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AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

TABLE OF CONTENTS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Table of Contents
FOREWORD ....................................................................................................................................................................... iv
MESSAGE FROM THE DEPUTY 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 ............................................................................................................... 11
Term Asset-Backed Securities Loan Facility .............................................................................................. 12
Small Business Administration 7(a) Securities Purchase Program .................................................. 12
Automotive Industry Financing Program .................................................................................................... 12
American International Group (AIG) Investment Program ................................................................. 13
Operational Goal Two: Continue Helping Families in Need to Avoid Foreclosure ............................. 14
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 2014 and 2013 Financial Summary and Cumulative Net Income...................................... 19
Systems, Controls, and Legal Compliance............................................................................................................ 25
Other Management Information, Initiatives, and Issues ............................................................................... 29
Limitations of the Financial Statements............................................................................................................... 30

Part 2: Financial Report

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (CF0) ............................................................................ 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 ................................................................................................. 77

Part 3: Other Information (Unaudited)

Section A – Schedule of Spending ........................................................................................................................... 81
Section B – IPIA (as amended by IPERA) ............................................................................................................. 82

Part 4: Appendices
Appendix A: TARP Glossary ...................................................................................................................................... 84
Appendix B: Abbreviations and Acronyms ......................................................................................................... 86
WEBSITES ......................................................................................................................................................................... 87

For the online version of this Report see www.FinancialStability.gov
and search on Reports by Frequency, Yearly

TABLE OF CONTENTS

iii

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

FOREWORD
The Office of Management and Budget (OMB) Circular A-136 provides agencies with the guidance
for reporting financial and performance information to Congress, the President, and the American
people on an annual basis. In lieu of the consolidated Performance and Accountability Report (PAR),
the U.S. Department of Treasury’s (Treasury) Office of Financial Stability (OFS) has chosen to
prepare a series of separate reports to provide the fiscal year 2014 financial and performance
information for the Troubled Asset Relief Program (TARP). The following Agency Financial Report
(AFR) is the first in this series of reports, and includes the following components:




Message from the Deputy Assistant Secretary: A statement from the Deputy Assistant
Secretary providing his assessment of the reliability and completeness of the financial and
performance data contained in the report, as well as a summary status of TARP programs.
Management’s Discussion and Analysis: This section contains summary information about
the history of TARP and the mission and organizational structure of OFS; background and
analysis of OFS programs and Operational Goals; and analysis of financial statements,
systems, controls, and legal compliance, including the Deputy Assistant Secretary’s
Statement of Assurance.
Financial Report: This section provides a message from the Chief Financial Officer; the
Report of the Independent Auditors; the financial statements; the notes to the financial
statements; and other statutory reporting.
Other Information: This section includes the Schedule of Spending and information
regarding the Improper Payments Information Act (IPIA).

In addition to this AFR, the performance section of the OFS fiscal year 2016 Congressional Budget
Justification and the Citizens’ Report satisfy the reporting requirements of the following major
legislation:







Reports Consolidation Act of 2000;
Government Performance and Results Act of 1993 (GPRA) and GPRA Modernization Act of
2010;
Government Management Reform Act of 1994 (GMRA);
Federal Managers’ Financial Integrity Act of 1982 (FMFIA);
Federal Financial Management Improvement Act of 1996 (FFMIA);
Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments
Elimination and Recovery Act of 2010 (IPERA).

These reports will be available on the OFS website at: http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx

FOREWORD

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY FOR
FINANCIAL STABILITY
November 5, 2014
I am pleased to present the Office of Financial Stability’s (OFS) Agency
Financial Report for the Fiscal Year 2014. This report describes our
financial and performance results for the sixth year of the Troubled Asset
Relief Program (TARP). Within this report you will find the comparative
fiscal years 2014 and 2013 financial statements for TARP, and the
Government Accountability Office’s (GAO) auditor’s report with the audit
opinion on these financial statements, an opinion from GAO on OFS’s
internal control over financial reporting for TARP, and the results of the
GAO’s tests of OFS’s compliance with selected provisions of laws,
regulations, contracts, and grant agreements applicable to OFS.
The Emergency Economic Stabilization Act (EESA) of 2008 established OFS within the Office of
Domestic Finance at the Department of the Treasury (Treasury) to implement TARP. With the
nation in the midst of the worst financial crisis since the Great Depression, TARP was created to
“restore the liquidity and stability of the financial system.” It was an extraordinary response to an
extraordinary crisis.
Today, it is generally agreed that as a result of the forceful and coordinated response by the federal
government through TARP and many other emergency programs, we helped avert what could have
been a devastating collapse of our financial system. Although we are still repairing the damage from
the crisis and many families still face challenges on a daily basis, the financial system is much more
stable and our economy is growing, albeit not as fast as we would like. Credit is more available than
would otherwise be the case for families, businesses, and local governments, banks are better
capitalized, and we are implementing reforms to address the underlying causes of the crisis.
OFS has made significant progress towards winding down TARP investments. As of September 30,
2014, OFS had collected 103 percent of the $412.1 billion in program funds that were disbursed
under TARP investment programs, as well as an additional $17.5 billion from Treasury’s equity
stake in AIG. Here is where we stand concerning the four categories of TARP investment programs:

•

Banking Programs. OFS has collected more than $275.0 billion (including $1.7 billion
collected in fiscal year 2014) for all TARP bank support programs through repayments, sales,
dividends, interest, and other income compared to $245.5 billion invested. As of September
30, 2014, $1.1 billion in banking program investments remained outstanding, primarily in
community banks, and OFS is continuing to wind-down these investments through
repurchases by banks and asset sales.

•

Credit Market Programs. OFS has substantially completed the wind-down of all of the
TARP credit market programs, including investments made under the Public-Private
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 2014, OFS collected
$23.6 billion as compared to $19.1 billion of disbursements under these programs.

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY



Auto Industry Financing Program. As of September, 30 2014, OFS collected $68.9 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 the General Motors
(GM) stake was completed in December 2013. In November 2013, OFS received a repayment
of $5.9 billion from Ally Financial Inc. (Ally) under an agreement announced in August 2013.
In January 2014, OFS collected $3.0 billion from a sale of Ally stock to private investors. The
company executed a successful initial public offering in April 2014, which brought in $2.4
billion in proceeds on behalf of taxpayers, plus $181 million associated with the overallotment option that was exercised in May 2014. OFS has since begun selling its remaining
stake through a series of pre-defined written trading plans. As of September 30, 2014, OFS
collected approximately $18.1 billion on the Ally investment, roughly $923 million more than
the original $17.2 billion investment.

•

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 canceled. 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 collections from repayments, sales, dividends,
interest, and other income related to AIG assets totaled $55.3 billion. Treasury’s non-TARP
AIG shares generated proceeds in excess of cost of $17.5 billion, resulting in net proceeds in
excess of cost of $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 (which
includes government sponsored enterprise (GSE) and non-GSE programs) have also set new
mortgage modification and consumer protection standards which have helped to transform the
mortgage servicing industry and thereby helped millions more families. On June 26, 2014, the
Obama Administration announced the extension of the application deadline for the Making Home
Affordable Program through at least December 2016 in order to provide struggling homeowners
additional time to access sustainable mortgage relief.
The financial and performance data contained in this report are reliable and complete. For the sixth
consecutive year, OFS has earned unmodified opinions on its financial statements for TARP and its
internal control over financial reporting for TARP from the GAO. In 2014, OFS was also awarded its
fifth consecutive Certificate of Excellence in Accountability Reporting by the Association of
Government Accountants.
Sincerely,

