tant Secretar for Financ Stability
ry
cial
y
 

AUDITOR’S	REPORT	

41 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 

FINANCIAL	STATEMENTS	
	

The Office of Financial Stability (OFS) prepares
financial statements for the Troubled Asset
Relief Program (TARP) as a critical aspect of
ensuring the accountability and stewardship for
the public resources entrusted to it and as
required by Section 116 of the Emergency
Economic Stabilization Act of 2008 (EESA).
Preparation of these statements is also an
important part of the OFS’s financial
management goal of providing accurate and
reliable information that may be used to assess
performance and allocate resources. The OFS
management is responsible for the accuracy and
propriety of the information contained in the
financial statements and the quality of internal
controls. The statements are, in addition to
other financial reports, used to monitor and
control budgetary resources. The OFS prepares
these financial statements from its books and
records in conformity with the accounting
principles generally accepted in the United
States for federal entities and the formats
prescribed by the Office of Management and
Budget (OMB).

assets, liabilities, or results of operations of
commercial entities in which the OFS has a
significant equity interest.
The Balance Sheet summarizes the OFS assets,
liabilities and net position as of September 30,
2013 and 2012. Intragovernmental assets and
liabilities resulting from transactions between
federal agencies are presented separately from
assets and liabilities resulting from transactions
with the public.
The Statement of Net Cost presents the net cost
of (income from) operations for the years ended
September 30, 2013 and 2012.
The Statement of Changes in Net Position
presents the change in OFS’s net position for
two components, Cumulative Results of
Operations and Unexpended Appropriations, for
the years ended September 30, 2013 and 2012.
The ending balances of both components of net
position are also reported on the Balance Sheet.
The Statement of Budgetary Resources provides
information about funding and availability of
budgetary resources and the status of those
resources for the years ended September 30,
2013 and 2012.

While these financial statements reflect activity
of the OFS in executing its programs, including
providing resources to various entities to help
stabilize the financial markets, they do not
include, as more fully discussed in Note 1, the

42	

	

FINANCIAL	STATEMENTS		

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Office of Financial Stability - T roubled Asset Relief Program

BALANCE	SHEET	
As of September 30, 2013 and 2012
Dollars in Millions

2013

2012

ASSETS
Intragovernmental Assets:
Fund Balanc e with Treasury (Note 3)

$

53,240

Asset Guarantee Program (Note 6)

$

75,495

-

967

1

1

Total Intragovernmental Assets

53,241

76,463

Cash on Deposit for Housing Program (Note 4)
Direct Loans and Equity Investments, Net (Note 6)

50
17,869

50
40,231

Other

Total Assets

$

71,160

$

1

$

116,744

LIABILITIES
Intragovernmental Liabilities:
Ac c ounts Pay able and Other Liabilities
Due to the General Fund (Note 7)

$

2

8,139

62,544

87

Accounts Payable and Other Liabilities

52,828

20,089

Total Intragovernmental Liabilities

9,714

11,949

Princ ipal Pay able to the Bureau of the Fisc al S erv ic e (Note 8)

87

Liabilities for Treasury Housing Programs Under TARP:
FHA-Refinanc e Program (Notes 5 and 6)

9

Total Liabilities

$

7

263

Making Home Affordable Program and Hardest Hit Fund (Note 5)

241

20,448

$

-

Commitments and Contingencies (Note 9)

62,879
-

NET POSITION
Unexpended Appropriations

$

Cumulativ e Results of Operations

50,663

$

49

54,572
(707)

Total Net Position

$

50,712

$

53,865

Total Liabilities and Net Position

$

71,160

$

116,744

The accompanying notes are an integral part of these financial statements.

 

 

 

FINANCIAL	STATEMENTS		

	

43 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
Office of Financial Stability - T roubled Asset Relief Program

STATEMENT	OF	NET	COST
For the Years Ended September 30, 2013 and 2012

Dollars in Millions

2013

2012

STRATEGIC GOAL: TO ENSURE THE OVERALL STABILITY AND LIQUIDITY OF THE FINANCIAL SYSTEM, PREVENT AVOIDABLE
FORECLOSURES AND PRESERVE HOME OWNERSHIP
Gross Cost of (Income from) Operations:
Program Subsidy Cost (Income) (Note 6)
Direc t Loan and Equity Inv estment Programs
Other Credit Programs
Total Program Subsidy Cost (Income)

$

(11,794) $
(116)
(11,910)

(10,778)
(201)
(10,979)

Interest Expense on Borrowings from the Bureau of the Fiscal Service (Note 10)
Treasury Housing Programs Under TARP (Note 5)
Administrative Cost
Total Gross Cost of (Income from) Operations

856
3,961
248
(6,845)

2,252
2,963
268
(5,496)

Earned Revenue:
Div idend and Interest Inc ome - Programs (Note 6)
Interest Inc ome on Financ ing Ac c ount (Note 10)
Subsidy Allowanc e Amortization (Note 10)
Total Earned Revenue

(1,292)
(235)
671
(856)

(2,733)
(605)
1,086
(2,252)

(7,701) $

(7,748)

Total Net Cost of (Income from) Operations

$

The accompanying notes are an integral part of these financial statements.

 

44	

	

	

	

	

	

	

	

	

	

	

FINANCIAL	STATEMENTS 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Office of Financial Stability - T roubled Asset Relief Program

STATEMENT	OF	CHANGES	IN	NET	POSITION
For the Years Ended September 30, 2013 and 2012
2012

2013
Cumulative
Results of
Operations

Unexpended
Appropriations

Dollars in Millions
Beginning Balances

$

54,572

$

(707) $

Budgetary Financing Sources
Appropriations Rec eiv ed
Appropriations Used
Other Financing Sources
Total Financing Sources

788
(4,697)
(3,909)
(3,909)

57,544

4,697
(11,642)
(6,945)

Net (Cost of) Income from Operations
Net Change

7,701
756

Ending Balances

$

50,663

$

49

Cumulative
Results of
Operations

Unexpended
Appropriations
$

(27,836)

27,593
(30,565)
(2,972)

30,565
(11,184)
19,381

(2,972)
$

54,572

7,748
27,129
$

The accompanying notes are an integral part of these financial statements.

FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

	

	

45	

(707)

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	

 
Office of Financial Stability - T roubled Asset Relief Program

STATEMENT	OF	BUDGETARY	RESOURCES
For the Years Ended September 30, 2013 and 2012
2013

Budgetary
Accounts

Dollars in Millions
BUDGETARY RESOURCES
Unobligated Balanc e Brought Forward, Oc tober 1
Rec ov eries of Prior-Year Unpaid Obligations
Borrowing Authority Withdrawn
Ac tual Repay ments of Debt, Prior-Year Balanc es
Unobligated Balanc e from Prior-Year Budget Authority , Net
Appropriations
Borrowing Authority
Spending Authority from Offsetting Collec tions
TOTAL BUDGETARY RESOURCES (Note 11)

$

$

$

CHANGE IN OBLIGATED BALANCES
Unpaid Obligations:
Unpaid Obligations Brought Forward, Oc tober 1
Obligations Inc urred
Gross Outlay s

779

$

STATUS OF BUDGETARY RESOURCES
Obligations Inc urred
Unobligated Balanc e:
Apportioned
Unapportioned
Total Unobligated Balanc e
TOTAL STATUS OF BUDGETARY RESOURCES

14,350
7,246
21,596
788
1
22,385

11
21,595
21,606
22,385

$

Rec ov eries of Prior-Year Unpaid Obligations
Unpaid Obligations, End of Year

Nonbudgetary
Financing
Accounts
$

$

17,631
4,941
(2,611)
(17,738)
2,223
208
13,131
15,562

$

14,100

$

668
794
1,462
15,562

40,548 $
779
(4,675)
(7,246)
29,406

Uncollected Payments from Federal Sources:
Unc ollec ted Pay ments Brought Forward, Oc tober 1
Change in Unc ollec ted Pay ments
Uncollected Payments from Federal Sources, End of Year
Obligated Balance, Net, End of Year

$

$

$

40,548

$

$

BUDGET AUTHORITY AND OUTLAYS, NET
Budget Authority , Gross
Ac tual Offsetting Collec tions
Change in Unc ollec ted Customer Pay ments from Federal Sourc es
BUDGET AUTHORITY, NET

29,406

$

$

$

$

$

$

14,166
146
14,312
27,593
41,905

$

21,143
6,114
(5,832)
(19,900)
1,525
2,659
21,695
25,879

$

27,555

$

8,248

$

41
14,309
14,350
41,905

$

3,946
13,685
17,631
25,879

$

(349)
123
(226)
767

$

43,814 $
27,555
(30,675)
(146)
40,548

(6,114)
5,926

$

$

5,577

$

43,814

$

12,662

767

$

40,548

$

5,577

27,593 $
27,593 $

24,354
(81,269)
147
(56,768)

30,675 $
30,675
(6,063)
24,612 $

9,366
(81,269)
(71,903)
(71,903)

13,339
(36,604)
123
(23,142)

$

4,675 $
(1)
4,674
(13,218)
(8,544) $

14,092
(36,604)
(22,512)
(22,512)

$

$

$

$

The accompanying notes are an integral part of these financial statements.

46	

	

	

	

	

	

	

	

	

	

13,158
8,248
(9,366)

40,548

$

$

789 $
(1)
788 $

$

Gross Outlay s
Ac tual Offsetting Collec tions
Net Outlay s
Distributed Offsetting Rec eipts
AGENCY OUTLAYS, NET

5,926
14,100
(14,092)

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

(4,941)
993

29,406

$

OBLIGATED BALANCES
(Net of Unpaid Obligations and Uncollected Payments Above)
Obligated Balance, Net, Brought Forward, October 1
Obligated Balance, Net, End of Year

2012

	

FINANCIAL	STATEMENTS 

(496)
147
(349)
5,577

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

NOTES	TO	THE	FINANCIAL	STATEMENTS	
 

NOTE	1.		REPORTING	ENTITY	
The Troubled Asset Relief Program (TARP) was
authorized by the Emergency Economic
Stabilization Act of 2008, as amended (EESA or “the
Act”). The Act gave the Secretary of the Treasury
(the Secretary) broad and flexible authority to
establish the TARP to purchase and insure
mortgages and other troubled assets, which
permitted the Secretary to inject capital into banks
and other commercial companies by taking equity
positions in those entities to help stabilize the
financial markets.

Guarantee Program (AGP); and the Treasury Housing
Programs Under TARP (see Notes 5 and 6 for details
regarding all of these programs).

While these financial statements reflect the activity
of the OFS in executing its programs, including
providing resources to various entities to help
stabilize the financial markets, they do not include
the assets, liabilities, or results of operations of
commercial entities in which the OFS has a
significant equity interest. Through the purchase of
troubled assets, the OFS entered into several
The EESA established certain criteria under which
different types of direct loan, equity investment, and
the TARP would operate, including provisions that
other credit programs (which consist of the AGP and
impact the budgeting, accounting, and reporting of
the Federal Housing Administration (FHA)
troubled assets acquired under the Act. Section 115
Refinance Program) (collectively, the OFS programs)
of the EESA limited the authority of the Secretary to with private entities. The OFS programs were
purchase troubled assets up to $700.0 billion
entered into with the intent of helping to stabilize
outstanding at any one time, calculated as the
the financial markets and mitigating, as best as
aggregate purchase prices of all troubled assets held. possible, any adverse impact on the economy; they
In July 2010, the Dodd-Frank Wall Street Reform and were not entered into to engage in the business
Consumer Protection Act amended Section 115 of the activities of the respective private entities. Based on
EESA, limiting the TARP’s authority to a total of
this intent, the OFS concluded that such programs
$475.0 billion cumulative obligations (i.e. purchases
are considered “bailouts,” under the provisions of
and guarantees) and prohibiting any new obligations paragraph 50 of Statement of Federal Financial
for programs or initiatives that had not been publicly Accounting Concepts (SFFAC) No. 2, Entity and
announced prior to June 25, 2010. Of the maximum
Display. In addition, these entities are not included
$475.0 billion authority under the EESA, OFS had
in the Federal budget and, therefore, do not meet
utilized (including purchases made, legal
the conclusive criteria in SFFAC No. 2. As such, the
commitments to make purchases and offsets for
OFS determined that none of these entities should
guarantees made) $456.6 billion as of September 30,
be classified as a federal entity. Consequently, their
2013 and $467.0 billion as of September 30, 2012.
assets, liabilities and results of operations were not
The reduction between 2013 and 2012 reflects the
consolidated in these OFS financial statements, but
deobligation of unused funds in certain programs.
the value of such investments was recorded in the
OFS financial statements.
The TARP developed the following programs: the
Capital Purchase Program (CPP); the Community
In addition, the OFS has made loans and
Development Capital Initiative (CDCI); the Publicinvestments in certain Special Purpose Vehicles
Private Investment Program (PPIP); the Term Asset- (SPV)4. SFFAC No. 2, paragraphs 43 and 44,
Backed Securities Loan Facility (TALF); the SBA 7(a)                                                             
4
Securities Purchase Program (SBA 7(a)); the
During	fiscal	year	2013,	the	OFS	held	investments	in	SPVs	
Automotive Industry Financing Program (AIFP); the under	the	TALF	and	PPIP	programs;	in	fiscal	year	2012,	the	OFS	
American International Group, Inc. (AIG) Investment held	investments	in	SPVs	under	the	TALF,	PPIP	and	AIG	
Program (formerly known as the Systemically
Investment	Programs.	
Significant Failing Institutions Program); the Asset

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

					47 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

reference indicative criteria such as ownership and
control to carry out government powers and
missions, as criteria in the determination about
whether an entity should be classified as a federal
entity. The OFS has concluded that none of the
SPVs meet the conclusive or indicative criteria to be
classified as a federal entity. As a result, the assets,
liabilities and results of operations of the SPVs are
not included in these OFS financial statements.
Additional disclosures regarding certain SPV
investments are included in Notes 2 and 6; see
PPIP, TALF and AIG Investment Program.

48		

	

The EESA established the OFS within the Office of
Domestic Finance of the U. S. Department of the
Treasury (Treasury) to administer the TARP and
required its separate audited financial statements.
The OFS prepares stand-alone financial statements
for TARP to satisfy EESA Section 116(b)(1).
Additionally, as an office of the Treasury, its
financial statements are consolidated into
Treasury’s Agency Financial Report. 