Timothy J. Bowler
Deputy Assistant Secretary for Financial Stability

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

FOREWORD

vii

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

EXECUTIVE SUMMARY
Six 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 of all sizes 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 Congress and the federal
government, the U.S. economy faced the risk of
falling into a second Great Depression.
It was out of these extraordinary circumstances
that TARP and OFS were created. They were a
central part of the emergency measures taken by
the federal government pursuant to the
Emergency Economic Stabilization Act of 2008
(EESA). 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
restarting economic growth, and in restoring
access to capital and credit.
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 $425.9 billion, OFS has collected
$422.9 billion (or $440.4 billion if including the

viii

$17.5 billion in proceeds from the additional
Treasury AIG shares discussed on page 13)
through repayments, sales, dividends, interest,
and other income. As of September 30, 2014,
only $2.9 billion in investments remain
outstanding.
The MD&A highlights the establishment of OFS,
its background, mission, organizational
structure, and programs. OFS administers
programs that fall into two major categories:
Investments and Housing. In total, OFS had
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 to promote domestic
economic growth and stability while continuing
reforms of the financial system. 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
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 had generated positive returns on
behalf of taxpayers.
As of September 30, 2014, 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 $100 million loan made through

EXECUTIVE SUMMARY

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.
OFS continued to wind down the Automotive
Industry Financing Program (AIFP) during
fiscal year 2014. OFS sold the remaining 101
million shares of GM common stock in
accordance with the plan announced in
December 2012, completing the wind-down of
OFS’s investment in GM. In November 2013,
per an August 2013 agreement, OFS collected a
total of $5.9 billion from Ally to repurchase all of
its Mandatory Convertible Preferred (MCP)
stock from OFS and to eliminate certain rights
under the original agreement. OFS collected
$3.0 billion from a sale of Ally stock to private
investors in January 2014, almost $2.4 billion
from Ally’s initial public offering (IPO) in April
2014, and $181 million associated with the overallotment option that was exercised in May
2014. OFS is actively seeking to wind down the
remaining Ally investment and on August 14,
2014, commenced the disposition of a portion of
the remaining 75 million common shares of Ally
common stock through a series of pre-arranged
written trading plans.
OFS exited its remaining holdings in the
American International Group, Inc. (AIG)
Investment Program in December 2012 and sold
the remaining warrants in March 2013. As of
September 30, 2013, OFS did not hold any
residual interest in AIG.
OFS’s second operational goal is to continue
helping struggling homeowners avoid
foreclosure. The Making Home Affordable
Program (MHA) is helping homeowners and
assisting in stabilizing the housing market. On
June 26, 2014, the Administration extended the
application deadline for MHA programs for at
least one additional year through 2016, in order
to provide struggling homeowners additional

EXECUTIVE SUMMARY

time to access sustainable mortgage relief. 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 (HHF)
provides funding to 18 states and the District of
Columbia to provide assistance to struggling
homeowners through locally-tailored programs.
All 19 HHF programs are fully operational and
have created extensive infrastructures 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. Six
states and the District of Columbia have closed
their HHF application portals in anticipation of
full commitment of program funds.
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 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’s final operational goal is to continue to
operate with the highest standards of
transparency, accountability, and integrity.
OFS posts a variety of reports online that
provide taxpayers 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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

collected to date. In addition to discussing
program performance, the MD&A also addresses
OFS’s financial performance in the Fiscal Year

2014 and 2013 Financial Summary and
Cumulative Net Income section. OFS provides
an overview of its financial data and explains its
fiscal year 2014 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 2014

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

PART 1: Management’s Discussion and Analysis
Background, OFS Organization Structure and Programs
Background
In response to the worst financial crisis since the
Great Depression, the Troubled Asset Relief
Program (TARP) was created pursuant to the
Emergency Economic Stabilization Act (EESA)
on October 3, 2008. To carry out the authorities
given to the Secretary of the Treasury to
implement TARP, the U.S. Department of the
Treasury (Treasury) established the Office of
Financial Stability (OFS) within the Office of
Domestic Finance. EESA authorized the
Secretary of the Treasury to establish TARP to
“purchase, and to make and fund commitments
to purchase, troubled assets from any financial
institution, on terms and conditions as are
determined by the Secretary” to restore the
liquidity and stability of the financial system.
The terms “troubled assets” and “financial
institution” are defined within EESA, which can
be found at:
http://www.gpo.gov/fdsys/pkg/BILLS110hr1424enr/pdf/BILLS-110hr1424enr.pdf
In addition, Section 109 of EESA provides
authority to assist homeowners.
The Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-Frank Act),
signed into law in July 2010, reduced total
TARP purchase authority from $700 billion to a
cumulative $475 billion. OFS’s authority to
make new commitments under TARP expired on
October 3, 2010. OFS is carefully managing the
disposition of TARP financial assets to recover
OFS’s outstanding investments while continuing
to implement initiatives to help struggling
homeowners avoid foreclosure.

Reporting to the Deputy Assistant Secretary are
five major organizations the: Office of the Chief
Investment Officer, Office of Finance and
Operations, Office of the Chief Home Ownership
Preservation Officer, Office of Financial Agents,
and Office of the Chief Compliance Officer. A
Chief Counsel’s Office also reports to the Deputy
Assistant Secretary and to the Office of the
General Counsel in the Department of the
Treasury.
The OFS organization chart follows:

Office of
Financial
Agents

Office of
Finance and
Operations

Deputy Assistant Secretary for
Financial Stability

Office of the
Chief Home
Ownership
Preservation
Officer

Office of the
Chief
Investment
Officer

Chief
Counsel

Office of the
Chief
Compliance
Officer

OFS is not envisioned as a permanent
organization, so to the maximum extent possible
when economically efficient and appropriate,
OFS utilizes private sector expertise in support
of the execution and liquidation of TARP
programs. These firms assist in the areas of
custodial services, accounting and internal
controls, administrative support, legal advisory,
financial advisory, and information technology.

OFS Organization Structure
OFS is currently headed by the Deputy
Assistant Secretary for Financial Stability.

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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 bank support
programs to help stabilize the nation’s banking
institutions.

Capital Purchase Program
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.
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 non–performing
assets. OFS received preferred stock or
subordinated debt securities in exchange for the
CPP investments. Most financial institutions
participating in the CPP initially paid 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
recovered.

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.

Targeted Investment 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.
OFS invested a total of $40.0 billion in two
institutions – Bank of America (BofA) and
Citigroup – under the TIP. Similar to the CPP,
OFS invested in preferred stock and received
warrants to purchase common stock in each
institution.
The TIP investments provided for annual
dividends of eight percent. 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.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

(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 $4.0
billion was OFS’s portion (which was reduced by
$1.8 billion upon termination of the
agreement). OFS also received warrants to
purchase 66.5 million shares of common stock.

Community Development Capital Initiative
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.
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
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

MANAGEMENT’S DISCUSSION AND ANALYSIS

allowed to exchange their CPP securities for
securities under the more favorable terms of this
program.

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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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.

Public-Private Investment Program
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).
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.

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

Small Business Administration 7(a)
Securities Purchase 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. 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.
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

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
threatened the overall economy as it 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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 have largely been repaid.
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
On September 15, 2008, Lehman Brothers filed
for bankruptcy. This triggered the start of a run
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. When the financial crisis hit,
AIG had hundreds of billions of dollars in
commitments without the capital and liquidity
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

MANAGEMENT’S DISCUSSION AND ANALYSIS

spread more broadly throughout the economy,
OFS and the Federal Reserve provided
assistance to AIG.
During this time, the Federal Reserve and OFS
took a series of steps to prevent AIG’s disorderly
failure and mitigate systemic risks. The initial
assistance to AIG was provided by the FRBNY
before the passage of EESA. 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 and the FRBNY. A series of
integrated transactions and corporate actions
were executed to accelerate the repayment of
taxpayer funds and to promote AIG’s transition
from a majority government owned and
supported entity to a financially sound and
independent entity.
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

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.

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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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. OFS has committed $29.8
billion under the MHA program.
MHA is aimed at helping homeowners who are
experiencing financial hardships remain in their
homes until their financial position improves or
they relocate to a more sustainable living
situation. 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.
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 and sustainable levels, so they can
avoid the pain and substantial cost of
foreclosure. In addition to HAMP, OFS
introduced programs under MHA to help
homeowners who are unemployed, “underwater”
on their loan (i.e. those who owe more on their
home than it is currently worth), or are
struggling with a second lien. MHA 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 a
one-year extension and important enhancements
to MHA that expanded the pool of eligible
borrowers. Extending the reach of HAMP
facilities assists a broader pool of struggling
homeowners, offering support for tenants at risk
of displacement due to foreclosure, and
providing more robust relief to those who
participate. On May 30, 2013, the

Administration extended the application
deadline for MHA programs to December 31,
2015, and then on June 26, 2014, the
Administration announced that the application
deadline would be extended at least a year to
December 31, 2016. Extending the program will
benefit additional families while maintaining
clear standards and accountability for the
servicing industry.
MHA has set new standards for mortgage
assistance and consumer protection, which have
contributed to millions of homeowners receiving
assistance to avoid foreclosure through other
government programs and proprietary mortgage
modifications.
In addition to HAMP, MHA includes additional
programs to help homeowners address specific
types of mortgages, in conjunction with the
Federal Housing Administration (FHA), and the
United States Department of Agriculture
(USDA).

Housing Finance Agency (HFA) Innovation
Fund for the Hardest Hit Housing Markets
(Hardest Hit Fund)
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
to a broader-based $7.6 billion initiative
encompassing 18 states and the District of
Columbia (DC).

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.

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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

OFS Operational Goals
OFS’s Operational Goals were developed by
management to achieve our strategic objective to
wind down emergency financial crisis response
programs under our strategic goal to promote
domestic economic growth and stability while
continuing reforms of the financial system. The
following discussion of OFS operational goals
focuses largely on the significant events that
occurred during fiscal years 2014 and 2013.

million in CPP gross investments remained
outstanding.

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.

Banking Support Programs
OFS disbursed a total of $245.5 billion under the
various TARP bank programs. As of September
30, 2014, OFS has collected more than $275.0
billion through repayments, dividends, interest,
warrant sales, and other income, representing
$29.5 billion in excess of disbursements. 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.

Capital Purchase Program
In fiscal year 2014, OFS continued to make
substantial progress winding down the CPP
according to the three-pronged exit strategy
announced in May 2012. Each dollar collected
from CPP participants now represents an
additional positive return on behalf of taxpayers.
From inception of the program through
September 30, 2014, OFS has received $199.4
billion in CPP repayments/sales, along with
$12.1 billion in dividends and interest, and $14.9
billion of proceeds in excess of cost totaling
$226.4 billion. As of September 30, 2014, $625

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.

Throughout fiscal year 2014, OFS continued to
implement the CPP exit strategy by periodically
selling preferred stock and subordinated debt in
CPP participants through private auctions. OFS
held six auctions with combined proceeds of
$289 million during fiscal year 2014 compared to
14 auctions with $1.5 billion in proceeds in fiscal
year 2013. During fiscal year 2014 and 2013, 62
and 173 investments were repaid or sold for a
total of $1.5 billion and $4.8 billion, respectively.
Another component of OFS’s exit strategy for the
CPP is to restructure certain investments in
limited cases. 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.
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, 2014, OFS has collected $8.0
billion in net proceeds from the sale of warrants
since inception.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Additional information on the CPP, 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/bank-investmentprograms/cap/Pages/default.aspx

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. Additional information on
TIP, 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/bank-investmentprograms/tip/Pages/default.aspx

Asset Guarantee Program
OFS completed the wind-down of the AGP in
February 2013, 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
program’s purpose, overview, and status can be
found at the following website:
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 2014 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
the TARP investments in their institutions.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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
2014 and 2013, OFS collected a total of $20
million and $97 million, respectively, in
repayments, dividends and interest from
institutions in the CDCI program. As of
September 30, 2014, $465 million in CDCI
investments remained outstanding.
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:
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 $23.6 billion has been collected
through September 30, 2014.

Public Private Investment Program
OFS substantially completed the wind-down of
the PPIP during fiscal year 2013, with no debt or
equity investments outstanding after the final
outstanding equity repayment was made in June
2013. During fiscal year 2014, OFS received
termination notices from five Public Private
Investment Funds (PPIFs), leaving only 1 of the
original 9 PPIFs in the process of winding down
as of September 30, 2014. From inception of the
program through September 30, 2014, OFS has
received $2.4 billion in interest and investment

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

income and $1.5 billion in net proceeds in excess
of cost. The total of $22.5 billion of repayments,
sales, and investment income exceeds the
original investment by $3.9 billion, with all
future PPIP payments providing additional
profit to OFS.
Additional information on PPIP, including
details on fund performance can be found at the
following website:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Public-PrivateInvestment-Program-Quarterly-Report.aspx

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. After subsequent reductions in OFS’s
commitments in 2013, the commitment was
$100 million – the initial loan amount disbursed
by OFS to fund the TALF, LLC.
During fiscal year 2013, OFS’s original $100
million loan disbursed was fully repaid with
interest. As of September 30, 2014, the balance
of outstanding TALF loans provided by FRBNY
had declined to $14 million from $101 million on
September 30, 2013, due to scheduled and
voluntary prepayments by borrowers. All loans
that have not been repaid-in-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, 2014,
accumulated income earned from investments in
TALF, LLC totaled $645 million, all of which
occurred during fiscal years 2014 and 2013.
Additional information on TALF, 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/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
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 continued to make substantial progress in
the wind-down of the AIFP during fiscal year
2014, including the exit from its investment in
GM. In total, OFS disbursed $79.7 billion in
loans and equity investments to the auto
industry through the AIFP. As of September 30,
2014, OFS has collected $68.9 billion through
sales, repayments, dividends and interest under
this program.
OFS disbursed a total of $12.4 billion to
Chrysler related entities including Old Chrysler
and New Chrysler. During fiscal year 2011,
OFS fully exited its loans and investment
relating to Chrysler entities, six years ahead of
the scheduled maturity of its loans. Of the $12.4
billion that was disbursed to Chrysler related
entities under TARP, OFS collected $11.1 billion
through principal repayments, sale of
investments, and interest. OFS retains a right
to receive proceeds from a liquidation trust, no
significant future cashflows are expected.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

In December 2013, OFS fully exited its
investment in GM completing the disposition of
its remaining shares of GM common stock. The
total amount collected for fiscal year 2014 was
$3.8 billion, raising to $39.7 billion the total
collected by Treasury from its original GM
investment (this excludes the $884 million loan
to GM which was converted to GMAC common
stock).
OFS invested $17.2 billion ($16.3 billion in
initial GMAC investments and an $884 million
loan to Old GM which was converted to GMAC
stock) in Ally Financial (Ally) under TARP. As
of September 30, 2014, OFS’s outstanding
investment in Ally stood at $1.8 billion. During
fiscal year 2014, Ally completed 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 year 2013, Ally, ResCap, and
ResCap’s major creditors agreed on terms for a
plan of reorganization and the settlement of
certain claims against Ally. In December 2013,
the bankruptcy court approved ResCap’s final
plan to liquidate and exit bankruptcy, thus
allowing Ally to cut its ties to ResCap. Ally also
has sold or entered into agreements to sell all of
its international auto finance operations for a
total of $9.2 billion. All related transactions
have closed with the exception of one joint
venture that is awaiting a foreign government’s
regulatory approval.
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

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 took significant action in fiscal year 2014 to
reduce its remaining investment in Ally. In
January 2014, Treasury sold Ally common stock
in a private offering for approximately $3.0
billion. In April 2014, Treasury sold common
stock as part of Ally’s initial public offering
(IPO) for almost $2.4 billion and $181 million
associated with the over-allotment option that
was exercised in May 2014. On August 14, 2014,
OFS commenced the disposition of its remaining
75 million common shares of Ally common stock
through a series of pre-arranged written trading
plans. These sales increased the total amount
collected by OFS on behalf of taxpayers to $18.1
billion, which is $923 million more than the
original investment in Ally. OFS is actively
seeking to wind-down the remaining investment
in Ally, which represents approximately 13.4
percent of Ally’s common stock as of September
30, 2014.
Additional information on the AIFP, 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/automotiveprograms/Pages/default.aspx