 
 

 

NOTES	TO	THE	FINANCIAL	STATEMENTS	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

NOTE	2.		SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES
Basis of Accounting and
Presentation
The accompanying financial statements include the
results of operations of the TARP and have been
prepared from the accounting records of the OFS in
conformity with accounting principles generally
accepted in the United States for federal entities
(Federal GAAP), and the OMB Circular A-136,
Financial Reporting Requirements, as amended.
Federal GAAP includes the standards issued by the
Federal Accounting Standards Advisory Board
(FASAB). The FASAB is recognized by the
American Institute of Certified Public Accountants
(AICPA) as the official accounting standards-setting
body for the U.S. Government.
Section 123(a) of the EESA requires that the
budgetary cost of purchases of troubled assets and
guarantees of troubled assets, and any cash flows
associated with authorized activities, be determined
in accordance with the Federal Credit Reform Act of
1990 (FCRA). Section 123(b) (1) of the EESA
requires that the budgetary costs of troubled assets
and guarantees of troubled assets be calculated by
adjusting the discount rate for market risks. As a
result of this requirement, the OFS considered
market risk in its calculation and determination of
the estimated net present value of its direct loans,
equity investments and other credit programs for
budgetary purposes. Similarly, market risk is
considered in the valuations for financial reporting
purposes (see Note 6 for further discussion).
Consistent with its accounting policy for equity
investments in private entities, including SPVs, the
OFS accounts for its equity investments at fair
value. Since fair value is not defined in federal
accounting standards as established in Statement of
Federal Financial Accounting Standards (SFFAS)
No. 34, The Hierarchy of Generally Accepted

Accounting Principles, Including the Application of
Standards Issued by the Financial Accounting
Standards Board, the OFS conforms to fair value

definitions contained in the private sector Financial
Accounting Standards Codification (ASC) 820, Fair
Value Measurement. OFS defines fair value of its
equity investments as the estimated amount of

NOTES	TO	THE	FINANCIAL	STATEMENTS			

	

proceeds that would be received if the equity
investments were sold to a market participant in an
orderly transaction. Note 6 presents Direct Loan and
Equity Investments and the Asset Guarantee
Program receivable tabulated by the Level of
Observation of the inputs used in the valuation
process. Level 1 assets are measured using quoted
market prices for identical assets. Level 2 assets are
measured using observable market inputs other
than direct market quotes. Level 3 assets are
measured using unobservable inputs.
The OFS uses the present value accounting concepts
embedded in SFFAS No. 2, Accounting for Direct
Loans and Loan Guarantees, as amended (SFFAS
No. 2), to derive fair value measurements for its
equity investments in Levels 2 and 3. The OFS
concluded that some of the equity investments, such
as preferred stock, were similar to direct loans since
there was a stated rate and a redemption feature
which, if elected, required repayment of the amount
invested. Furthermore, consideration of market risk
provided a basis to arrive at a fair value
measurement. Therefore, the OFS concluded that
SFFAS No. 2 (as more fully discussed below) should
be followed for reporting and disclosure
requirements of its equity investments.
The OFS applies the provisions of FCRA for
budgetary accounting and the associated FASAB
accounting standard SFFAS No. 2 for financial
reporting for direct loans and other credit programs.
Direct loans disbursed and outstanding are
recognized as assets at the net present value of their
estimated future cash flows. Outstanding asset
guarantees are recognized as liabilities or assets at
the net present value of their estimated future cash
flows. Liabilities under the FHA-Refinance Program
are recognized at the net present value of their
estimated future cash flows when the FHA
guarantees loans.
For direct loans and equity investments, the subsidy
allowance account represents the difference between
the face value of the outstanding direct loan and
equity investment balance and the net present value
of the expected future cash flows or fair value, and is
reported as an adjustment to the face value of the
direct loan or equity investment.

49		

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

The OFS recognizes dividend income associated with
equity investments when declared by the entity in
which the OFS has invested and when received in
relation to any repurchases, exchanges and
restructurings. The OFS recognizes interest income
when earned on performing loans; interest income is
not accrued on non-performing loans. The OFS
reflects changes, referred to as reestimates, in its
determination of the value of direct loans, equity
investments, and other credit programs in the
subsidy cost on the Statement of Net Cost annually.

Credit Reform Accounting
The OFS accounts for the cost of direct loans, equity
investments and other credit programs in
accordance with Section 123(a) of the EESA and the
FCRA for budgetary accounting, and fair value and
SFFAS No. 2 for financial reporting. The FCRA
calls for the establishment of program, financing
and general fund receipt accounts to segregate and
report receipts and disbursements. These accounts
are classified as either budgetary or non-budgetary
in the Statement of Budgetary Resources. The OFS
maintains budgetary program accounts which
receive appropriations and obligate funds to cover
the subsidy cost of direct loans, equity investments
and other credit programs, and disburses the
subsidy cost to the OFS financing accounts. The
financing accounts are non-budgetary accounts that
are used to record all of the cash flows resulting
from the OFS direct loans, equity investments and
other credit programs. Cash flows include
disbursements, borrower repayments, repurchases,
fees, recoveries, interest, dividends, proceeds from
the sale of stock and warrants, borrowings from and
repayments to Treasury, negative subsidy and the
subsidy cost received from the program accounts, as
well as subsidy reestimates and modifications.

In certain programs, the OFS has received common
stock warrants, additional preferred stock (referred
to as warrant preferred stock) or additional notes as
additional consideration. The OFS accounts for any
proceeds received from the sale of these investments
as fees under SFFAS No. 2; as such, they are
credited to the subsidy allowance rather than to
income.

Use of Estimates
The OFS has made certain estimates and
assumptions relating to the reporting of assets,
liabilities, revenues, and cost to prepare these
financial statements. Actual results could
significantly differ from these estimates. Major
financial statement lines that include estimates are
Direct Loans and Equity Investments, Net, the
Asset Guarantee Program and the Liabilities for
Treasury Housing Programs Under TARP on the
Balance Sheet, and related Program Subsidy Cost
(Income) on the Statement of Net Cost (see Note 6).

Financing arrangements specifically for the TARP
activities are provided for in EESA as follows: (1)
borrowing for program funds under Section 118,
reported as “appropriations” in these financial
statements and (2) borrowing by financing accounts
for amounts not covered by subsidy cost, under the
FCRA and Section 123. The OFS uses budgetary
general fund receipt accounts to record the receipt of
amounts paid from the financing accounts when
there is a negative subsidy or negative modification
(a reduction in subsidy cost due to changes in
program policy or terms that change estimated
future cash flows) from the original estimate or a
downward reestimate. Any assets in these accounts
are non-entity assets, not available to the OFS, and
are offset by intragovernmental liabilities. At the
end of the fiscal year, the fund balance transferred
to the U.S. Treasury through the general fund
receipt accounts is not included in the OFS’s
reported Fund Balance with Treasury.

The most significant differences between actual
results and estimates may occur in the valuation of
OFS programs. These valuation estimates are
sensitive to slight changes in model assumptions,
such as general economic conditions, specific stock
price volatility of the entities in which the OFS has
an equity interest, estimates of expected default,
and prepayment rates. Forecasts of future financial
results have inherent uncertainty, and the Direct
Loans and Equity Investments, Net and Asset
Guarantee Program line items, as of fiscal year
ends, primarily reflect relatively illiquid assets with
values that are sensitive to future economic
conditions and other assumptions. Estimates are
also prepared for the FHA-Refinance Program to
determine the liability for losses.

50		

	

	

	

	

	

	

SFFAS No. 2 requires that the actual and expected
costs of federal credit programs be fully recognized
in financial reporting. The OFS calculated and
recorded initial estimates of the future performance

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
of direct loans, equity investments, and other credit
programs. The data used for these estimates were
reestimated annually, at fiscal year end, to reflect
adjustments for market risk, asset performance, and
other key variables and economic factors. The
reestimate data were then used to estimate and
report the “Program Subsidy Cost (Income)” in the
Statement of Net Cost. A detailed discussion of the
OFS subsidy calculation and reestimate
assumptions, process and results is provided in Note
6.

Asset Guarantee Program
During fiscal year 2010, the OFS and the Federal
Deposit Insurance Corporation (FDIC) entered into
a termination agreement with the Asset Guarantee
Program’s sole participant, Citigroup. As a result,
the Intragovernmental Asset line item, Asset
Guarantee Program, remaining on the Balance
Sheet at September 30, 2012 was the estimated
value of certain Citigroup trust preferred securities
including dividends collected, held by the FDIC for
the benefit of OFS. Under the termination
agreement, the FDIC transferred those securities to
the OFS, less any losses on FDIC’s guarantee of
Citigroup debt, in fiscal year 2013. OFS then sold
the securities. See Note 6.

Fund Balance with Treasury
The Fund Balance with Treasury includes general,
financing and other funds available to pay current
liabilities and finance authorized purchases. Cash
receipts and disbursements are processed by the
Treasury, and the OFS’s records are reconciled with
those of the Treasury on a regular basis.

General Property and Equipment
Equipment with a cost of $50,000 or more per unit
and a useful life of two years or more is capitalized
at full cost and depreciated using the straight-line
method over the equipment’s useful life. Other
equipment not meeting the capitalization criteria is
expensed when purchased. Software developed for
internal use is capitalized and amortized over the
estimated useful life of the software if the cost per
project is greater than $250,000. However, OFS
may expense such software if management
concludes that total period costs would not be
materially distorted and the cost of capitalization is
not economically prudent. Based upon these
criteria, the OFS reports no capitalized property,
equipment or software on its Balance Sheet as of
September 30, 2013 and 2012.

Available unobligated balances represent amounts
that are apportioned for obligation in the current
fiscal year. Unavailable unobligated balances
represent unanticipated collections in excess of the
amounts apportioned which are unavailable.
Obligated balances not yet disbursed include
undelivered orders and unpaid expended authority.
See Note 3.

Direct Loans and Equity
Investments, Net
Direct Loans and Equity Investments, Net
represents the estimated net outstanding amount of
the OFS direct loans and equity investments. The
direct loan and equity investment balances have
been determined in accordance with the provisions
of SFFAS No. 2 or at fair value (see Note 6). Writeoffs of gross direct loan and equity investment
balances (presented in Note 6 table) are recorded
when a legal event occurs, such as a bankruptcy
with no further chance of recovery or
extinguishment of a debt instrument by agreement.
Under SFFAS No. 2, write-offs do not affect the
Statement of Net Cost because the written-off asset
is fully reserved. Therefore, the write-off removes
the asset balance and the associated subsidy
allowance.

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

Accounts Payable and Other
Liabilities
Accounts Payable and Other Liabilities are amounts
due to intragovernmental or public entities that are
anticipated to be liquidated during the next
operating cycle (within one year from the balance
sheet date).

Due to the General Fund
Due to the General Fund represents the amount of
accrued downward reestimates not yet funded,
related to direct loans, equity investments and other

	

	

	

	

	

	

	51	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

credit programs as of September 30, 2013 and 2012.
See Notes 6 and 7.

one of the Liabilities for Treasury Housing Programs
Under TARP, on the Balance Sheet. See Notes 4, 5
and 6.

Principal Payable to the Bureau of
the Fiscal Service

Unexpended Appropriations
Unexpended Appropriations represents the OFS
undelivered orders and unobligated balances in
budgetary appropriated funds as of September 30,
2013 and 2012.

Principal Payable to the Bureau of the Fiscal Service
(Fiscal Service)(formerly Principal Payable to the
Bureau of Public Debt; the Department of the
Treasury combined the functions of the Bureau of
Public Debt and the Financial Management Service
into the Fiscal Service on October 7, 2012) is the net
amount due for equity investments, direct loans and
other credit programs funded by borrowings from
the Fiscal Service as of the end of the fiscal year.
Additionally, OFS borrows from the Fiscal Service
for payment of intragovernmental interest and
payment of negative subsidy cost to the general
fund, as necessary. See Note 8.

Cumulative Results of Operations
Cumulative Results of Operations, presented on the
Balance Sheet and on the Statement of Changes in
Net Position, represents the net results of the OFS
operations not funded by appropriations or some
other source, such as borrowing authority, from
inception through fiscal year end. At September 30,
2012, OFS had $755 million of unfunded upward
reestimates that resulted in OFS reporting negative
Cumulative Results of Operations. These
unfunded upward reestimates were funded in fiscal
year 2013. Cumulative Results of Operations in
2013 and 2012 also included $50 million reported as
Cash on Deposit for Housing Program on the
Balance Sheet, see Note 4.

Liabilities for the Treasury Housing
Programs Under TARP
There are three initiatives in the Treasury Housing
Programs: the Making Home Affordable Program,
the Housing Finance Agency Hardest-Hit Fund and
the FHA-Refinance Program. The OFS has
determined that credit reform accounting is not
applicable to the Treasury Housing Programs Under
TARP except for the FHA-Refinance Program.
Therefore, liabilities for the Making Home
Affordable Program and Housing Finance Agency
Hardest-Hit Fund are accounted for in accordance
with SFFAS No. 5, Accounting for Liabilities of the
Federal Government. In accordance with this
standard, a liability is recognized for any unpaid
amounts due and payable as of the reporting date.
The liability estimate, as of September 30, 2013 and
2012, is based on information about loan
modifications reported by participating servicers for
the Making Home Affordable Program and
participating states for the Housing Finance Agency
Hardest-Hit Fund. See Note 5.

Other Financing Sources
The Other Financing Sources line in the Statement
of Changes in Net Position for each year consists
primarily of downward reestimates. Each program’s
reestimates, upward and downward, are recorded
separately, not netted together.

Leave
A liability for the OFS employees’ annual leave is
accrued as it is earned and reduced as leave is
taken. Each year the balance of accrued annual
leave is adjusted to reflect current pay rates as well
as forfeited “use or lose” leave. Amounts are
unfunded to the extent current or prior year
appropriations are not available to fund annual
leave earned but not taken. Sick leave and other
types of non-vested leave are expensed as taken.
The liability is included in the Balance Sheet
amount for Accounts Payable and Other Liabilities.

At the end of fiscal year 2010, the OFS entered into
a loss-sharing agreement with the FHA to support a
program in which FHA would guarantee refinancing
for borrowers whose homes are worth less than the
remaining amounts owed under their mortgage
loans, i.e. “underwater.” The liability for OFS’s
share of losses was determined under credit reform
accounting and shown as FHA-Refinance Program,

52		

	

	

	

	

	

	

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

Employee Health and Life Insurance
and Workers’ Compensation Benefits

Employee Pension Benefits
The OFS employees participate in either the Civil
Service Retirement System (CSRS) or the Federal
Employees’ Retirement System (FERS) and Social
Security. These systems provide benefits upon
retirement and in the event of death, disability or
other termination of employment and may also
provide pre-retirement benefits. They may also
include benefits to survivors and their dependents,
and may contain early retirement or other special
features. The OFS contributions to retirement plans
and Social Security, as well as imputed costs for
pension and other retirement benefit costs
administered by the Office of Personnel
Management, are recognized on the Statement of
Net Cost as Administrative Cost. Federal employee
benefits also include the Thrift Savings Plan (TSP).
For FERS employees, a TSP account is
automatically established and the OFS matches
employee contributions to the plan, subject to
limitations. The matching contributions are
recognized as Administrative Costs on the
Statement of Net Cost.