American International Group (AIG)
Investment Program
In fiscal year 2013, OFS exited all remaining
holdings in AIG through the sale of common
stock and AIG’s repurchase of warrants. 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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

which were later canceled. 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 were recovered through sales
and other income. OFS’s cumulative net
proceeds from repayments, sales, dividends,
interest, and other income related to AIG assets
totaled $55.3 billion. While TARP recovered less
than its $67.8 billion total investment, this was
offset by the proceeds from the additional
Treasury shares of AIG, resulting in overall
proceeds exceeding disbursements by $5.0 billion
for Treasury as a whole.
Additional information on the AIG Investment
Program, 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/aig/Pages/default.aspx

Operational Goal Two: Continue
Helping Families in Need to Avoid
Foreclosure
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, 2014, 81 non-GSE servicers are participating
in MHA. As of September 30, 2014, OFS has
commitments to fund up to $29.8 billion in MHA
payments and has disbursed $9.3 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
at risk of foreclosure, and encourage servicers to

improve processes and performance for
foreclosure prevention activities.
MHA performance highlights for fiscal year 2014
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 program’s purpose, overview, and
status can be found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/mha/Pages/default.aspx

Home Affordable Modification Program
(HAMP)
The largest program within MHA is the Home
Affordable Modification Program (HAMP).
HAMP offers eligible homeowners at risk of
foreclosure the opportunity to obtain reduced
monthly mortgage payments that are affordable
and sustainable over the long-term.
As of September 30, 2014, approximately 1.4
million homeowners have received permanent
modifications through HAMP.2 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 42 percent
median reduction in their mortgage payments—
representing more than $540 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.

783,301 of these modifications were OFS funded.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Housing Finance Agency Innovation Fund
for the Hardest Hit Housing Markets
(Hardest Hit Fund)
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,
locally-targeted foreclosure prevention
programs. As of September 30, 2014, 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 Ocwen) are currently
participating in programs in all 19 jurisdictions,
primarily through mortgage payment assistance
and mortgage loan reinstatement assistance.
As of September 30, 2014, the 19 HFAs have
collectively drawn approximately $4.5 billion (59
percent) of the $7.6 billion allocated under the
program. For fiscal years 2014 and 2013, this
program has disbursed $1.6 billion and $1.4
billion, 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
enter into agreements with borrowers. As of
September 30, 2014, seven HFAs had stopped
accepting new applications for assistance in
anticipation of full commitment of program
funds: the District of Columbia, Illinois, New
Jersey, Ohio, Oregon, Rhode Island and
Tennessee.
Each HFA submits a quarterly report on the
progress of its program. These reports measure
the states’ performance against metrics set by
OFS for various aspects of their programs.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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
OFS also publishes a Quarterly Performance
Summary, a companion reference to the HFAs’
Quarterly Performance Reports. The Summary
contains performance data and trends, key
economic and loan performance indicators, and
brief program descriptions for each HFA. The
Quarterly Performance Summary can be found
at:
http://www.treasury.gov/initiatives/financialstability/reports/Documents/FINAL%20Q1%202
014%20Hardest%20Hit%20Fund%20Program%2
0Performance%20Summary.pdf
Additional information on the Hardest Hit Fund,
including details on the program’s purpose,
overview, and status can be found at the
following website:
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/hhf/Pages/default.aspx

FHA Refinance Program
On March 26, 2010, HUD and 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
associated with this program (subsequently
reduced to $1.0 billion in fiscal year 2013 due to
low utilization). As of September 30, 2014, FHA
guaranteed 2,069 Refinance loans with a total

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

face value of almost $292 million currently
under OFS’s letter of credit facility.

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 2014 and 2013 to dispose of OFS’s
outstanding investments in a manner that
balances the desire to exit these investments as
quickly as practicable with maximizing returns
on behalf of taxpayers. OFS continues to take
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 takes a disciplined portfolio approach –
reviewing each investment 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 with approval
from regulators.

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.

Compliance
OFS 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 Ally) must comply with
additional restrictions on executive
compensation, lobbying, and corporate expenses.
OFS also performs periodic reviews of the 19
HFAs participating in the HHF program, to
evaluate each HFA’s ongoing compliance with
their contractual agreement with Treasury, as
well as compliance with HHF program terms
and underwriting requirements.
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
compliance reviews performed by OFS’s
compliance agent, Making Home AffordableCompliance (MHA-C), a separate, independent
division of Freddie Mac, to monitor whether
servicers’ obligations under MHA requirements
are being met. In fiscal year 2011, OFS began
publishing quarterly assessments of the largest
servicers that currently comprise approximately
88% of the HAMP mortgage servicing and
continued publishing these quarterly
assessments throughout fiscal year 2014. These
assessments have helped prompt the industry to
improve its practices.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.
All of this information, along with numerous
reports of different frequencies, is posted in 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:










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;
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 quarterly 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; and

MANAGEMENT’S DISCUSSION AND ANALYSIS



A quarterly report to Congress on
administrative expense activities.

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. Researchers interested in
using the MHA Data File can access the file and
user guide at:
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 sixth OFS
Agency Financial Report (AFR), and includes the
audited financial statements for the fiscal years
ended September 30, 2014 and September 30,
2013. Additional reports for prior periods are
available at:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Annual-AgencyFinancial-Reports.aspx
In its six years of operation, TARP’s financial
statements have received 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 2013, 2012, 2011, 2010 and the
period ending September 30, 2009.

TARP Tracker
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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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

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

Congressional Hearings and Testimony

OFS activities are currently reviewed by three
oversight entities:

OFS officials have testified in numerous
Congressional hearings since TARP was created.
Copies of their written testimony are available
at:





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;

http://www.treasury.gov/initiatives/financialstability/news-room/Pages/default.aspx

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Fiscal Year 2014 and 2013 Financial Summary and Cumulative Net
Income
OFS’s fiscal year 2014 net cost of operations of
$3.0 billion includes the reported net income
related to loans, equity investments, and other
credit programs, as well as expenses for the
Treasury housing programs under TARP and
administrative expenses. For the fiscal year
ended September 30, 2014, OFS reported net
subsidy income for 5 programs – CPP, CDCI,
TALF, AIFP, and FHA-Refinance. These
programs collectively reported net subsidy
income of $1.5 billion. Fiscal year 2014 expenses
for the Treasury housing programs under TARP
are $4.3 billion and administrative costs are
$186 million. For the fiscal year ended
September 30, 2013, the net income from
operations was $7.7 billion. These net cost and
income amounts reported in the financial
statements reflect only transactions through
September 30, 2014 and September 30, 2013,
respectively, and therefore are different than
lifetime cost estimates made for budgetary
purposes.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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.

TARP Program Summary
Table 1 provides a financial summary for TARP
programs since its inception on October 3, 2008,
through September 30, 2014. 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, 2014,
and cash inflows on the investments in the form
of dividends, interest or other fees.

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Table 1: TARP Summary1
From TARP Inception through September 30, 2014
(Dollars in billions)
Purchase
Price or
Guarantee
Amounts

Total $
Disbursed

Investment
Repayments

Write-offs
and Losses6

Outstanding
Balance7

Received
from
Investments

Bank Support Programs
Capital Purchase Program2

Targeted Investment
Program

204.9

(199.4)5

(4.9)

0.6

27.0

40.0

(40.0)

4.4

Asset Guarantee Program

5.0

4.1

Community Development
Capital Initiative

0.6

(0.1)

0.5

0.1

18.7

18.6

(18.6)

3.9

Term Asset-Backed
Securities Loan Facility

0.1

(0.1)

0.6

SBA 7(a) Securities
Purchase Program

0.4

(0.4)

Automotive Industry
Financing Program

79.7

(61.8)

(16.1)

1.8

7.1

American International
Group Investment
Program3

67.8

(54.3)

(13.5)

1.0

417.2

412.1

(374.7)

(34.5)

2.9

48.2

38.54

13.8

N/A

Credit Market Programs
Public Private Investment
Program

Other Programs

Sub-total for Investment
Programs
Treasury Housing
Programs under TARP
Total for TARP Program

455.7

425.9

(374.7)

(34.5)

2.9

48.2

1 This

table shows TARP activity for the period from inception through September 30, 2014, 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 OFS

received $31.9 billion in proceeds from sales of Citigroup common stock, of which $25.0 billion is included at cost
in investment repayments, and $6.9 billion of net proceeds in excess of cost is included in Received from Investments.
3The 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).
4Individual obligation amounts are $29.8 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.
5 Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI exchanges from CPP of $363 million.
6Losses 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”.
7Total 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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, 2014 OFS received a total of
$24.5 billion in dividends and interest.

billion from auctions. TARP’s Warrant
Disposition Report is posted on the OFS website
at the following link:

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 2014 and 2013,
OFS sold its investments in 31 and 113 banks
for combined proceeds of $263 million and $1.5
billion, respectively, through individual private
auctions. These auctions resulted in net
proceeds less than cost of $73 million and $455
million for those investments during fiscal years
2014 and 2013, 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 2014 and 2013. 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, 2014 and 2013. 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
investments, this amount represents fair
value. The total difference of $679 million
(2014) and $5.6 billion (2013) 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, 2014, OFS has received $9.6
billion in gross proceeds from the disposition of
warrants associated with 216 CPP, TIP, AGP,
and AIG, consisting of (i) $4.0 billion from issuer
repurchases at agreed upon values and (ii) $5.6

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Summary of TARP Equity
Investments

See Note 6 in the financial statements for
further discussion.

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

T able 2: Sum m ar y of T ARP Equity Investm ents
(Dollars in billions)

P r ogr am

Estim ated
Value of
Investm ent as
of Septem ber
30, 2014

Outstanding
Balanc e as of
Septem ber 30,
2014 1

Estim ated
Value of
Investm ent as
of Septem ber
30, 2013

Outstanding
Balanc e as of
Septem ber 30,
2013 1

Bank Suppor t P r ogr am s
Capital Purchase Program
Community Development
Capital Initiative

0.6

0.3

3.1

1.8

0.5

0.4

0.5

0.4

0.1

1.8

1.5

19.9

15.6

Cr edit Mar k et P r ogr am s
Public Private Investment
Program
Term Asset-Backed Securities
Loan Facility
SBA 7(a) Securities Purchase
Program
Other P r ogr am s
Automotive Industry
Financing Program
American International Group
Investment Program
T otal
1

2. 9

2. 2

23. 5

17. 9

Before subsidy cost allowance.

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,

and prepayments. Wherever possible, OFS uses
market prices of tradable securities to estimate
the fair value of TARP investments. Use of
market prices is 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 marketbased 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Comparison of Estimated Lifetime TARP
Costs Over Time

influenced by industry and macroeconomic
factors. This table assumes that all expected
investments and 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:
http://www.treasury.gov/initiatives/financialstability/Pages/default.aspx

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,
2014, provide a good illustration of this
impact. Table 3 provides information on how
OFS’s estimated lifetime cost of TARP has
changed over time. The cost estimates for the
non-housing programs have fluctuated in
large part due to changes in the market prices
of common stock for AIG, GM and Ally. The
future value of OFS’s remaining investment in
Ally will be determined based on market
prices of Ally common stock, which could be

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
2009 5
2010
2011
2012
2013

Program
Bank Support Programs
Capital Purchase Program
Targeted Investment Program
Asset Guarantee Program2
Community Development
Capital Initiative
Credit Market Programs
Public Private Investment
Program
Term Asset-Backed Securities
Loan Facility
SBA 7(a) Securities Purchase
Program
Other Programs
Automotive Industry
Financing Program
American International Group
Investment Program3
Subtotal
Treasury Housing Programs
under TARP4
Total

(14.6)
(1.9)
(2.2)

(11.2)
(3.8)
(3.7)

(13.0)
(4.0)
(3.7)

(14.9)
(4.0)
(3.9)

(16.1)
(4.0)
(4.0)

2014
$

(16.1)
(4.0)
(4.0)

0.4

0.2

0.1

1.4

(0.7)

(2.4)

(2.7)

(0.3)

(0.4)

(0.5)

(0.6)

N/A

0.0

---

34.5

14.7

23.6

24.3

14.7

12.2

56.8

36.9

24.3

15.3

15.2

74.1

32.1

24.6

14.1

2.6

0.1

50.0
$

0.3

45.6

37.7

37.4

124.1

77.7

70.2

59.7

40.3

37.5

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 13.
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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Key Trends/Factors Affecting TARP Future Activities and Ultimate Cost
TARP investment programs are nearly wound
down with only $2.9 billion of the $412.1
billion still outstanding, representing 64
million shares of Ally Financial and 111 small
banks in the CPP and CDCI portfolios. The
estimated lifetime costs of investment
programs are currently $67 million and may
fluctuate in the future. Going forward, the
fluctuations in Ally common stock prices and

expenditures for Treasury housing programs
under TARP are expected to most significantly
affect changes to the lifetime cost of TARP.
The ultimate cost of Treasury housing
programs will depend on macroeconomic
factors, including real-estate values, financing
available in capital markets, and the market
demand for housing.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Systems, Controls, and Legal Compliance
MANAGEMENT ASSURANCE STATEMENT
The Office of Financial Stability’s (OFS) management is responsible for establishing and
maintaining effective internal control and financial management systems that meet the objectives
of the Federal Managers’ Financial Integrity Act (FMFIA), 31 U.S.C. 3512(c),(d). OFS has evaluated
its management controls, internal controls over financial reporting, and compliance with the federal
financial systems standards. As part of the evaluation process, we considered the results of
extensive documentation, assessment and testing of controls across OFS, as well as the results of
independent audits. We conducted our reviews of internal controls in accordance with FMFIA and
Office of Management and Budget (OMB) Circular A-123.
As a result of our reviews, management concludes that the management control objectives described
below, taken as a whole, were achieved as of September 30, 2014. Specifically, this assurance is
provided relative to Section 2 (internal controls) and 4 (systems controls) of FMFIA. OFS further
assures that the financial management systems relied upon by OFS are in substantial compliance
with the requirements imposed by the Federal Financial Management Improvement Act (FFMIA).
OFS’ internal controls are designed to meet the management objectives established by Treasury
and listed below:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)

Programs achieve their intended results;
Resources are used consistent with overall mission;
Programs and resources are free from waste, fraud, and mismanagement;
Laws and regulations are followed;
Controls are sufficient to minimize any improper or erroneous payments;
Performance information is reliable;
Systems security is in substantial compliance with all relevant requirements;
Continuity of operations planning in critical areas is sufficient to reduce risk to
reasonable levels;
(i) Financial management systems are in compliance with federal financial systems
standards, i.e., FMFIA Section 4 and FFMIA;
(j) Complete and accurate data is reported on USAspending; and
(k) Controls and policies are in place to prevent fraud and inappropriate use of government
charge cards.
In addition, OFS management conducted its assessment of the effectiveness of internal control over
financial reporting which includes the safeguarding of assets and compliance with applicable laws and
regulations, in accordance with OMB Circular A-123, Management’s Responsibility for Internal Control,
Appendix A, Internal Control over Financial Reporting. Based on the results of this evaluation, OFS
provides unqualified assurance that internal control over financial reporting is appropriately designed
and operating effectively as of September 30, 2014, with no related material weaknesses noted.
Sincerely,

Timothy J. Bowler
Deputy Assistant Secretary for Financial Stability

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Federal Managers’ Financial
Integrity Act (FMFIA)
The management control objectives under
FMFIA are to reasonably ensure that:
•
•

•

Obligations and costs are in
compliance with applicable law;
Funds, property, and other assets are
safeguarded against waste, loss,
unauthorized use, or
misappropriation; and
Revenues and expenditures applicable
to agency operations are properly
recorded and accounted for to permit
the preparation of accounts, reliable
financial and statistical reports, and
to maintain accountability over the
assets.