The OFS employees may choose to participate in the
contributory Federal Employees Health Benefit and
the Federal Employees Group Life Insurance
Programs. The OFS matches a portion of the
employee contributions to each program. Matching
contributions are recognized as current operating
expenses.
The Federal Employees’ Compensation Act (FECA)
provides income and medical cost protection to
covered Federal civilian employees injured on the
job, and employees who have incurred a workrelated injury or occupational disease. Future
workers’ compensation estimates are generated from
an application of actuarial procedures developed to
estimate the liability for FECA benefits. The
actuarial liability estimates for FECA benefits
include the expected liability for death, disability,
medical, and miscellaneous costs for approved
compensation cases. Any FECA amounts relating to
OFS employees are expensed as incurred.

Related Parties
The nature of related parties and descriptions of
related party transactions are discussed within
Notes 1 and 6.

 

NOTE	3.	FUND	BALANCES	WITH	TREASURY	
Fund Balances with Treasury, by fund type and status, as of September 30, 2013 and 2012, are presented in
the following table.
As of September 30,
(Dollars in Millions)

2013

Fund Balances:
General Funds
Program Funds
Financing Funds

$

$

36,630
14,382
2,228
53,240

$

Total Fund Balances

678
22,389
30,173
53,240

Status of Fund Balances:
Unobligated Balances
Available
Unavailable
Obligated Balances Not Yet Disbursed
Total Status of Fund Balances

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

2012

	

$

$

$

	

40,517
14,382
20,596
75,495

3,987
27,994
43,514
75,495

	

	53	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

Collections relating to the AGP are deposited in the
Troubled Assets Insurance Financing Fund (which is
within OFS Financing Funds balance) as required
by the EESA Section 102(d). In fiscal year 2013 the
TAIFF was closed because the AGP program was

completed and investments sold. In fiscal year 2012
the TAIFF balance was reduced for AGP-related
downward reestimates, repayments of AGP-related
debt and interest payments on debt due to the
Bureau of the Public Debt.

NOTE	4.		CASH	ON	DEPOSIT	FOR	HOUSING	PROGRAM	
As of September 30, 2013 and 2012, the OFS had
$50 million on deposit with a commercial bank to
facilitate its payments of claims under the FHARefinance Program as OFS’s agent.

Under terms of the agreement with the commercial
bank, unused funds will be returned to the OFS
upon the termination of the program.

Fiscal years 2013 and 2012 saw continued
advancement of programs designed to provide
stability for both the housing market and
homeowners. These programs assist homeowners
who are experiencing financial hardships to remain
in their homes until their financial position
improves or they relocate to a more sustainable

living situation. The programs fall into three
initiatives:

	
NOTE	5.		TREASURY	HOUSING	PROGRAMS	UNDER	TARP	

1) Making Home Affordable Program (MHA);
2) Hardest-Hit Fund (HHF); and
3) FHA-Refinance Program.
Features of these initiatives follow:

Housing Program

Features

MHA
Home Affordable Modification Program (HAMP)
First Lien Modification Program

Provides for upfront, monthly and annual incentives to servicers, borrowers
and investors who participate, whereby the investor and OFS share the costs
of modifying qualified first liens, conditional on borrower performance.

Principal Reduction Alternative Program (PR A)
Home Price Depreciation Program (HPDP)
Home Affordable Foreclosure Alternatives (HAFA)

U nemployment Forebearance Program (U P)

FHAHAMP
Second Lien Program (2MP)
Treasury/FHA Second Lien Program (FHA 2LP)
Rural Development Program (RDHAMP)

HHF
FHARefinance Program

54		

	

	

	

	

	

	

Pays financial incentives to investors for principal reduction in conjunction
with a first lien HAMP modification.
Provides financial incentives to investors to partially offset losses from home
price declines.
Designed to assist eligible borrowers unable to retain their homes through a
HAMP modification, by simplifying and streamlining the short sale and deedin-lieu of foreclosure processes and providing financial incentives to servicers
and investors as well as relocation assistance to borrowers who pursue short
sales and deeds-in-lieu.
Offers assistance to unemployed homeowners through temporary
forebearance of a portion of their mortgage payments. This program does not
require any payments from OFS.
Provides mortgage modifications similar to HAMP, but for FHA-insured or
guaranteed loans offered by the FHA, VA or USDA.
Offers financial incentives to participating servicers who modify second liens
in conjunction with a HAMP modification.
Provides for reduction or elimination of second mortgages on homes whose
servicers participate in the FHA Refinance Program.
Provides for lower monthly payments on USDA guaranteed loans.
Provides targeted aid to homeowners in the states hardest hit by the housing
market downturn and unemployment.
Joint initiative with HUD to encourage refinancing of existing underwater
mortgage loans not currently insured by FHA into FHA insured mortgages.

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
contingent on borrowers remaining in good
standing.

MHA
In early 2009, Treasury launched the Making
Home Affordable Program (MHA) to help
struggling homeowners avoid foreclosure. Since
its inception, MHA has helped homeowners avoid
foreclosure by providing a variety of solutions to
modify or refinance their mortgages, get
temporary forbearance if they are unemployed, or
transition out of homeownership via a short sale
or deed-in-lieu of foreclosure. The cornerstone of
MHA is the Home Affordable Modification
Program (HAMP), which provides eligible
homeowners the opportunity to reduce their
monthly mortgage payments to more affordable
levels. Treasury also launched programs under
MHA to help homeowners who are unemployed,
“underwater” on their loans (those who owe more
on their home than it is currently worth), or
struggling with second liens. It also includes
options for homeowners who would like to
transition to a more affordable living situation
through a short sale or deed-in-lieu of foreclosure.
MHA includes several additional programs to help
homeowners refinance or address specific types of
mortgages, in conjunction with the Federal
Housing Administration (FHA), the U. S.
Department of Agriculture (USDA), and the U. S.
Department of Veterans Affairs (VA).

Fannie Mae, as the MHA Program Administrator,
provides direct programmatic support as a third
party agent on behalf of the OFS. Freddie Mac
provides compliance oversight of servicers as a
third party agent on behalf of the OFS, and the
servicers work directly with the borrowers to
modify and service the borrowers’ loans. Fees
paid to Fannie Mae and Freddie Mac are included
in administrative costs reported on the Statement
of Net Cost.

HHF
The HHF was implemented in fiscal year 2010,
and provides targeted aid to homeowners in the
states hit hardest by the housing market
downturn and unemployment through each state’s
Housing Finance Agency (HFA). States that meet
the criteria for this program consist of Alabama,
Arizona, California, Florida, Georgia, Illinois,
Indiana, Kentucky, Michigan, Mississippi,
Nevada, New Jersey, North Carolina, Ohio,
Oregon, Rhode Island, South Carolina, Tennessee,
as well as the District of Columbia. Approved
states develop and roll out their own programs
with timing and types of programs offered
targeted to address the specific needs and
economic conditions of their state. States have
until December 31, 2017 to enter into agreements
with borrowers.

In fiscal year 2013, the deadline for applications
under the MHA programs was extended from
December 31, 2013, to December 31, 2015.

In fiscal year 2013, the state HFAs continued to
adapt their programs to best meet borrower needs
in evolving economic and housing markets. A
total of seven HFAs now offer principal reduction
to enable a loan modification, refinance, or recast,
and other states are strongly considering this
model. Florida, Illinois and Ohio have utilized
HHF resources to purchase notes and modify the
underlying loan terms, and Oregon offers
refinancing options to underwater homeowners
ineligible for other options. Additionally,
Michigan has elected to designate a portion of its
HHF allocation for blight elimination activities
that target vacant and abandoned urban
residences. Ohio has submitted a proposal to do
the same, and other states are contemplating this
approach to foreclosure prevention.

In fiscal year 2012, the OFS made additional
changes to MHA programs to provide relief to
more homeowners and accelerate the housing
market recovery. HAMP program guidelines were
expanded through the introduction of a secondlevel evaluation that expands the population of
homeowners eligible for the programs, including
certain rental properties and vacancies, creating a
flexible debt-to-income ratio band and including
certain previous HAMP participants who may
have lost good standing. Finally, investor
incentives for PRA were tripled on first liens and
doubled on second liens, and servicer incentives
were restructured to promote early engagement
with the borrowers.
All MHA disbursements are made to servicers
either for themselves or for the benefit of
borrowers and investors, and all payments are

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

	55	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

In fiscal year 2012, the state HFAs made
substantial eligibility changes to existing
programs (e.g. Florida, New Jersey) and
significantly modified principal reduction
programs (e.g. Arizona, California and Nevada)
incorporating curtailments (i.e. unmatched
principal reduction) that can be applied to all
eligible loans including GSE loans that
historically have not participated in principal
reduction programs.

cost is calculated under the FCRA, and
accordingly OFS determined that it was
appropriate to follow SFFAS No. 2 for financial
reporting. Therefore, the liability is calculated at
the net present value of estimated future cash
flows. Homeowners can refinance into FHAguaranteed mortgages through December 31,
2014, and OFS will honor its share of claims
against the letter of credit through September
2020. As of September 30, 2013, 3,015 loans had
been refinanced. As of September 30, 2012, 1,774
loans had been refinanced.

FHA-Refinance Program

OFS deposited $50 million with a commercial
bank as its agent to administer payment of claims
under the program; $47,840 in claim payments
were made as of September 30, 2013. No claim
payments had been made as of September 30,
2012. See Notes 4 and 6 for further details about
the deposit and the program. OFS paid $2 million
each year in fiscal years 2013 and 2012 to
maintain the letter of credit.

The FHA-Refinance Program is a joint initiative
with the U. S. Department of Housing and Urban
Development (HUD) which is intended to
encourage refinancing of existing underwater
mortgage loans not currently insured by FHA into
FHA-insured mortgages. HUD will pay a portion
of the amount refinanced to the investor and OFS
will pay incentives to encourage the
extinguishment of second liens associated with
the refinanced mortgages. OFS established a
letter of credit that obligated the OFS portion of
any claims associated with the FHA-guaranteed
mortgages. The OMB determined that for
budgetary purposes, the FHA-Refinance Program

The table below recaps housing program total
commitments as of September 30, 2013, and
payments and accruals as of September 30, 2013
and 2012.

Treasury Housing Programs Under TARP
Total Commitments as of  

Fiscal Year Payments through September 30, 

1

(Dollars in Millions)

September 30, 2013

2013

2012

MHA

$                   

29,867

$                      

2,541

$                  

HFA Hardest Hit Fund 

                        

7,600

                        

1,396

2013

                       

FHA ‐ Refinance

2

                        

1,025

$                   

Totals

38,492

                                
$                      

2

3,939

2012

2,202

$          

263

$         

241

861

              

‐

             

‐

2

              

‐

             

‐

3,065

$          

263

$         

241

                            
$                  

Accruals as of September 30, 

1

Total commitments represent amounts obligated to support all of OFS's Housing programs.  This differs from the $28,747 outstanding 
commitments as of September 30, 2013, which are the remaining funds available to be spent.

2

Payments do not include $50 million to establish reserve, shown on Balance Sheet as Cash on Deposit for Housing Program, nor the subsidy cost to 
fund OFS's estimated share of defaults, which establishes the liability for losses, see Note 6.  Payments are the FHA‐Refinance administrative 
expense only.

56		

	

	

	

	

	

	

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

NOTE	6.		TROUBLED	ASSET	RELIEF	PROGRAM	DIRECT	LOANS	AND	
EQUITY	INVESTMENTS,	NET	AND	OTHER	CREDIT	PROGRAMS	
The OFS administers a number of programs
designed to help stabilize the financial system and
restore the flow of credit to consumers and
businesses. The OFS made direct loans and equity
investments under TARP. The OFS also entered

into other credit programs, which consist of an asset
guarantee program and a loss-sharing program
under the TARP. The table below recaps OFS
programs by title and type:

`
Direct Loans and Equity Investments

Program Type

Capital Purchase Program
Community Development Capital Initiative

Equity Investment/Subordinated Debentures
Equity Investment/Subordinated Debentures

Public-Private Investment Program
Term Asset-Backed Securities Loan Facility

Equity Investment and Direct Loan
Subordinated Debentures

SBA 7(a) Security Purchase Program
Automotive Industry Financing Program
American International Group, Inc. Investment Program
Other Credit Programs

Direct Loan
Equity Investment and Direct Loan
Equity Investment

Asset Guarantee Program

Asset Guarantee

FHA-Refinance Program

Loss-sharing Program with FHA

Direct Loan and Equity Investment Programs
EESA, from public QFIs to purchase a number of
shares of common stock. QFIs that are Subchapter
S corporations issued subordinated debentures
instead of preferred stock (to comply with tax code
regulations) with interest rates of 7.7 percent for the
first five years and 13.8 percent thereafter.

Capital Purchase Program (CPP)
In October 2008, the OFS began implementation of
the TARP with the Capital Purchase Program
(CPP), designed to help stabilize the financial
system by assisting in building the capital base of
certain viable U.S. financial institutions to increase
the capacity of those institutions to lend to
businesses and consumers and support the economy.

The OFS received warrants from non-public QFIs for
the purchase of additional senior preferred stock (or
subordinated debentures if appropriate) with a
stated dividend rate of 9.0 percent (13.8 percent
interest rate for subordinate debentures) and a
liquidation preference equal to 5.0 percent of the
total senior preferred stock (additional subordinate
debenture) investment. These warrants were
immediately exercised and resulted in the OFS
holding additional senior preferred stock
(subordinated debentures) (collectively referred to as
“warrant preferred stock”) of non-public QFIs.

The OFS invested a total of $204.9 billion in 707
institutions under the CPP program between
October 2008 and December 2009.
Under this program, the OFS purchased senior
perpetual preferred stock from qualifying U.S.
controlled banks, savings associations, and certain
bank and savings and loan holding companies
(Qualified Financial Institution or QFI). The senior
preferred stock has a stated dividend rate of 5.0
percent through year five, increasing to 9.0 percent
in subsequent years. The dividends are cumulative
for bank holding companies and non-cumulative for
others; they are payable when and if declared by the
institution’s board of directors. In addition to the
senior preferred stock, the OFS received warrants,
with a 10-year term, as required by section 113(d) of

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

In addition to the above transactions, the OFS
entered into other transactions with various
financial institutions including exchanging existing
preferred shares for a like amount of non-taxdeductible Trust Preferred Securities, exchanging
preferred shares for shares of mandatorily
convertible preferred securities and selling preferred

	

	

	

	

	

	

	57	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

shares to financial institutions that were acquiring
the QFIs that have issued the preferred shares.
Generally, these transactions are entered into with
financial institutions in poor financial condition with
a high likelihood of failure. As such, in accordance
with SFFAS 2, these transactions are considered
workouts and not modifications. The changes in cost
associated with these transactions are captured in
the year-end reestimates.