FMFIA requires agencies to evaluate and
report on the effectiveness of controls over
operations and financial reporting (FMFIA
Section 2), and conformance with financial
management systems requirements (FMFIA
Section 4 and FFMIA) that protect the
integrity of federal programs. Deficiencies
that seriously affect an agency’s ability to
meet these objectives are deemed “material
weaknesses.”
OFS continues to have a high performing
internal control program in compliance with
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 help
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.

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
sub-certification 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.
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 for TARP since fiscal year
2009, its first year of operation. OFS
continues to execute its internal controls
assessment process to ensure that
management can identify risks and
deficiencies and take timely corrective actions.
The OFS fiscal year 2014 self-assessment of
its system of internal controls did not identify
any significant deficiencies or material
weaknesses.

OFS has a Senior Assessment Team (SAT) to
guide the organization’s efforts to meet the
statutory and regulatory requirements

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Federal Financial Management
Improvement Act (FFMIA) and
Financial Management Systems
FFMIA
FFMIA mandates that agencies “…implement
and maintain financial management systems
that comply substantially with federal
financial management systems requirements,
applicable federal accounting standards, and
the United States Government Standard
General Ledger (USSGL) at the transaction
level.” FFMIA also requires the development
of remediation plans by any entity unable to
report substantial compliance with these
requirements.
During fiscal year 2014, OFS used a riskbased approach to assess its financial
management systems’ compliance with
FFMIA, as required by OMB and in
accordance with Treasury-wide guidance.
OFS conducted its self-assessment to
determine its risk levels and determined that
all OFS financial management systems are in
compliance with FFMIA.

Financial Management Systems
Framework
OFS’s financial management systems
framework consists of two fundamental
components: 1) core financial and mixed
systems maintained by OFS and Treasury
bureaus that cross-service OFS; and 2)
systems that are financially relevant operated
and supported by financial agents. Combined,
this framework satisfies OFS’s diverse
financial operational and reporting needs as
well as OFS’s internal and external reporting
requirements.
In fiscal year 2014, OFS continued to utilize
and improve the Core Investment Transaction
Flow (CITF), TARP’s system of record and

MANAGEMENT’S DISCUSSION AND ANALYSIS

accounting translation engine. OFS continued
to fine-tune standardized management reports
from CITF to improve their usefulness to
management’s decision-making and reduce
reliance on manual processes.
In addition, OFS utilizes financial systems
maintained by Treasury Departmental Offices
and various Treasury bureaus. These systems
are also in substantial compliance with
federal financial management systems
requirements and undergo regular
independent audits.
In fiscal year 2014, OFS devoted substantial
attention to simplifying its technology footprint in concert with the reduced activity and
size of OFS operations. The simplification
effort helps ensure the reliability,
maintainability, and controllability of OFS
technology as TARP programs wind-down.
Certain financially relevant systems are
operated and 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. These plans and programs are
reviewed and approved by OFS at least on an
annual basis.

Legal Compliance
OFS is subject to numerous legislative and
regulatory requirements that promote and
support an effective internal control
environment. At least on an annual basis,
OFS conducts a formal process to identify and
document applicable laws and regulations.
This process includes the review and
consideration of Treasury guidance, statutory
and OMB requirements as well as
consultation with OFS program management

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

and the Treasury Office of General Counsel.
OFS program managers are responsible for
identifying laws and regulations which impact
their areas, developing policies and
procedures which ensure compliance with
those laws and regulations, and disseminating
information to employees regarding
compliance responsibilities.
In order to test compliance with laws and
regulations, OFS maps the requirements of
each applicable law or regulation to controls
that support the requirements. The majority
of the laws and regulations applicable to OFS
are tested in this manner. In instances where
OFS cannot leverage specific controls, OFS
either performs alternative evaluation
procedures or, through adherence to the
guidance provided by Treasury, checks that
controls are in place to meet guidance
concerns and specifications where they apply.
The results of OFS’s evaluation of compliance
with applicable laws and regulations are
reflected in OFS’s assurance statement.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Other Management Information, Initiatives, and Issues
Areas for Improvement
Over the next year, OFS management will focus on maintaining its internal control environment in
several key areas as follows:
•

•

As programs continue to wind-down, 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.
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. Where necessary and appropriate to ensure fiscal responsibility, OFS will
look to reduce the number of third-party service providers commensurate with the winddown in OFS operations.
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. OFS will
manage this process through the SAT to ensure that any resulting risk is minimal and
controlled.

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Limitations of the Financial Statements
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 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 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 2014

MESSAGE FROM THE CHIEF FINANCIAL OFFICER

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Part 2: Financial Report

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (CF0)
The Office of Financial Stability’s (OFS) Agency Financial Report for fiscal year 2014 provides readers
information on financial results relating to the Troubled Asset Relief Program (TARP) as required by the
Emergency Economic Stabilization Act (EESA) of 2008 and other laws. It is a critical part of our efforts to
ensure the highest level of transparency and accountability to the American people.
For fiscal year 2014, the Government Accountability Office (GAO) provided OFS unmodified audit opinions on
the fair presentation of our financial statements and the effectiveness of our internal control over financial
reporting for TARP. In addition, the auditors determined that we had no material weaknesses or significant
deficiencies relating to internal control over our accounting and financial reporting processes for TARP. Since
the inception of TARP in 2009, the program has consistently received unmodified audit opinions – a remarkable
achievement for a start-up organization with complex programs.
I would like to acknowledge senior management’s commitment to good governance as well as the discipline,
transparency, and care exhibited by OFS employees in creating and executing our organization’s policies and
procedures. We were honored to have received the Certificate of Excellence in Accountability Reporting (CEAR)
award from the Association of Government Accountants for each of the five periods from inception through the
fiscal year 2013.
For fiscal year 2014, net cost of operations was $3.0 billion, resulting in a cumulative net cost of operations of
$15.6 billion since inception. Cumulative net cost of operations consists of (1) total net subsidy cost of $132
million, and (2) housing costs and administrative costs of $14.0 billion and $1.5 billion, respectively. Total
cumulative net subsidy cost consists of net subsidy income from the CPP, TIP, AGP, PPIP, SBA and TALF
investments totaling $27.5 billion, offset primarily by net subsidy cost from investments in AIG of $15.2 billion,
and automobile company investments of $12.3 billion.
During fiscal year 2014, OFS collected a total of $17.4 billion through repayments, sales, dividends, and other
receipts. OFS’s gross outstanding loan and equity investment balance as of September 30, 2014 was $2.9
billion, comprised of $1.8 billion in AIFP, $625 million in CPP, and the remainder in CDCI. OFS is committed to
exiting investments in a timely manner while maximizing collections on behalf of the taxpayer. During fiscal
year 2014, 62 CPP institutions repaid, were auctioned, or were restructured and sold. OFS also fully exited its
investment in GM in fiscal year 2014 and continued with the disposition of its Ally investment with an initial
repayment by Ally followed by sales of common stock through a private offering, a public offering, and prearranged trading plans.
In fiscal year 2014, as OFS continued to wind down, we have streamlined many of our processes to eliminate
redundancy and become more efficient, making sure to maintain coverage over key controls. As an
organization, OFS has and will continue to consolidate roles, as appropriate, and without comprising the
internal control environment. Consolidation allows for the continued retention of institutional knowledge and
helps ensure that all control points are monitored and executed. Maintaining rigorous internal control processes
around transaction processing, disbursements, collections, and financial reporting will continue to be one of
OFS’s top priorities.
I feel fortunate to play a role in continuing the tradition of sound fiscal stewardship at OFS. This organization
recognizes the importance of a robust control environment and will continue to uphold the highest standards of
integrity as we carry out our fiduciary responsibilities to the American people.
Sincerely,

Lorenzo Rasetti
Chief Financial Officer

MESSAGE FROM THE CHIEF FINANCIAL OFFICER

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT

441 G St. N.W.
Washington, DC 20548

Independent Auditor’s Report
To the Deputy Assistant Secretary for Financial Stability
In our audits of the fiscal years 2014 and 2013 financial statements of the Troubled Asset Relief
Program (TARP), which is implemented by the Office of Financial Stability (OFS),1 we found




the OFS financial statements for TARP as of and for the fiscal years ended September
30, 2014, and 2013, are presented fairly, in all material respects, in accordance with
U.S. generally accepted accounting principles;
OFS maintained, in all material respects, effective internal control over financial reporting
for TARP as of September 30, 2014; and
no reportable noncompliance for fiscal year 2014 with provisions of applicable laws,
regulations, contracts, and grant agreements we tested.

The following sections discuss in more detail (1) our report on the financial statements and on
internal control over financial reporting, which includes two emphasis of matters related to
certain factors affecting the valuation of TARP direct loans and equity investments and the
TARP reporting entity, and required supplementary information (RSI)2 and other information3
included with the financial statements; (2) our report on compliance with laws, regulations,
contracts, and grant agreements; and (3) agency comments. In addition to our responsibility to
audit OFS’s annual financial statements for TARP, we are also required under the Emergency
Economic Stabilization Act of 2008 (EESA)4 to report at least every 60 days on the findings
resulting from our oversight of the actions taken under TARP.5 This report responds to both of
these requirements. We have issued numerous other reports on TARP in connection with this
60-day reporting responsibility, which can be found on GAO’s website at http://www.gao.gov.
1

Section 101 of the Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, div. A, 122 Stat 3765, 3767
(Oct. 3, 2008), classified at 12 U.S.C. § 5211, established OFS within the Department of the Treasury (Treasury) to
implement TARP.
2

RSI consists of “Management’s Discussion and Analysis” and the “Combined Statement of Budgetary Resources”,
which are included with the financial statements.
3

Other information consists of information included with the financial statements, other than RSI and the auditor’s
report.
4

EESA is classified, in part, as amended, as sections 5201 through 5261 of Title 31 of the United States Code. Section
116(b) of EESA, 12 U.S.C. § 5226(b), requires that Treasury annually prepare and submit to Congress and the public
audited fiscal year financial statements for TARP that are prepared in accordance with generally accepted accounting
principles. Section 116(b) further requires that GAO audit TARP’s financial statements annually in accordance with
generally accepted auditing standards.
5

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

AUDITOR’S REPORT

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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, 2014, and
2013; 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,
2014, 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.6 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, 2014, 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
6

Section 116(b) of EESA requires that GAO audit TARP’s financial statements annually in accordance with generally
accepted auditing standards (GAAS). U.S. generally accepted government auditing standards incorporates by
reference the American Institute of Certified Public Accountants Statements on Auditing Standards which constitutes
GAAS.

AUDITOR’S REPORT

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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
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.7
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, 2014, and 2013, 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.

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.

AUDITOR’S REPORT

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Emphasis of Matters
Valuation of TARP’s Direct Loans and Equity Investments
As discussed in notes 2 and 6 to OFS’s financial statements for TARP, the valuation of TARP’s
direct loans and equity investments 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 adjustment for market risk to
reflect the variability around any unexpected losses. In valuing the direct loans and the equity
investments, 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.8 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
and equity investments as of September 30, 2014, and 2013 (which totaled $2.2 billion and
$17.9 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.9
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. As also
discussed in note 1 to the financial statements, 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

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 the Federal Housing Administration
refinance program.
9

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.

AUDITOR’S REPORT

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

In our opinion, OFS maintained, in all material respects, effective internal control over financial
reporting for TARP as of September 30, 2014, based on criteria established under FMFIA.
During our fiscal year 2014 audit, we identified deficiencies in OFS’s internal control over
financial reporting for TARP that we do not consider to be material weaknesses or significant
deficiencies.10 Nonetheless, these deficiencies warrant OFS management’s attention. We have
communicated these matters to OFS management and, where appropriate, will report on them
separately.
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.
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. 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.

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

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Management’s Responsibility
OFS management is responsible for complying with laws, regulations, contracts, and grant
agreements applicable to OFS.
Auditor’s Responsibility
Our responsibility is to test compliance with selected provisions of laws, regulations, contracts,
and grant agreements applicable to OFS that have a direct effect on the determination of
material amounts and disclosures in the TARP financial statements, and perform certain other
limited procedures. Accordingly, we did not test compliance with all laws, regulations, contracts,
and grant agreements applicable to OFS.
Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements
Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and
grant agreements disclosed no instances of noncompliance for fiscal year 2014 that would be
reportable under U.S. generally accepted government auditing standards. However, the
objective of our tests was not to provide an opinion on compliance with laws, regulations,
contracts, and grant agreements applicable to OFS. Accordingly, we do not express such an
opinion.
Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant
Agreements
The purpose of this report is solely to describe the scope of our testing of compliance with
selected provisions of applicable laws, regulations, contracts, and grant agreements, and the
results of that testing, and not to provide an opinion on compliance. This report is an integral
part of an audit performed in accordance with U.S. generally accepted government auditing
standards in considering compliance. Accordingly, this report on compliance with laws,
regulations, contracts, and grant agreements is not suitable for any other purpose.
Agency Comments
In commenting on a draft of this report, OFS stated that it is proud to receive unmodified
opinions on its financial statements and its internal control over financial reporting. OFS also
stated that it is committed to maintaining the high standards and transparency reflected in these
audit results. The complete text of OFS’s response is reprinted in appendix II.

Gary T. Engel
Director
Financial Management and Assurance
November 5, 2014

AUDITOR’S REPORT

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Appendix I: Management’s Report on Internal Control Over
Financial Reporting
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

Management’s Report on Internal Control Over Financial Reporting

The Office of Financial Stability’s (OFS) internal control over financial reporting (for TARP) 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.
OFS management is responsible for 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. OFS management evaluated the effectiveness of OFS’s internal
control over financial reporting as of September 30, 2014, based on the criteria established under 31
U.S.C. 3512(c), (d) (commonly known as the Federal Managers’ Financial Integrity Act).
Based on that evaluation, we conclude that, as of September 30, 2014, OFS’s internal control over
financial reporting was effective.
Office of Financial Stability

Timothy Bowler
Deputy Assistant Secretary for Financial Stability

Lorenzo Rasetti
Chief Financial Officer
November 5, 2014

AUDITOR’S REPORT

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Appendix II: OFS Response to Auditor’s Report
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

DEPUTY ASSISTANT SECRETARY

November 5, 2014

Mr. Gary T. Engel
Director, Financial Management and Assurance
U.S. Government Accountability Office
441 G Street, N.W.
Washington, DC 20548
Dear Mr. Engel:
We have reviewed the Independent Auditor’s Report concerning your audit of the Office of
Financial Stability’s (OFS) fiscal year 2014 financial statements. OFS is proud to receive
unmodified opinions on our financial statements and our internal controls over financial
reporting.
We appreciate the professionalism and commitment demonstrated by your staff throughout the
audit process. The process was valuable for us and resulted in concrete improvements in our
operations and financial management efforts.
OFS is committed to maintaining the high standards and transparency reflected in these audit
results as we carry out our responsibilities for managing the Troubled Asset Relief Program.
Sincerely,

Timothy J. Bowler
Deputy Assistant Secretary for Financial Stability

AUDITOR’S REPORT

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.