In fiscal year 2012, OFS sold 40 CPP investments in
six separate auctions for total net proceeds of $1.3
billion. These auction sales resulted in net proceeds
less than cost of $180 million. In addition, other
sales and redemptions for 56 institutions resulted in
net proceeds less than cost of $105 million.
During fiscal year 2013, one CPP institution was
written off for $104 million. OFS originally invested
$110 million and recovered $6 million. There were
no write-offs in fiscal year 2012. During fiscal year
2013, seven institutions, in which OFS had invested
$137 million, were either closed by their regulators
or declared bankruptcy. During fiscal year 2012, six
institutions, in which OFS had invested $51 million,
were either closed by their regulators or declared
bankruptcy. The OFS does not anticipate recovery
on these investments and therefore the values of
these investments are reflected at zero as of
September 30, 2013 and 2012. The ultimate amount
received, if any, from the investments in institutions
that filed for bankruptcy and institutions closed by
regulators will depend primarily on the outcome of
the bankruptcy proceedings and of each institution’s
receivership.

During fiscal year 2012, OFS elected to sell selected
CPP investments to the public in auction sales.
Because auction sales were not considered in the
budget formulation estimate for the CPP program,
OFS recorded a modification increasing the cost of
the program by $973 million. During fiscal year
2013, OFS continued auction sales of selected
remaining CPP investments.
In fiscal year 2013, OFS sold 113 CPP investments
in 14 separate auctions for total net proceeds of $1.5
billion. These auction sales resulted in net proceeds
less than cost of $455 million. In addition, other
sales and redemptions for 60 institutions resulted in
net proceeds less than cost of $38 million.

The following tables provide key data points related to the CPP for the fiscal years ending September 30,
2013 and 2012:
CPP Participating Institutions

Cumulative as of September 30,
2013

2012

Number of Institutions Funded

707

707

Institutions Paid in Full, Merged or Investments Sold

(407)

(234)

Institutions Transferred to CDCI

(28)

(28)

Institutions Refinanced to SBLF

(137)

(137)

Institutions Written Off After Bankruptcy or Receivership

(3)

Institutions in Bankruptcy or Receivership

(2)

132

Number of Institutions w ith Outstanding OFS Investments

306

(24)

Number of CPP Institutions V alued at Year-End

(17)

108
76

Of the Institutions V alued, Number that Have Missed One or More
Dividend Payments

289
157

CPP Investments
(Dollars in Millions)

Fiscal Year 2013

Outstanding Beginning Balance, Investment in CPP Institutions, Gross

$

Repayments and Sales of Investments

Fiscal Year 2012
8,664

$

(4,752)

Write-Offs

(8,223)

(104)

Losses from Sales and Repurchases of Assets in Excess of Cost

17,299

(665)

Outstanding Balance, Investment in CPP Institutions, Gross

$

Interest and Dividend Collections
Net Proceeds from Sales and Repurchases of Assets Less Than Cost

58		

	

	

	

	

(412)

	

	

	

$

$

	

3,143
262

$

$

(493) $

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

8,664
572
(285)

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Community Development Capital
Initiative (CDCI)

Public-Private Investment Program
(PPIP)

In February 2010, the OFS announced the
Community Development Capital Initiative (CDCI)
to invest lower cost capital in Community
Development Financial Institutions (CDFIs). Under
the terms of the program, the OFS purchased senior
preferred stock (or subordinated debt) from eligible
CDFIs. The senior preferred stock had an initial
dividend rate of 2 percent. CDFIs could apply to
receive capital up to 5 percent of risk-weighted
assets. To encourage repayment while recognizing
the unique circumstances facing CDFIs, the
dividend rate increases to 9 percent after eight
years.

The PPIP was part of the OFS’s efforts to help
restart the financial securities market and provide
liquidity for legacy securities. Under this program,
the OFS (as a limited partner) made equity
investments in and loans to nine investment
vehicles (referred to as Public Private Investment
Funds or “PPIFs”) established by private investment
managers between September and December 2009.
The OFS equity investments were used to match
private capital and equaled 49.9 percent of the total
equity invested. Each PPIF elected to receive a loan
commitment equal to 100 percent of partnership
equity. Agreements between the OFS and the
PPIFs require cash flows from purchased securities
received by the PPIFs to be distributed in
accordance with a priority of payments schedule
(waterfall) designed to help protect the interests of
secured parties. Security cash flows collected are
disbursed: 1) to pay administrative expenses; 2) to
pay margin interest on permitted hedges; 3) to pay
current period interest to OFS; 4) to maintain a
required interest reserve account; 5) to pay principal
on the OFS loan when the minimum Asset Coverage
Ratio Test is not satisfied; 6) to pay other amounts
on interest rate hedges if not paid under step 2 ; 7)
for additional temporary investments or to prepay
loans (both at the discretion of the PPIF); 8) for
distributions to equity partners up to the lesser of 12
months’ net interest collected or 8 percent of the
funded capital commitments; 9) for loan
prepayments to OFS; and 10) for distribution to
equity partners.

For CDFI credit unions, the OFS purchased
subordinated debt at rates equivalent to those
offered to CDFIs and with similar terms. These
institutions could apply for up to 3.5 percent of total
assets - an amount approximately equivalent to the
5 percent of risk-weighted assets available to banks
and thrifts.
CDFIs participating in the CPP, subject to certain
criteria, were eligible to exchange, through
September 30, 2010, their CPP preferred shares
(subordinated debt) then held by OFS for CDCI
preferred shares (subordinated debt). These
exchanges were treated as disbursements from
CDCI and repayments to CPP. OFS invested a total
of $570 million ($363 million as a result of
exchanges from CPP) in 84 institutions under the
CDCI.
During fiscal year 2013, one CDCI institution, in
which the OFS invested $7 million, was written off;
there were no write-offs in fiscal year 2012. During
fiscal year 2012, this CDCI institution was closed by
its regulator. The OFS did not anticipate recovery
on the investment and therefore its value was
reflected at zero as of September 30, 2012.

As a condition of its investment, the OFS also
received a warrant from each of the PPIFs entitling
the OFS to 2.5 percent of investment proceeds
(excluding those from temporary investments)
otherwise allocable to the non-OFS partners after
the PPIFs return of 100 percent of the non-OFS
partners’ capital contributions. Distributions
relating to the warrants generally occur upon the
final distribution of each partnership.

In fiscal year 2013, OFS received $86 million in
repayments and $11 million in dividends and
interest from its CDCI investments. In fiscal year
2012, OFS received $3 million in repayments and
$11 million in dividends and interest from its CDCI
investments.

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

The PPIFs were allowed to purchase commercial
and non-agency residential mortgage-backed
securities (CMBS and RMBS, respectively) issued
prior to January 1, 2009, that were originally rated
AAA or an equivalent rating by two or more
nationally recognized statistical rating organizations
without external credit enhancement and that are

	

	

	

	

	

	

	59	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

secured directly by the actual mortgage loans, leases
or other assets (eligible assets) and not other
securities. The PPIFs investment period ended
December 2012 and as of June 30, 2013, all of the
PPIF’s securities portfolios were completely
liquidated. As of September 30, 2012, the PPIFs’
portfolios were comprised of approximately 74
percent RMBS and 26 percent CMBS.

As of September 30, 2012, OFS had equity
investments in six PPIFs outstanding of $4.1 billion
and loans outstanding of $5.7 billion for a total of
$9.8 billion. These investments and loans were
valued at $10.8 billion.

Term Asset-Backed Securities Loan
Facility (TALF)

OFS made no disbursements to PPIFs during fiscal
year 2013. During fiscal year 2012, OFS disbursed
$245 million as equity investments and $803 million
as loans to PPIFs.

The Term Asset-Backed Securities Loan Facility
(TALF) was created by the Federal Reserve Board
(FRB) to provide low cost funding to investors in
certain classes of Asset-Backed Securities (ABS).
The OFS agreed to participate in the program by
providing liquidity and credit protection to the FRB.

In fiscal year 2013, the six remaining PPIFs
liquidated investments and fully repaid investors,
including OFS. During fiscal year 2013, the OFS
received $17 million in interest on loans and $5.7
billion in loan principal repayments from the PPIFs
and received $5.5 billion in equity distributions, of
which $254 million was recognized as investment
income, $1.2 billion as net proceeds in excess of cost
and $4.1 billion as a reduction of the gross
investment outstanding. During fiscal year 2012,
the OFS received $124 million in interest on loans
and $5.6 billion in loan principal repayments from
the PPIFs and received $3.2 billion in equity
distributions, of which $1.3 billion was recognized as
investment income, $223 million as net proceeds in
excess of cost and $1.7 billion as a reduction of the
gross investment outstanding. One PPIF
partnership fully repaid its investors, including
OFS, in fiscal year 2012. Another had repaid all
equity capital in fiscal year 2012 and distributed
additional funds and ceased operations early in
fiscal year 2013.

Under the TALF, the Federal Reserve Bank of New
York (FRBNY), as implementer of the TALF
program, originated loans on a non-recourse basis to
purchasers of certain AAA-rated ABS secured by
consumer and commercial loans and commercial
mortgage backed securities (CMBS). The FRBNY
ceased issuing new loans on June 30, 2010. As of
September 30, 2013, $101 million of loans due to the
FRBNY remained outstanding. As of September 30,
2012, approximately $1.5 billion of loans due to the
FRBNY remained outstanding.
As part of the program, the FRBNY created the
TALF, LLC, a special purpose vehicle that agreed to
purchase from the FRBNY any collateral it has
seized due to borrower default. The TALF, LLC
would fund purchases from the accumulation of
monthly fees paid by the FRBNY as compensation
for the agreement. Only if the TALF, LLC had
insufficient funds to purchase the collateral did the
OFS commit to invest up to $20.0 billion in nonrecourse subordinated notes issued by the TALF,
LLC. In July 2010, the OFS’s commitment was
reduced to $4.3 billion. In June 2012, the OFS’s
commitment was reduced from $4.3 billion to $1.4
billion. In fiscal year 2013, the remaining
commitment was terminated.

As of September 30, 2013, OFS had no PPIF equity
investments or loans outstanding. The $10 million
positive balance in the PPIP subsidy allowance
account represents additional proceeds expected
upon final liquidation of remaining partnerships.
The legal commitments to disburse up to $1.8 billion
in additional loans to remaining PPIFs as of
September 30, 2012 were canceled in 2013 since all
PPIFs had ceased operations. Commitments of $984
million to disburse additional equity to PPIFs will
remain until all distributions have been received
from PPIFs and all PPIF liabilities have been
settled, although a requirement for additional
disbursement by OFS is highly unlikely.

60		

	

	

	

	

	

	

The OFS disbursed $100 million upon the creation of
TALF, LLC in 2009. Upon its wind-down, when
collateral defaults, reaches final maturity or is sold,
available cash will be disbursed to FRBNY and OFS
according to the legal agreement between them.
In fiscal year 2013, a modification to the terms of the
legal agreement resulted in $55 million in subsidy
income for the program. The modification allowed

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
possession (DIP) financing while Old GM was in
bankruptcy. As of September 30, 2011, after various
sales and restructurings of its investment, the OFS
held 500 million shares of common stock of New GM,
the post-bankruptcy GM entity, and had received a
cumulative total of $23.9 billion in stock sale
proceeds, loan repayments, dividends and interest.

OFS to receive $100 million in repayments, $13
million in interest and $570 million of contingent
interest, recorded as proceeds in excess of cost, in
fiscal year 2013 rather than in fiscal year 2015 as
originally expected.
As of September 30, 2013 and 2012, no TALF loans
were in default and consequently no collateral was
purchased by the TALF, LLC.

During fiscal year 2013, OFS sold 399 million shares
of GM common stock for $12.0 billion. The sales
resulted in net proceeds less than cost of $5.4 billion.
During fiscal year 2012, OFS did not sell any of its
New GM common stock shares.

SBA 7(a) Securities Purchase Program
In March 2010, the OFS began the purchase of
securities backed by Small Business Administration
7(a) loans (7(a) Securities) as part of the Unlocking
Credit for Small Business Initiative. Under this
program OFS purchased 7(a) Securities
collateralized with 7(a) loans (these loans are
guaranteed by the full faith and credit of the United
States Government) packaged on or after July 1,
2008. In May 2011, OFS began selling its securities
to investors. Sales were completed in January of
2012 and the program closed.

At September 30, 2013, the OFS held 101 million
shares of the common stock of New GM that
represented approximately 7.3 percent of the
common stock of New GM outstanding. Market
value of the 101 million shares as of September 30,
2013 was $3.6 billion. At September 30, 2012, the
OFS held 500 million shares, approximately 32
percent of the common stock of New GM
outstanding, with a market value of $11.4 billion.
In fiscal year 2011, $986 million of OFS’s loan to Old
GM was converted to an administrative claim. OFS
retains the right to recover additional proceeds but
recoveries are dependent on actual liquidation
proceeds and pending litigation. OFS recovered $22
million and $26 million in fiscal years 2013 and
2012, respectively, on the administrative claim, and
the outstanding balance at September 30, 2013 was
$827 million. OFS does not expect to recover any
significant additional proceeds from this claim.

As of September 30, 2013 and 2012, the OFS held no
investment in SBA 7(a) securities. The OFS
invested a total of $367 million (excluding purchased
accrued interest) and received $363 million in
principal payments and sales proceeds, as well as
$13 million in interest on its securities over the
course of the program. During fiscal year 2012, the
OFS sold its remaining SBA securities and received
proceeds of $127 million, including interest.

Automotive Industry Financing Program
(AIFP)

Chrysler Group LLC (New Chrysler) and
Chrysler Holding LLC (Old Chrysler)

The Automotive Industry Financing Program (AIFP)
was designed to help prevent a significant
disruption of the American automotive industry,
which could have had a negative effect on the
economy of the United States.

During fiscal years 2009 and 2010, OFS invested
$7.8 billion in Chrysler Holding LLC (Old Chrysler),
including the auto supplier and warranty programs,
and an additional $4.6 billion in Chrysler Group
LLC (New Chrysler) under the terms of Chrysler’s
bankruptcy agreement. Prior to fiscal year 2012,
pursuant to several agreements with New Chrysler
that included writeoffs, OFS had received loan
repayments, interest and additional payments
totaling $11.1 billion and had no remaining interest
in New Chrysler.

General Motors Company (New GM) and
General Motors Corporation (Old GM)

	

In the period ended September 30, 2009, the OFS
provided $51.0 billion to General Motors
Corporation (Old GM) through various loan
agreements including the initial loan for general and
working capital purposes, auto supplier and
warranty programs, and the final loan for debtor-in-

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

OFS continues to hold a right to receive proceeds
from a bankruptcy liquidation trust related to Old
Chrysler, but no significant cash flows are expected.

	

	

	

	

	

	

	61	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

Nothing was received from the trust in fiscal year
2013; $9 million was received during fiscal year
2012. The underlying loan balance was
extinguished in the Chrysler bankruptcy.

At September 30, 2012, OFS’s investment in Ally
was valued at $6.2 billion based upon a model that
calculated an average of three valuation
benchmarks, since there was no direct market
activity available.

Ally Financial Inc. (formerly known as
GMAC)

American International Group, Inc. (AIG)
Investment Program

The OFS invested a total of $16.3 billion in GMAC
between December 2008 and December 2009, to help
support its ability to originate new loans to GM and
Chrysler dealers and consumers and to help address
GMAC’s capital needs. In addition, in May 2009,
under the terms of a separate $884 million loan to
Old GM, OFS exercised its exchange option and
received 190,921 shares of GMAC common stock
from Old GM in full satisfaction of the loan. In May
2010, GMAC changed its corporate name to Ally
Financial, Inc. (Ally), a private bank holding
company. As a result of original investments,
exchanges, conversions, warrant exercises and sales,
at the beginning of fiscal year 2012, OFS had
received $5.1 billion in sales proceeds and dividends
on its initial investment and held 981,971 shares of
common stock (73.8 percent of Ally’s outstanding
common stock) and 119 million shares of Series F-2
mandatorily convertible preferred securities (Series
F-2). The Series F-2 were convertible into at least
513,000 shares of common stock.

The OFS provided assistance to systemically
significant financial institutions on a case by case
basis in order to help provide stability to institutions
that were deemed critical to a functioning financial
system and were at substantial risk of failure as
well as to help prevent broader disruption to
financial markets. OFS invested in one institution,
AIG, under the program.
In November 2008, the OFS invested $40.0 billion in
AIG in the form of Series D 10 percent cumulative
perpetual preferred stock. An additional $27.8
billion was drawn from a capital facility made
available to AIG by OFS, secured by additional
preferred stock and common stock warrants. By
January 2011, and as a result of various
restructurings of both the OFS’s and the Federal
Reserve Bank of New York’s investments in AIG,
the OFS’s entire investment outstanding consisted
of $20.3 billion of interests in two AIG subsidiaries
organized as Special Purpose Vehicles (the “AIG
SPVs”) and 1.1 billion shares of AIG common stock.

Per an August 2013 agreement, all of the Series F-2
were repurchased by Ally from OFS for $5.2 billion
in November 2013. OFS received an additional $725
million for the elimination of certain rights under
the original agreement. This August 2013
agreement also included terms for Ally to issue a
November 2013 private offering of new common
stock at a price of $6,000 per share. Following this
private offering, OFS’s ownership was reduced to
63.4 percent of Ally’s outstanding common stock.
See the Valuation Methodology and Subsidy Cost
and Reestimate sections of Note 6 for further
discussion of the effects of this agreement.

In fiscal year 2013, OFS sold the remainder of its
common stock and warrants for $5.0 billion,
resulting in proceeds less than cost of $1.7 billion.
In fiscal year 2012, OFS received $9.6 billion in
distributions from the AIG SPVs, paying off the
remaining investment balance of $9.1 billion,
recording proceeds in excess of cost of $127 million,
and collecting $395 million of investment income
(including $204 million capitalized and recognized
as income in fiscal year 2011). OFS also sold 806
million shares of common stock for $25.2 billion.
These proceeds were less than OFS’s cost by $9.9
billion.

The OFS received $534 million in dividends from the
Ally investment each year in fiscal years 2013 and
2012.

As of September 30, 2013, OFS retained no
ownership interest in AIG, common or preferred, nor
any interests in SPVs. At September 30, 2012, the
OFS owned 154 million shares of AIG common stock,
approximately 10.5 percent of AIG’s common stock

The investment in Ally was valued at $12.0 billion
at September 30, 2013, considering the effects of the
August 2013 agreement: $5.9 billion for the common
stock and $6.1 billion for the Series F-2.

62		

	

	

	

	

	

	

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
equity5. Market value of the common stock shares
was $5.1 billion.

but not intended to represent fair value, i.e. the
proceeds that would be expected to be received if the
loans were sold to a market participant. The OFS
uses market observable inputs, when available, in
developing cash flows and incorporating the
adjustment required for market risk. For purposes
of this disclosure, the OFS has classified its
programs’ asset valuations as follows, based on the
observability of inputs that are significant to the
measurement of the asset:

On its original $67.8 billion investment in AIG, OFS
received $55.3 billion in repayments, sales proceeds,
fees and dividends. OFS also incurred net interest
cost of $2.7 billion, for a total subsidy cost of $15.2
billion, or 22.4 percent of its original investment.

Valuation Methodology
The OFS applies fair value and the provisions of
SFFAS No. 2 to account for direct loans, equity
investments and other credit programs. This
standard requires measurement of the asset or
liability at the net present value of the estimated
future cash flows. The cash flow estimates for each
transaction reflect the actual structure of the
instruments. For each of these instruments,
analytical cash flow models generate estimated cash
flows to and from the OFS over the estimated term
of the instrument. Further, each cash flow model
reflects the specific terms and conditions of the
program, technical assumptions regarding the
underlying assets, risk of default or other losses, and
other factors as appropriate. The models also
incorporate an adjustment for market risk to reflect
the additional return required by the market to
compensate for variability around the expected
losses reflected in the cash flows (the “unexpected
loss”).





Significant Observable Inputs (Level 2): The
measurement of assets in this classification is
primarily derived from market observable data,
other than a direct market quote, for the asset.
This data could be market quotes for similar
assets for the same entity.



The adjustment for market risk requires the OFS to
determine the return that would be required by
market participants to enter into similar
transactions or to purchase the assets held by OFS.
Accordingly, the measurement of the assets
attempts to represent the proceeds expected to be
received if the assets were sold to a market
participant in an orderly transaction. The
methodology employed for determining market risk
for equity investments generally involves a
calibration to market prices of similar securities that
results in measuring equity investments at fair
value. The adjustment for market risk for loans is
intended to capture the risk of unexpected losses,

Quoted prices for Identical Assets (Level 1): The
measurement of assets in this classification is
based on direct market quotes for the specific
asset, e.g. quoted prices of common stock.

Significant Unobservable Inputs (Level 3): The
measurement of assets in this classification is
primarily derived from inputs which generally
represent management’s best estimate of how a
market participant would assess the risk
inherent in the asset. These unobservable
inputs are used because there is little to no
direct market activity.

                                                            
5

The Department of the Treasury retained no ownership
interest in AIG at September 30, 2013. It owned 80
million shares of AIG common stock, approximately 5.4
percent of AIG’s common stock equity, at September 30,
2012.

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

	63	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

The following table displays the assets held by the observability of inputs significant to the measurement of
each value:
As of September 30, 2013

(Dollars in Millions)

Quoted
Prices for
Identical
Assets
(Level 1)
Program
Capital Purchase Program
CDCI and TALF
Public-Private Investment Program
Automotive Industry Financing Program

$

125
18
3,647
3,790

$

Total TARP Programs

Quoted
Prices for
Identical
Assets
(Level 1)
Program
Capital Purchase Program
CDCI and TALF
Public-Private Investment Program
Automotive Industry Financing Program
American International Group Inc. Investment Program
Asset Guarantee Program

$

$

Total TARP Programs

The following provides a description of the
methodology used to develop the cash flows and
incorporate the market risk into the measurement of
the OFS assets.

The estimated values of preferred equity
investments are the net present values of the
expected dividend payments and proceeds from
repurchases and sales. The model assumes that the
key decisions affecting whether or not institutions
pay their preferred dividends are made by each
institution based on the strength of its balance
sheet. The model assumes a probabilistic evolution

$

$

11,950
11,950

$

1,668
451
10
2,129

$

$

1,793
469
10
15,597
17,869

6

This consists of equity investments made under CPP and
CDCI.

	

	

	

	

327
9
11,376
5,067
16,779

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

$

$

$

967
967

$

5,407
1,095
10,778
6,170
2
23,452

Total

$

$

5,734
1,104
10,778
17,546
5,069
967
41,198

In the model, when equity decreases, i.e. the assetto-liability ratio falls, institutions are increasingly
likely to default, either because they enter
bankruptcy or are closed by regulators. The
probability of default is estimated based on the
performance of a large sample of U.S. banks over the
period 1990-2012. At the other end of the spectrum,
institutions call their preferred shares when the
present value of expected future dividends exceeds

                                                            

	

$

Total

of each institution’s asset-to-liability ratio (the assetto-liability ratio is based on the estimated fair value
of the institution’s assets against its liabilities).
Each institution’s assets are subject to uncertain
returns and institutions are assumed to manage
their asset-to-liability ratios in such a way that they
revert over time to a target level. Historical
volatility is used to scale the likely evolution of each
institution’s asset-to-liability ratio.

Financial Institution Equity Investments6

	

Significant
Unobservable
Inputs
(Level 3)

As of September 30, 2012

(Dollars in Millions)

64		

Significant
Observable
Inputs
(Level 2)

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
the call price; this occurs when equity is high and
interest rates are low. Inputs to the model include
institution-specific accounting data obtained from
regulatory filings, an institution’s stock price
volatility and historical bank failure information, as
well as market prices of comparable securities
trading in the market. The market risk adjustment
is obtained through a calibration process to the
market value of certain trading securities of
financial institutions within TARP programs or
other comparable financial institutions. The OFS
estimates the values and projects the cash flows of
warrants using an option-pricing approach based on
the current stock price and its volatility.
Investments in common stock that are exchange
traded are valued at the quoted market price as of
year end.

calculated based on analysis of historical loan loss
and charge-off experience by credit sector and
subsector. Historical mean loss rates and volatilities
are significantly stressed to reflect recent and
projected performance. Simulated losses are run
through cash flow models to project impairment to
the TALF-eligible securities. Simulation outcomes
consisting of a range of loss scenarios are
probability-weighted to generate the expected net
present value of future cash flows.
Automotive Industry Financing Program
Shares of common stock in General Motors Company
(New GM) held by OFS were valued by multiplying
the publicly traded share price by the number of
shares held plus the value of any traded but not
settled shares as of September 30, 2013 and 2012.
Traded but not settled shares were valued based on
the actual trade proceeds.

Public-Private Investment Program
At September 30, 2013, since the PPIFs no longer
held security portfolios, the valuation represents
expected proceeds to OFS upon final liquidation of
the remaining PPIFs. For the valuations at
September 30, 2012, OFS estimated cash flows by
simulating the performance of the collateral
supporting the residential mortgage-backed
securities (RMBS) and commercial mortgage-backed
securities (CMBS) held by the PPIF (i.e.
performance of the residential and commercial
mortgages). Inputs used to simulate the cash flows,
which considered market risks, included
unemployment forecasts, home price
appreciation/depreciation forecasts and the current
term structure of interest rates and historical pool
performance as well as estimates of the net income
and value of commercial real estate supporting the
CMBS. The simulated cash flows were then run
through a financial model that defined distributions
of the RMBS/CMBS to determine the estimated cash
flows to the PPIF. Once determined, those cash
flows were run through the defined payment
hierarchy of the PPIFs to determine the expected
cash flows to the OFS through both the equity
investments and the loans.

To value its holdings in Ally at September 30, 2013,
OFS considered observable market data from the
August 2013 agreement for the repurchase of the
Series F-2 and Ally’s private offering of new common
stock at a price of $6,000 per share. Proceeds and
dividends received in November related to the Series
F-2 repurchase were discounted to September 30,
2013 at a risk-free discount rate to reflect the timing
and certainty of the expected cash flows. OFS’s
investment in 981,971 shares of common stock was
valued at the price per share in Ally’s private
offering.
To value its holdings in Ally common equity and
Series F-2 mandatorily convertible preferred
securities, on an “if-converted” basis at September
30, 2012, the OFS used an average of valuation
multiples such as price-to-earnings, price-to-tangible
book value, and asset manager valuations to
estimate the value of the shares. The multiples
were based on those of comparable publicly-traded
entities. The adjustment for market risk was
incorporated in the data points used to determine
the measurement for Ally, since all points relied on
market data.

Term Asset-Backed Securities Loan Facility

American International Group, Inc.
Investment Program

For TALF, the OFS model derives the cash flows to
the Federal Reserve Bank of New York (FRBNY)
TALF LLC SPV, and ultimately the OFS, by
simulating the performance of underlying collateral.
Loss probabilities on the underlying collateral are

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

The OFS investment in AIG common stock was
valued by multiplying the publicly traded share
price by the number of shares held as of September

	

	

	

	

	

	

	65	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

30, 2012. OFS had no investment in AIG common
stock remaining as of September 30, 2013.

Net downward reestimates for the fiscal years ended
September 30, 2013 and 2012, totaled $11.8 billion
and $11.9 billion, respectively. Descriptions of the
reestimates, by OFS Program, are as follows:

Asset Guarantee Program

CPP

As of September 30, 2012, the instruments within
the AGP, consisting of Citigroup Trust Preferred
Securities receivable from the FDIC with an $800
million liquidation preference value plus accrued
dividends and interest, were valued in a manner
broadly analogous to the previously described
methodology used for financial institution equity
investments. As of September 30, 2013, no
instruments remained.

The $1.1 billion downward reestimate for CPP for
the year ended September 30, 2013 was the result of
a reduction in the projected number of institutions
that would be sold via asset sales, repayments and
improved market values of the outstanding
investments.
The $2.9 billion downward reestimate for CPP for
the year ended September 30, 2012 was the result of
improved market values of the outstanding
investments and the effect of receiving $8.2 billion in
repayments, which reduced the remaining
investment by about one-half, in fiscal year 2012.

Subsidy Cost and Reestimates
The recorded subsidy cost of a direct loan, equity
investment or other credit program is based upon
the calculated net present value of expected future
cash flows. The OFS’s actions, as well as changes in
legislation that change these estimated future cash
flows change subsidy cost, and are recorded as
modifications. The cost or reduction in cost of a
modification is recognized when it occurs.

CDCI
The CDCI program continued to experience
improved investment performance with several
institutions repaying in full, resulting in a $32
million downward reestimate for the year ended
September 30, 2013.

During fiscal year 2013, modifications occurred in
the AGP and TALF programs that resulted in
subsidy income of $94 million and $55 million,
respectively. During fiscal year 2012, a modification
occurred in the CPP, increasing subsidy cost by $973
million.

The CDCI program reflected improved investment
performance, resulting in a $30 million downward
reestimate for the year ended September 30, 2012.
PPIP

The purpose of reestimates is to update original
program subsidy cost estimates to reflect actual cash
flow experience as well as changes in equity
investment valuations or forecasts of future cash
flows. Forecasts of future cash flows are updated
based on actual program performance to date,
additional information about the portfolio,
additional publicly available relevant historical
market data on securities performance, revised
expectations for future economic conditions, and
enhancements to cash flow projection methods.

The $380 million net downward reestimate for the
PPIP for the year ended September 30, 2013, was
primarily due to accelerated repayments.
The $240 million upward reestimate for the PPIP for
the year ended September 30, 2012, was due
primarily to accelerated repayments and changes in
projected performance of the PPIP portfolio.
TALF

For fiscal years 2013 and 2012, financial statement
reestimates for all programs were performed using
actual financial transaction data through September
30. For fiscal years 2013 and 2012, a mix of market
and security specific data publicly available as of
August 31 and September 30 each year was used for
all programs.

66		

	

	

	

	

	

	

The investments in the TALF continued to
experience improved market conditions and
accelerated repayments, resulting in a $33 million
downward reestimate for the year ended September
30, 2013. The $55 million downward modification
reflects principal and interest repayments occurring
in February 2013, with contingent interest paid over

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
time beginning in February 2013. Prior to the
modification, principal, interest and contingent
interest would have occurred in March 2015.

market price of New GM, from $20.18 per share at
September 30, 2011 to $22.75 per share at
September 30, 2012.

The investments in the TALF experienced improved
market conditions and accelerated repayments,
resulting in a $96 million downward reestimate for
the year ended September 30, 2012.

AIG Investment Program
The $32 million net upward reestimate for the year
ended September 30, 2013 was due primarily to the
sale of the remaining 155 million shares of AIG
common stock at a price of $32.50 per share, slightly
lower than the September 30, 2012 price of $32.79
per share. The AIG program was closed out in fiscal
year 2013.

SBA 7(a)
The SBA 7(a) Securities Purchase Program was
closed in fiscal year 2012, with a $1 million
downward closing reestimate.

The $9.2 billion downward reestimate for the year
ended September 30, 2012 was due primarily to
sales of 806 million shares of common stock at prices
higher than the September 30, 2011 price of $21.95
per share and the effect of valuing the remaining
155 million shares at the September 30, 2012 price
of $32.79 per share.

AIFP
Improvements in the common stock share price for
New GM accounted for $4.4 billion of the $10.2
billion in downward reestimates for AIFP as of
September 30, 2013. The price improved throughout
fiscal year 2013, from $22.75 per share at September
30, 2012 to $35.97 per share at September 30, 2013.
The remaining $5.8 billion in downward reestimates
for AIFP was due to increases in the valuation of the
outstanding investment in Ally, reflecting
observable market data from the August 2013
agreement for the repurchase of the Series F-2 and
for Ally’s private offering.

Summary Table
The following table recaps gross direct loans or
equity investments, subsidy allowance, net direct
loans or equity investments, reconciliation of
subsidy cost allowance and subsidy cost, by TARP
program, as of and for the years ended September
30, 2013 and 2012. OFS authority expired October
3, 2010 and no commitments were made thereafter,
so there were no budget execution subsidy rates for
fiscal years 2013 and 2012.

The $230 million upward reestimate for the year
ended September 30, 2012, was due to a decline of
$1.6 billion in the value of the Ally investment,
partially offset by an increase in the common stock

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

	67	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	
Troubled Asset Relief Program Loans and Equity Investments
(Dollars in Millions)

TOTAL

As of September 30, 2013
Direct Loans and Equity Investment Programs:
Direct Loans and Equity Investments Outstanding, Gross
Subsidy Cost Allow ance
Direct Loans and Equity Investments Outstanding, Net

$

23,496 $
(5,627)
17,869 $

Obligations for Loans and Investments not yet Disbursed

$

984 $

$

CPP

22,842 $
(55)
1,092

$

Reconciliation of Subsidy Cost Allowance:
Balance, Beginning of Period
Subsidy Cost (Income) for Modifications
Dividend and Interest Income
Net Proceeds from Sales and Repurchases of Assets
in Excess of (Less than) Cost
Write-Offs
Net Interest Expense on Borrow ings from
Fiscal Service and Financing Account Balance
Balance, End of Period, Before Reestimates
Subsidy Reestimates - Upw ard (Dow nw ard)
Balance, End of Period

PPIP

3,143 $
(1,350)
1,793 $
-

$

2,930 $
262

AIFP

- $ 19,878 $
10
(4,281)
10 $ 15,597 $
984 $

CDCI-TALF

AIG

-

$

- $
- $
-

475
(6)
469

$

-

(1,015) $ 19,706 $
271
534

1,658 $
-

(437)
(55)
25

1,173
-

(1,679)
-

570
(7)

(5,790)
(111)

(493)
(104)

(612)
17,366
(11,739)
5,627 $

(105)
2,490
(1,140)
1,350 $

(59)
(412)
370
14,467
(380)
(10,186)
(10) $ 4,281 $

(11)
(32)
32
$

(25)
71
(65)
6

$

(55) $
(11,739)

- $
(1,140)

- $
- $
(380)
(10,186)

- $
32

(55)
(65)

$

(11,794) $

(1,140) $

(380) $ (10,186) $

32 $

(120)

$

Reconciliation of Subsidy Cost (Income):
Subsidy Cost (Income) for Modifications
Subsidy Reestimates - Upw ard (Dow nw ard)
Total Direct Loan and Equity Investment Programs
Subsidy Cost (Income)

(Dollars in Millions)

TOTAL

CPP

PPIP

(5,361)
-

AIFP

AIG

CDCI-TALFSBA

As of September 30, 2012
Direct Loans and Equity Investment Programs:
Direct Loans and Equity Investments Outstanding, Gross
Subsidy Cost Allow ance
Direct Loans and Equity Investments Outstanding, Net

$

63,073 $
(22,842)
40,231 $

New Loans or Investments Disbursed

$

1,048 $

-

$

1,048 $

-

$

-

$

-

Obligations for Loans and Investments not yet Disbursed

$

4,358 $

-

$

3,058 $

-

$

-

$

1,300

$

42,301 $
942
2,733

$

Reconciliation of Subsidy Cost Allowance:
Balance, Beginning of Period
Subsidy Cost (Income) for Disbursements and Modifications
Dividend and Interest Income
Net Proceeds from Sales and Repurchases of Assets
in Excess of (Less than) Cost
Net Interest Expense on Borrow ings from
Fiscal Service and Financing Account Balance
Balance, End of Period, Before Reestimates
Subsidy Reestimates - Upw ard (Dow nw ard)
Balance, End of Period

	

	

	

	

4,857 $
973
572

6,727 $
(1,658)
5,069 $

(2,434) $ 19,440 $ 20,717 $
(31)
1,426
534
191

	

(285)

(1,626)
34,562
(11,720)
22,842 $

(290)
5,827
(2,897)
2,930 $

(31) $
973
(11,720)

- $
973
(2,897)

(31) $
240

- $
230

- $
(9,166)

(127)

$

	

(10,778) $

(1,924) $

209 $

230 $

(9,166) $

(127)

	

	

9

(279)
10

(9,788)

$

223

667
437
1,104

$

Reconciliation of Subsidy Cost (Income):
Subsidy Cost (Income) for Disbursements
Subsidy Cost (Income) for Modifications
Subsidy Reestimates - Upw ard (Dow nw ard)
Total Direct Loan and Equity Investment Programs
Subsidy Cost (Income)

68		

8,664 $ 9,763 $ 37,252 $
(2,930)
1,015
(19,706)
5,734 $ 10,778 $ 17,546 $

(9,735)

(439)
(507)
(349)
(1,255)
19,476
10,824
240
230
(9,166)
(1,015) $ 19,706 $ 1,658 $

(41)
(310)
(127)
(437)

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

Other Credit Programs

In December 2009, the USG Parties and Citigroup
agreed to terminate the guarantee agreement.
Citigroup cancelled $1.8 billion of the preferred
stock previously issued to OFS. In addition, the
FDIC agreed to transfer to the OFS $800 million of
their Trust Preferred Securities (TruPS) plus
dividends by December 31, 2012. The amount OFS
was to receive would be reduced by any losses FDIC
incurred on its Citigroup guaranteed debt. The
additional preferred shares from the FDIC were
included in the subsidy calculation for AGP, based
on the net present value of expected future cash
inflows.

Asset Guarantee Program
The Asset Guarantee Program (AGP) provided
guarantees for assets held by systemically
significant financial institutions that faced a risk of
losing market confidence due in large part to a
portfolio of distressed or illiquid assets.
Section 102 of the EESA required the Secretary to
establish the AGP to guarantee troubled assets
originated or issued prior to March 14, 2008,
including mortgage-backed securities. The OFS
completed its only transaction under the AGP in
January 2009, when it finalized the terms of a
guarantee agreement with Citigroup. Under the
agreement, the OFS, the Federal Deposit Insurance
Corporation (FDIC), and the FRBNY (collectively
the USG Parties) provided protection against the
possibility of large losses on an asset pool of
approximately $301.0 billion of loans and securities
backed by residential and commercial real estate
and other such assets, which remained on
Citigroup’s balance sheet. The OFS’s guarantee was
limited to $5.0 billion.

Only the $800 million of TruPS-related receivable
from the FDIC valued at $967 million was on the
OFS Balance Sheet at September 30, 2012. The
TruPS were received, exchanged for subordinated
notes, and the notes sold in 2013 for $894 million.
In addition, OFS received $200 million of dividends
on the TruPS in 2013 and the program was closed.
A downward modification of $94 million due to the
exchange of TruPS into subordinated notes and
immediate sale of the notes, and net reestimates
including the closing downward reestimate of $24
million resulted in subsidy income for fiscal year
2013. For fiscal year 2012, the AGP program
recorded a $207 million downward reestimate, due
to revised expectations about the timing of receipt of
dividends, interest on the dividends and the TruPS
from the FDIC.

As a premium for the guarantee, Citigroup issued
$7.0 billion of cumulative perpetual preferred stock
(subsequently converted to Trust Preferred
Securities with similar terms) with an 8 percent
stated dividend rate and a warrant for the purchase
of common stock; $4.0 billion and the warrant were
issued to the OFS, and $3.0 billion was issued to the
FDIC.

The following table details the changes in the
receivable account and the AGP subsidy cost during
fiscal years 2013 and 2012:

Reconciliation of Asset Guarantee Program Receivable:
Fiscal Year
2013
2012
Balance, Beginning of Period
$
967 $
739
Subsidy Income for Modifications
94
Dividend Revenue
(200)
Proceeds from Sales in Excess of Cost
(894)
Net Interest Expense on Borrow ings from Fiscal Service and Financing Account Balance
9
21
Balance, End of Period, Before Reestimates
(24)
760
Subsidy Reestimates - Dow nw ard
24
207
Balance, End of Period
$
$
967

(Dollars in Millions)

Reconciliation of Subsidy Cost (Income):
Subsidy Income for Modifications
Subsidy Reestimates - (Dow nw ard)

$

(94)
(24)

(207)

Total Subsidy Cost (Income)

$

(118) $

(207)

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

	69	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

guarantee resulted in a liability of $9 million at
September 30, 2013 and a liability of $7 million at
September 30, 2012. The liability was calculated,
using credit reform accounting, as the present value
of the estimated future cash outflows for the OFS’s
share of losses incurred on any defaults of the
disbursed loans. As of September 30, 2013, $47,840
of claims had been paid by OFS under the program.
As of September 30, 2012, no claims had been paid.

FHA-Refinance Program
The OFS entered into a loss-sharing agreement with
the FHA to support a program in which FHA
guarantees refinancing of borrowers whose homes
were worth less than the remaining amounts owed
under their mortgage loans. OFS has established a
$50 million account, held by a commercial bank
serving as its agent, from which any required
reimbursements for losses will be paid to third party
claimants, including banks or other investors.

At September 30, 2013, OFS’s obligation for subsidy
for undisbursed loans was $1.0 billion. This was
reduced in fiscal year 2013 from the $8.1 billion
outstanding at September 30, 2012, due to
adjustments to expected participation in the
program.

During fiscal year 2013, $182 million of loans were
disbursed by the FHA. As of September 30, 2013,
3,015 loans that FHA guaranteed, with a total value
of $489 million, had been refinanced under the
program through May 2013. Effective June 1, 2013,
the Treasury Coverage Ratio, which governs the
amount of losses financed by OFS, was recalculated
and it was determined that OFS’s guarantee was no
longer needed during the remainder of fiscal year
2013. During fiscal year 2012, $234 million of loans
were disbursed by the FHA. As of September 30,
2012, 1,774 loans that FHA had guaranteed, with a
total value of $307 million, had been refinanced
under the program.

Budget subsidy rates for the program, entirely for
defaults, were set at 2.48 percent and 4.0 percent for
loans guaranteed in fiscal years 2013 and 2012,
respectively.
The program recorded $3 million downward
reestimates each year, for fiscal years 2013 and
2012, due to reductions in market risks and lower
than projected defaults.
The following table details the changes in the FHARefinance Program Liability and the Subsidy Cost
for the program during fiscal years 2013 and 2012:

OFS’s maximum exposure related to FHA’s
guarantee totaled $59 million and $41 million at
September 30, 2013 and 2012, respectively. OFS’s

Reconciliation of FHA-Refinance Program Liability
Fiscal Year
2013
2012
$
7 $
1
5
9
12
10
(3)
(3)

(Dollars in Millions)

Balance, Beginning of Period
Subsidy Cost for Guarantees (Defaults)
Balance, End of Period, Before Reestimates
Subsidy Reestimates - (Dow nw ard)
Balance, End of Period

9

Reconciliation of Subsidy Cost (Income)
Subsidy Cost for Guarantees (Defaults)
Subsidy Reestimates - (Dow nw ard)

$

Total Subsidy Cost (Income)

70		

$

$

5 $
(3)
2 $

	

	

	

	

	

	

	

	

$

7

9
(3)
6

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

NOTE	7.	DUE	TO	THE	GENERAL	FUND	
As of September 30, 2013, the OFS accrued $8.1
billion of downward reestimates payable to the
General Fund. As of September 30, 2012, the OFS

accrued $9.7 billion of downward reestimates
payable to the General Fund. Due to the General
Fund is a Non-Entity liability on the Balance Sheet.

NOTE	8.	PRINCIPAL	PAYABLE	TO	THE	BUREAU	OF	THE	FISCAL	SERVICE	
(Fiscal	Service)		
Equity investments, direct loans and other credit
programs accounted for under federal credit reform
are funded by subsidy appropriations and
borrowings from the Fiscal Service. The OFS also
borrows funds to pay the Treasury General Fund for
negative program subsidy costs and downward
reestimates (these reduce program subsidy cost) in
advance of receiving the expected cash flows that
cause the negative program subsidy or downward
reestimate. The OFS makes periodic principal

repayments to the Fiscal Service based on the
analysis of its cash balances and future
disbursement needs. All debt is intragovernmental
and covered by budgetary resources. See additional
details on borrowing authority in Note 11,
Statement of Budgetary Resources.
Debt transactions for the fiscal years ended
September 30, 2013 and 2012, were as follows:

As of September 30,
(Dollars in Millions)

2013

Beginning Balance, Principal Payable to the Fiscal Service
New Borrow ings
Repayments

$

Ending Balance, Principal Payable to the Fiscal Service

$

2012

52,828 $
208
(41,087)
11,949 $

129,497
2,658
(79,327)
52,828

Borrowings from the Fiscal Service by TARP program, outstanding as of September 30, 2013 and 2012, were
as follows:
As of September 30,
(Dollars in Millions)

2013

Capital Purchase Program
CDCI and TALF
Public-Private Investment Program
Automotive Industry Financing Program
American International Group, Inc. Investment Program
Asset Guarantee Program

$

Total Borrowings Outstanding

$

	

	

1,210
551
305
9,883
11,949

$

5,150
1,020
16,317
17,845
11,736
760
52,828

$

percent. As of September 30, 2012, borrowings
carried remaining terms ranging from 2 to 29 years,
with interest rates from 1.0 percent to 4.4 percent.

As of September 30, 2013, borrowings carried
remaining terms ranging from 3 to 28 years, with
interest rates from 2.5 percent to 3.8

NOTES	TO	THE	FINANCIAL	STATEMENTS		

2012

	

	

	

	

	

	

	71	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

NOTE	9.		COMMITMENTS	AND	CONTINGENCIES	
The OFS is party to various legal actions and claims
brought by or against it. In the opinion of
management and the Chief Counsel, the ultimate
resolution of these legal actions and claims will not
have a material effect on the OFS financial
statements. The OFS has not incurred any loss

contingencies that would be considered probable or
reasonably possible for these cases; therefore, no
liability was established. Refer to Note 5 for
additional commitments relating to the Treasury
Housing Programs under TARP and Note 6 relating
to Direct Loans and Equity Investments, Net and
Other Credit Programs.

NOTE	10.		STATEMENT	OF	NET	COST
The Statement of Net Cost (SNC) presents the net
cost of (income from) operations for the OFS under
the strategic goal of ensuring the overall stability
and liquidity of the financial system, preventing
avoidable foreclosures and preserving
homeownership. The OFS has determined that all
initiatives and programs under the TARP fall within
this strategic goal.

includes $2.3 billion of intragovernmental costs
relating to interest expense on borrowings from the
Fiscal Service and $605 million in
intragovernmental revenues relating to interest
income on financing account balances.
Subsidy allowance amortization on the SNC is the
difference between interest income on financing
fund account balances, dividends and interest
income on direct loans, equity investments and other
credit programs from TARP participants, and
interest expense on borrowings from the Fiscal
Service. Credit reform accounting requires that only
subsidy cost, not the net of other costs (interest
expense and dividend and interest income), be
reflected in the SNC. The subsidy allowance
account is used to present the loan or equity
investment at the estimated net present value of
future cash flows. The OFS SNC includes $671
million and $1.1 billion of subsidy allowance
amortization for fiscal years 2013 and 2012,
respectively.

The OFS SNC reports the annual accumulated full
cost of the TARP’s output, including both direct and
indirect costs of the program services and output
identifiable to TARP, in accordance with SFFAS No.
4, Managerial Cost Accounting Concepts and
Standards.
The OFS SNC for fiscal year 2013 includes $856
million of intragovernmental costs relating to
interest expense on borrowings from the Fiscal
Service and $235 million intragovernmental
revenues relating to interest income on financing
account balances. The OFS SNC for fiscal year 2012

	
NOTE	11.		STATEMENT	OF	BUDGETARY	RESOURCES	
The Statement of Budgetary Resources (SBR)
presents information about total budgetary
resources available to the OFS and the status of
those resources. For the year ended September 30,
2013, the OFS’s total resources in budgetary
accounts were $22.4 billion and resources in nonbudgetary financing accounts, including borrowing
authority and spending authority from collections of
loan principal, liquidation of equity investments,
interest, dividends and fees were $15.6 billion. For
the year ended September 30, 2012, the OFS’s total
resources in budgetary accounts were $41.9 billion
and resources in non-budgetary financing accounts
were $25.9 billion.

72		

	

	

	

	

	

	

Permanent Indefinite Appropriations
The OFS receives permanent indefinite
appropriations annually, if necessary, to fund
increases in the projected subsidy costs of direct
loans, equity investments and other credit programs
as determined by the reestimation process required
by the FCRA.
Additionally, Section 118 of the EESA states that
the Secretary may issue public debt securities and
use the resulting funds to carry out the Act and that
any such funds expended or obligated by the

	

	

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
Secretary for actions authorized by this Act,
including the payment of administrative expenses,
shall be deemed appropriated at the time of such
expenditure or obligation.

Undelivered Orders
Undelivered orders as of September 30, 2013 were
$29.1 billion in budgetary accounts and $1.0 billion
in non-budgetary financing accounts. Undelivered
orders as of September 30, 2012 were $40.2 billion in
budgetary accounts and $5.9 billion in nonbudgetary financing accounts.

Borrowing Authority
The OFS is authorized to borrow from the Fiscal
Service whenever funds needed to disburse direct
loans and equity investments, and to enter into
asset guarantee and loss-sharing arrangements,
exceed subsidy costs and collections in the nonbudgetary financing accounts. For the year ended
September 30, 2013, the OFS had no borrowing
authority available, of the $208 million authorized,
since the authority was used. For the year ended
September 30, 2012, the OFS had borrowing
authority available of $2.6 billion, of the $2.7 billion
authorized.

Explanation of Differences Between
the Statement of Budgetary
Resources and the Budget of the
United States Government
Federal agencies and entities are required to explain
material differences between amounts reported in
the SBR and the actual amounts reported in the
Budget of the U.S. Government (the President’s
Budget).

The OFS uses dividends and interest received as
well as principal repayments on direct loans and
liquidation of equity investments to repay debt in
the non-budgetary direct loan, equity investment
and other credit program financing accounts. These
receipts are not available for any other use per
credit reform accounting guidance.

The President’s Budget for 2015, with the “Actual”
column completed for fiscal year 2013, has not yet
been published as of the date of these financial
statements. The President’s Budget is currently
expected to be published and delivered to Congress
in early February 2014. It will be available from the
Government Printing Office.

Apportionment Categories of
Obligations Incurred: Direct versus
Reimbursable Obligations

The 2014 President’s Budget, with the “Actual”
column completed for the year ended September 30,
2012, was published in April 2013, and reconciled to
the SBR. The only differences between the two
documents were due to:
 Rounding;
 Expired funds that are not shown in the
“Actual” column of the President’s Budget.

All of the OFS apportionments are Direct and are
Category B. Category B apportionments typically
distribute budgetary resources on a basis other than
calendar quarters, such as by activities, projects,
objects or a combination of these categories. The
OFS obligations incurred are direct obligations
(obligations not financed from intragovernmental
reimbursable agreements).

NOTES	TO	THE	FINANCIAL	STATEMENTS		

	

	

	

	

	

	

	

	

	73	 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

NOTE	12.		RECONCILIATION	OF	OBLIGATIONS	INCURRED	TO	NET	COST	
OF	(INCOME	FROM)	OPERATIONS	
The OFS presents the SNC using the accrual basis
of accounting. This differs from the obligation-based
measurement of total resources supplied, both
budgetary and from other sources, on the SBR. The
reconciliation of obligations incurred to net cost of
operations shown below categorizes the differences

between the two, and illustrates that the OFS
maintains reconcilable consistency between the two
types of reporting.
The Reconciliation of Obligations Incurred to Net
Cost of (Income from) Operations for the fiscal years
ended September 30, 2013 and 2012 follows:

(Dollars in Millions)

2013

2012

Resources Used to Finance Activities:
Budgetary Resources Obligated
Obligations Inc urred

$

Ac tual Offsetting Collec tions, Net of Change in Unc ollec ted Customer Pay ments, and Rec ov eries

14,879

$

(48,668)

Offsetting Rec eipts

35,803
(87,383)

(13,218)

(6,063)

Net Obligations
Other Resourc es

(47,007)

(57,643)

Total Resources Used to Finance Activities

(47,006)

(57,642)

27,322

78,988

1

Resources Used to Finance Items Not Part of Net Cost of (Income from) Operations:
Net Obligations in Direc t Loan, Equity Inv estment and Other Credit Programs Financ ing Funds
Change in Resourc es Obligated for Goods, S erv ic es and Benefits Ordered but not y et Prov ided

11,164

Resourc es that Fund Prior Period Expenses and Reestimates

8,957

1

3,157
(23,294)

47,443

Total Resources Used to Finance the Net Cost of (Income from) Operations

58,851

437

Total Resources Used to Finance Items Not Part of Net Cost of (Income from) Operations

1,209

Components of Net Cost of (Income from) Operations that Will Not Require or Generate Resources
in the Current Period:
Ac c rued Net Downward Reestimates at Year-End

(8,139)

Other
Total Components of Net Cost of (Income from) Operations that Will Not Require or Generate
Resources in the Current Period
Net Cost of (Income from) Operations

74		

	

	

	

	

1

	

	

	

1

(8,138)
$

	

(8,958)

(8,957)

(7,701) $

(7,748)

NOTES	TO	THE	FINANCIAL	STATEMENTS	 

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

REQUIRED	SUPPLEMENTARY	INFORMATION
Office of Financial Stability - T roubled Asset Relief Program

REQUIRED	SUPPLEMENTARY	INFORMATION
COMBINED	STATEMENT	OF	BUDGETARY	RESOURCES
For the Year Ended September 30, 2013
(Unaudited)
2013

Dollars in Millions

Combined
Nonbudgetary
Financing
Budgetary
Accounts
Accounts

T AR P Programs
Nonbudgetary
Budgetary
Financing
Accounts
Accounts

T ARP Administrative
Nonbudgetary
Budgetary
Financing
Accounts
Accounts

BUDGETARY RESOURCES
Unobligated Balanc es Brought Forward, Oc tober 1

$

$

$

14,350

Rec ov eries of Prior-Year Unpaid Obligations

$

7,246

17,631
4,941

14,071

$

7,219

17,631
4,941

Borrowing Authority Withdrawn

-

(2,611)

-

-

(17,738)

-

$

27

(17,738)

-

(2,611)

Ac tual Repay ment of Debt, Prior-Year Balanc es

279

Unobligated Balanc e from Prior-Year Budget Authority , Net

-

21,596

Spending Authority from Offsetting Collec tions

2,223

306

-

483

-

305

-

Borrowing Authority

21,290

788

Appropriations

2,223
208

-

208

1

13,131

-

-

-

13,131

1

TOTAL BUDGETARY RESOURCES (Note 11)

$

22,385

$

15,562

$

21,773

$

15,562

$

612

$

-

STATUS OF BUDGETARY RESOURCES
Obligations Inc urred

$

779

$

14,100

$

483

$

14,100

$

296

$

-

Unobligated Balanc e:
Apportioned

11

TOTAL STATUS OF BUDGETARY RESOURCES

-

668

11

-

794

21,290

794

305

-

21,606

Total Unobligated Balanc e

668

21,595

Unapportioned

1,462

21,290

1,462

316

$

22,385

$

$

40,548

$

15,562

$

21,773

$

5,926

$

40,384

$

-

15,562

$

612

$

5,926

$

164

$

-

CHANGE IN OBLIGATED BALANCES
Unpaid Obligations:
Unpaid Obligations Brought Forward, Oc tober 1
Obligations Inc urred

779

14,100

483

14,100

296

-

Gross Outlay s

(4,675)

(14,092)

(4,427)

(14,092)

(248)

-

Rec ov eries of Prior-Year Unpaid Obligations

(7,246)

(4,941)

(7,219)

(4,941)

(27)

-

29,406

Unpaid Obligations, End of Year
Uncollected Payments from Federal Sources:
Unc ollec ted Pay ments Brought Forward, Oc tober 1

29,221

993

185

-

-

-

(349)

-

-

123

-

123

-

-

$

(349)

-

Change in Unc ollec ted Pay ments
Uncollected Payments from Federal Sources, End of Year
Obligated Balance, Net, End of Year

993

(226)

-

(226)

-

29,406

$

767

$

29,221

$

767

$

185

$

-

OBLIGATED BALANCES
(Net of Unpaid Obligations and Uncollected Payments Above)
Obligated Balance, Net, Brought Forward, October 1

$

40,548

$

5,577

$

40,384

$

5,577

$

164

$

-

Obligated Balance, Net, End of Year

$

29,406

$

767

$

29,221

$

767

$

185

$

-

BUDGET AUTHORITY AND OUTLAYS, NET
Budget Authority , Gross

$

789

$

13,339

$

483

$

$

306

$

Ac tual Offsetting Collec tions

(1)

Change in Unc ollec ted Customer Pay ments from Federal Sourc es
BUDGET AUTHORITY, NET
Gross Outlay s

788

$

$

4,675

$

(1)

Net Outlay s

4,674

Distributed Offsetting Rec eipts

REQUIRED	SUPPLEMENTARY	INFORMATION		

(13,218)
$

(8,544) $

	

-

123

$

Ac tual Offsetting Collec tions

AGENCY OUTLAYS, NET

(36,604)

-

(23,142) $
14,092

$

(36,604)
(22,512)
(22,512) $

13,339
(36,604)

(1)
-

123

483

$

4,427

$

(23,142) $
14,092

$

-

305

$

248

$

-

-

(36,604)

4,427

(22,512)

247

-

-

-

-

(13,218)
(8,791) $

(22,512) $

(1)

-

247

-

$

75		

-

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

Office of Financial Stability - T roubled Asset Relief Program

REQUIRED	SUPPLEMENTARY	INFORMATION
COMBINED	STATEMENT	OF	BUDGETARY	RESOURCES
For the Year Ended September 30, 2012
(U naudited)
2012
Combined

T ARP Programs

Dollars in Millions

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

BUDGETARY RESOURCES
Unobligated Balanc e Brought Forward, Oc tober 1

$

$

$

14,166

Rec ov eries of Prior-Year Unpaid Obligations

146

21,143
6,114

T AR P Administrative

Nonbudgetary
Financing
Accounts

13,967

$

104

21,143

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

$

$

6,114

199

-

42

-

1,525

241

-

323

Borrowing Authority Withdrawn

-

(5,832)

-

(5,832)

Ac tual Repay ment of Debt, Prior-Year Balanc es

-

(19,900)

-

(19,900)

Unobligated Balanc e from Prior-Year Budget Authority , Net

14,312

Appropriations

-

27,270

-

-

S pending Authority from Offsetting Collec tions

14,071

27,593

Borrowing Authority

1,525

2,659

-

2,659

-

21,695

-

-

-

21,695

-

-

TOTAL BUDGETARY RESOURCES (Note 11)

$

41,905

$

25,879

$

41,341

$

25,879

$

564

$

-

STATUS OF BUDGETARY RESOURCES
Obligations Inc urred

$

27,555

$

8,248

$

27,270

$

8,248

$

285

$

-

Unobligated Balanc e:
Apportioned

41

TOTAL STATUS OF BUDGETARY RESOURCES

-

3,946

41

13,685

14,071

13,685

238

-

14,350

Total Unobligated Balanc e

3,946

14,309

Unapportioned

17,631

14,071

17,631

279

-

$

41,905

$

25,879

$

$

43,814

$

13,158

$

41,341

$

25,879

$

43,618

$

13,158

$

-

564

$

196

$

-

CHANGE IN OBLIGATED BALANCES
Unpaid Obligations:
Unpaid Obligations Brought Forward, Oc tober 1
Obligations Inc urred

27,555

Gross Outlay s

(9,366)

(146)

(6,114)

40,548

Unpaid Obligations, End of Year
Uncollected Payments from Federal Sources:
Unc ollec ted Pay ments Brought Forward, Oc tober 1

-

285

(30,400)

(9,366)

(275)

-

(104)

5,926

8,248
(6,114)

(42)

-

40,384

5,926

-

164

-

-

$

-

(496)

-

-

147

-

147

-

-

-

Uncollected Payments from Federal Sources, End of Year

(496)

-

Change in Unc ollec ted Pay ments
Obligated Balance, Net, End of Year

27,270

(30,675)

Rec ov eries of Prior-Year Unpaid Obligations

8,248

(349)

-

(349)

-

40,548

$

5,577

$

40,384

-

$

5,577

$

164

$

-

OBLIGATED BALANCES
(Net of Unpaid Obligations and Uncollected Payments Above)
Obligated Balance, Net, Brought Forward, October 1

$

43,814

$

12,662

$

43,618

$

12,662

$

196

$

-

Obligated Balance, Net, End of Year

$

40,548

$

5,577

$

40,384

$

5,577

$

164

$

-

BUDGET AUTHORITY AND OUTLAYS, NET
Budget Authority , Gross

$

27,593

$

24,354

$

27,270

$

24,354

$

323

$

Ac tual Offsetting Collec tions

-

Change in Unc ollec ted Customer Pay ments from Federal Sourc es
BUDGET AUTHORITY, NET
Gross Outlay s

27,593

$

$

30,675

$

-

(56,768) $
9,366

(81,269)

$

-

147

27,270

$

30,400

$

-

(56,768) $
9,366

$

-

323

$

275

$

-

-

Distributed Offsetting Rec eipts

(81,269)

-

(81,269)

-

30,675

Net Outlay s

76		

-

147

$

Ac tual Offsetting Collec tions

AGENCY OUTLAYS, NET

(81,269)

(71,903)

30,400

(71,903)

275

-

-

-

-

(6,063)
$

24,612

	

$

(71,903) $

(6,063)
24,337

$

(71,903) $

275

-

$

REQUIRED	SUPPLEMENTARY	INFORMATION	 

-

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 

OTHER	INFORMATION	–	SCHEDULE	OF	SPENDING	
Office of Fina ncia l S ta bility - T rouble d Asse t R e lie f P rogra m

OTHER	INFORMATION
SCHEDULE	OF	SPENDING
For the Y e a rs E nde d S e pte mbe r 30, 2013 a nd 2012
(U na udite d)
2013

2012

Dollars in Millions

Budgetary
Accounts

N onbudgetary
Financing
Accounts

WHAT IS AVAILABLE TO SPEND?
Total Resourc es per S tatement of Budgetary Resourc es (S BR)

$

$

Less Amount Apportioned (not y et agreed to be spent)

22,385

15,562

N onbudgetary
Financing
Accounts

Budgetary
Accounts

$

41,905

$

25,879

(11)

(668)

(41)

(3,946)

(21,595)

(794)

(14,309)

(13,685)

Less Amount Unapportioned (not y et av ailable to be spent)
AMOUNT AVAILABLE TO SPEND-OBLIGATIONS INCURRED PER SBR

$

779

$

HOW WAS THE AMOUNT SPENT?
Personnel Compensation

$

17

$

14,100

$

27,555

$

-

$

22

$

8,248

-

Personnel Benefits

5

-

6

Trav el and Transportation

1

-

1

-

S upplies and Materials

1

-

2

-

272

26

254

20

-

856

-

2,252

Other S erv ic es
Interest

-

S ubsidies, inc luding Reestimates for Prev iously
Disbursed Loans and Inv estments Outstanding7
AMOUNT AVAILABLE TO SPEND-OBLIGATIONS INCURRED PER SBR

$

TO WHOM WERE THE OBLIGATIONS MADE?
Federal Agenc ies and Entities

$

483

Non-Federal Companies - Freddie Mac /Fannie Mae for Housing

13,218

27,270

5,976

779

$

14,100

$

27,555

$

8,248

505

$

14,074

$

27,306

$

8,228

215

Non-Federal Indiv iduals
AMOUNT AVAILABLE TO SPEND-OBLIGATIONS INCURRED PER SBR

164

-

41

Non-Federal Companies - All Other

26

60

20

18
$

779

$

14,100

25
$

27,555

$

 
The Schedule of Spending presents an
overview of obligations incurred subtotaled by
purpose and again by type of entity to be paid.
Obligations are legally binding agreements
that usually result in outlays, immediately or
in the future. The schedule presents more
detail than the Statement of Budgetary
Resources, although the data used to populate
both is the same.

payments have not yet been made for
particular obligations. While most obligations
become contractual agreements for which
services and goods are received in the same
fiscal year as established, certain obligations
or portions of obligations reported here may
never be used. These unused amounts, when
closed, are reported as “Recoveries of PriorYear Unpaid Obligations” on the SBR. 7

The section “How Was the Amount Spent”
presents obligations committed to in each
fiscal year for services received, supplies
purchased, subsidies and program loans or
investments made, even if actual receipt of
services or goods has not yet occurred or

                                                            

OTHER	INFORMATION	–SCHDEULE	OF	SPENDING		

7

Subsidies obligated in nonbudgetary financing accounts
consist of negative subsidies and downward reestimates,
which are reductions of subsidy cost, transferred from the
financing accounts to the Treasury General Fund. These
transfers occur in the same fiscal year as the obligations.

	

77	

8,248

THE	DEPAR
RTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY
	

	
	

78	

	

APPENDIX	A:	TARP	GLO
D
OSSARY	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	
R

 

	
3:	Append
dices	
Part		3
 

APPENDIX	A
A:	TARP	GLOSSA
ARY	

 

79 

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

APPENDIX	A:	TARP	GLOSSARY
Asset-Backed Security (ABS): A financial
instrument representing an interest in a pool
of other assets, typically consumer loans.
Most ABS are backed by credit card
receivables, auto loans, student loans, or other
loan and lease obligations.

OFS that promotes economic revitalization
and community development.
Debtor-In-Possession (DIP): A debtor-inpossession in U. S. bankruptcy law has filed a
bankruptcy petition but still remains in
possession of its property. DIP financing
usually has priority over existing debt, equity
and other claims.

Asset Guarantee Program (AGP): A TARP
program under which OFS, together with the
Federal Reserve and the FDIC, agreed to
share losses on certain pools of assets held by
systemically significant financial institutions
that faced a high risk of losing market
confidence due in large part to a portfolio of
distressed or illiquid assets.

Emergency Economic Stabilization Act
(EESA): The law that created the Troubled
Asset Relief Program (TARP).
Government-Sponsored Enterprises (GSEs):
Private corporations created by the U.S.
Government. Fannie Mae and Freddie Mac
are GSEs.

Automotive Industry Financing Program
(AIFP): A TARP program under which OFS
provided loans or equity investments in order
to avoid a disorderly bankruptcy of one or
more auto companies that would have posed a
systemic risk to the country’s financial
system.

Home Affordable Modification Program
(HAMP): A TARP program OFS established
to help responsible but struggling
homeowners reduce their mortgage payments
to affordable levels and avoid foreclosure.

Capital Purchase Program (CPP): A TARP
program pursuant to which OFS invested in
preferred equity securities and other
securities issued by financial institutions.

Legacy Securities: CMBS and non-agency
RMBS issued prior to 2009 that were
originally rated AAA or an equivalent rating
by two or more nationally recognized
statistical rating organizations without
ratings enhancement and that are secured
directly by actual mortgage loans, leases or
other assets and not other securities.

Commercial Mortgage-Backed Securities
(CMBS): A financial instrument representing
an interest in a commercial real estate
mortgage or a group of commercial real estate
mortgages.

Making Home Affordable (MHA): A
comprehensive plan to stabilize the U.S.
housing market and help responsible, but
struggling, homeowners reduce their monthly
mortgage payments to more affordable levels
and avoid foreclosure. HAMP is part of MHA.

Community Development Capital Initiative
(CDCI): A TARP program that provides lowcost capital to Community Development
Financial Institutions to encourage lending to
small businesses and help facilitate the flow of
credit to individuals in underserved
communities.

Mortgage-Backed Securities (MBS): A type of
ABS representing an interest in a pool of
similar mortgages bundled together by a
financial institution.

Community Development Financial
Institution (CDFI): A financial institution
that focuses on providing financial services to
low- and moderate- income, minority and
other underserved communities, and is
certified by the CDFI Fund, an office within

80	

Non-Agency Residential Mortgage-Backed
Securities: RMBS that are not guaranteed or
issued by Freddie Mac, Fannie Mae, any other

	

APPENDIX	A:	TARP	GLOSSARY	

 

AGENCY	FINANCIAL	REPORT	|	FISCAL	YEAR	2013	

 
GSE, Ginnie Mae, or a U.S. federal
government agency.

Servicer: An administrative third party that
collects mortgage payments, handles tax and
insurance escrows, and may even bring
foreclosure proceedings on past due mortgages
for institutional loan owners or originators.
The loan servicer also generates reports for
borrowers and mortgage owners on the
collections.

Preferred Stock: Equity ownership that
usually pays a fixed dividend and gives the
holder a claim on corporate earnings superior
to common stock owners. Preferred stock also
has priority in the distribution of assets in the
case of liquidation of a bankrupt company.
Public-Private Investment Fund (PPIF): An
investment fund established to purchase
Legacy Securities from financial institutions
under PPIP.

Targeted Investment Program (TIP): A TARP
program created to stabilize the financial
system by making investments in institutions
that are critical to the functioning of the
financial system.

Public-Private Investment Program (PPIP): A
TARP program designed to support the
secondary market in mortgage-backed
securities. The program is designed to
increase the flow of credit throughout the
economy by partnering with private investors
to purchase Legacy Securities from financial
institutions.

Term Asset-Backed Securities Loan Facility
(TALF): A program under which the Federal
Reserve Bank of New York made term nonrecourse loans to buyers of AAA-rated AssetBacked Securities in order to stimulate
consumer and business lending.
Troubled Asset Relief Program (TARP): The
Troubled Asset Relief Program, which was
established under EESA to help stabilize the
financial system and prevent a systemic
collapse.

Qualifying Financial Institution (QFI):
Private and public U.S.-controlled banks,
savings associations, bank holding companies,
certain savings and loan holding companies,
and mutual organizations.

Trust Preferred Security (TruPS): A security
that has both equity and debt characteristics,
created by establishing a trust and issuing
debt to it. TruPS are treated as capital, not
debt, for regulatory purposes.

Residential Mortgage-Backed Securities
(RMBS): A financial instrument representing
an interest in a group of residential real estate
mortgages.

Warrant: A financial instrument that
represents the right, but not the obligation, to
purchase a certain number of shares of
common stock of a company at a fixed price.

SBA: U.S. Small Business Administration.
SBA 7(a) Securities Purchase Program: A
TARP program under which OFS purchased
securities backed by the guaranteed portions
of the SBA 7(a) loans.

APPENDIX	A:	TARP	GLOSSARY		

	

81	

THE	DEPARTMENT	OF	THE	TREASURY	|	OFFICE	OF	FINANCIAL	STABILITY	
	

APPENDIX	B:	ABBREVIATIONS	AND	ACRONYMS	
 
ABS

Asset-Backed Securities

QFI

AGP

Asset Guarantee Program

RMBS

Qualifying Financial Institution
Residential Mortgage-Backed
Securities

AIFP

Automotive Industry Financing Program

AIG

American International Group, Inc.

CAP

Capital Assistance Program

CDFI

Community Development Financial Institution

CMBS

Commercial Mortgage-Backed Securities

SPV

Special Purpose Vehicle

CP

Commercial Paper

TAIFF

Troubled Assets Insurance

COP

Congressional Oversight Panel

CPP

Capital Purchase Program

CDCI

Community Development Capital Initiative

DIP

Debtor-In-Possession

EESA

Emergency Economic Stabilization Act of

SCAP

Supervisory Capital Assessment
Program

SIGTARP

Special Inspector General for the
Troubled Asset Relief Program

Financing Fund
TALF

Term Asset-Backed Securities
Loan Facility

TARP

Troubled Asset Relief Program

TIP

Targeted Investment Program

2008

TruPS

Trust Preferred Securities

FCRA

Federal Credit Reform Act of 1990

USDA

U. S. Department of Agriculture

FHA

Federal Housing Administration

FRBNY

Federal Reserve Bank of New York

GAO

Government Accountability Office

GSE

Government-Sponsored Enterprise

HAFA

Home Affordable Foreclosure Alternatives

HHF

Hardest Hit Fund

HAMP

Home Affordable Modification Program

HPDP

Home Price Decline Protection

MBS

Mortgage-Backed Security

MHA

Making Home Affordable Program

OFS

Office of Financial Stability

OMB

Office of Management and Budget

PPIF

Public-Private Investment Fund

PPIP

Public-Private Investment Program

PRA

Principal Reduction Alternative

82	

	

	APPENDIX	B:	ABBREVIATIONS	AND	ACRONYMS	 

Office of Financial Stability
Contact information:

Department of the Treasury – Office of Financial Stability
1500 Pennsylvania Avenue NW
Washington, DC 20220
Telephone 202-622-2000 - Treasury Press Office 202-622-2960

Websites:

www.FinancialStability.gov
www.MAKINGHOMEAFFORDABLE.gov

Documents Referenced in the AFR:
Monthly Reports to Congress
http://www.treasury.gov/initiatives/financial-stability/reports/Pages/Monthly-Report-to-Congress.aspx
The Financial Crisis Response in Charts – April 2012
http://www.treasury.gov/resource-center/data-chart-center/Documents/20120413_FinancialCrisisResponse.pdf.
Anniversary Reports
http://www.treasury.gov/initiatives/financial-stability/reports/Pages/TARP-Annual-Retrospectives.aspx
Agency Financial Reports, including 2013, 2012, 2011, 2010 and 2009:
http://www.treasury.gov/initiatives/financial-stability/reports/Pages/Annual-Agency-Financial-Reports.aspx
Housing Scorecard:
http://portal.hud.gov/hudportal/HUD?src=/initiatives/Housing_Scorecard
Making Home Affordable Monthly Reports:
http://www.treasury.gov/initiatives/financial-stability/reports/Pages/Making-Home-Affordable-ProgramPerformance-Report.aspx

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102