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

The Statement of Budgetary Resources provides
information about funding and availability of
budgetary resources and the status of those
resources for the fiscal years ended September 30,
2014 and 2013.

The Balance Sheet summarizes the OFS assets,
liabilities and net position as of September 30,
2014 and 2013. 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 fiscal years ended
September 30, 2014 and 2013.
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 fiscal
years ended September 30, 2014 and 2013. The
ending balances of both components of net
position are also reported on the Balance Sheet.

FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Office of Financial Stability - Troubled Asset Relief Program

BALANCE SHEET
As of September 30, 2014 and 2013
Dollars in Millions

2014

2013

ASSETS
Intragovernmental Assets:
Fund Balance with Treasury (Note 3)
Other

Total Intragovernmental Assets

53,240
1

33,210

53,241

50
2,174

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

33,210
-

50
17,869

35,434

71,160

4
1,488
1,304
2,796

1
8,139
11,949
20,089

LIABILITIES
Intragovernmental Liabilities:
Accounts Payable and Other Liabilities
Due to the General Fund (Note 7)
Principal Payable to the Bureau of the Fiscal Service (Note 8)
Total Intragovernmental Liabilities
Accounts Payable and Other Liabilities
Liabilities for Treasury Housing Programs Under TARP:
FHA-Refinance Program (Notes 5 and 6)
Making Home Affordable Program and Hardest Hit Fund (Note 5)
Total Liabilities

47
6
243
$

Commitments and Contingencies (Note 9)

87
9
263

3,092

20,448

NET POSITION
Unexpended Appropriations
Cumulative Results of Operations

32,295
47

50,663
49

Total Net Position

32,342

50,712

Total Liabilities and Net Position

35,434

71,160

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

FINANCIAL STATEMENTS

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

Office of Financial Stability - Troubled Asset Relief Program

STATEMENT OF NET COST
For the Years Ended September 30, 2014 and 2013
Dollars in Millions

2014

2013

STRATEGIC GOAL: TO PROMOTE DOMESTIC ECONOMIC GROWTH AND STABILITY WHILE CONTINUING REFORMS OF THE
FINANCIAL SYSTEM
Gross Cost of (Income from) Operations:
Program Subsidy Cost (Income) (Note 6)
Direct Loan and Equity Investment Programs
Other Credit Programs
Total Program Subsidy Cost (Income)

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

218
4,280
186
3,189

Earned Revenue:
Dividend and Interest Income - Programs (Note 6)
Interest Income on Financing Account (Note 10)
Subsidy Allowance Amortization (Note 10)
Total Earned Revenue
Total Net Cost of (Income from) Operations

(1,492) $
(3)
(1,495)

856
3,961
248
(6,845)

(245)
(29)
56
(218)
$

2,971

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

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

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

FINANCIAL STATEMENTS

(7,701)

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Office of Financial Stability - Troubled Asset Relief Program

STATEMENT OF CHANGES IN NET POSITION
For the Years Ended September 30, 2014 and 2013
2014
Unexpended Cumulative Results
Appropriations
of Operations

Dollars in Millions
Beginning Balances

2013

50,663

Unexpended Cumulative Results
Appropriations
of Operations
$

54,572

Budgetary Financing Sources
Appropriations Received
Appropriations Used
Other Adjustments - Canceled Authority
Other Financing Sources
Total Financing Sources

308
(4,556)
(14,120)
(18,368)

4,556
(1,587)
2,969

(18,368)

(2,971)
(2)

(707)

788
(4,697)
(3,909)

Net (Cost of) Income from Operations
Net Change

(3,909)

Ending Balances

32,295

50,663

4,697
(11,642)
(6,945)
7,701
756
$

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

FINANCIAL STATEMENTS

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

Office of Financial Stability - Troubled Asset Relief Program

STATEMENT OF BUDGETARY RESOURCES
For the Years Ended September 30, 2014 and 2013
2014

BUDGETARY RESOURCES
Unobligated Balance Brought Forward, October 1
Recoveries of Prior-Year Unpaid Obligations
Borrowing Authority Withdrawn
Actual Repayments of Debt, Prior-Year Balances
Canceled Authority
Unobligated Balance from Prior-Year Budget Authority, Net
Appropriations
Borrowing Authority
Spending Authority from Offsetting Collections
TOTAL BUDGETARY RESOURCES (Note 11)
STATUS OF BUDGETARY RESOURCES
Obligations Incurred
Unobligated Balance:
Apportioned
Unapportioned
Total Unobligated Balance
TOTAL STATUS OF BUDGETARY RESOURCES
CHANGE IN OBLIGATED BALANCES
Unpaid Obligations:
Unpaid Obligations Brought Forward, October 1
Obligations Incurred
Gross Outlays
Recoveries of Prior-Year Unpaid Obligations
Unpaid Obligations, End of Year
Uncollected Payments from Federal Sources:
Uncollected Payments Brought Forward, October 1
Change in Uncollected Payments
Uncollected Payments from Federal Sources, End of Year
Obligated Balance, Net, End of Year

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

Dollars in Millions
$

2013

21,606 $
261
(14,120)
7,747
308
8,055 $

1,462
865
(1,444)
883
839
7,394
9,116

295

8,502

14
7,746
7,760
8,055

558
56
614
9,116

29,406 $
295
(4,612)
(261)
24,828

24,828

$
$

Nonbudgetary
Financing
Accounts

Budgetary
Accounts
$

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

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

779

14,100

11
21,595
21,606
22,385

668
794
1,462
15,562

993
8,502
(8,503)
(865)
127

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

29,406

(226)
197
(29)
98

29,406
24,828

$
$

767
98

$
$

40,548
29,406

$
$

308
308

5,926
14,100
(14,092)
(4,941)
993

(349)
123
(226)
767

OBLIGATED BALANCES
(Net of Unpaid Obligations and Uncollected Payments Above)
Obligated Balance, Net, Brought Forward, October 1
Obligated Balance, Net, End of Year
BUDGET AUTHORITY AND OUTLAYS, NET
Budget Authority, Gross
Actual Offsetting Collections
Change in Uncollected Customer Payments from Federal Sources
BUDGET AUTHORITY, NET
Gross Outlays
Actual Offsetting Collections
Net Outlays
Distributed Offsetting Receipts
AGENCY OUTLAYS, NET

$
$

8,233
(17,541)
197
(9,111)

4,612 $
4,612
(8,238)
(3,626) $

8,503
(17,541)
(9,038)
(9,038)

789 $
(1)
788 $

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.

5,577
767

FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.

Program (PPIP); the Term Asset-Backed Securities
Loan Facility (TALF); the Automotive Industry
Financing Program (AIFP); and the Treasury Housing
Programs Under TARP. During fiscal year 2013, the
American International Group, Inc. (AIG) Investment
Program (formerly known as the Systemically
Significant Failing Institutions Program) and the
Asset Guarantee Program (AGP) were closed. See
Notes 5 and 6 for details regarding these programs.

While these financial statements reflect the activity
of the OFS in executing its programs, including
The EESA established certain criteria under which
providing resources to various entities to help
the TARP would operate, including provisions that
stabilize the financial markets, they do not include
impact the budgeting, accounting, and reporting of
the assets, liabilities, or results of operations of
troubled assets acquired under the Act. Section 115 of commercial entities in which the OFS has a
the EESA limited the authority of the Secretary to
significant equity interest. Through the purchase of
purchase troubled assets up to $700.0 billion
troubled assets, the OFS entered into several
outstanding at any one time, calculated as the
different types of direct loan, equity investment, and
aggregate purchase prices of all troubled assets held. other credit programs (which consist of the AGP and
In July 2010, the Dodd-Frank Wall Street Reform and the Federal Housing Administration (FHA)
Consumer Protection Act amended Section 115 of the Refinance Program) (collectively, the OFS programs)
EESA, limiting the TARP’s authority to a total of
with private entities. The OFS programs were
$475.0 billion cumulative obligations (i.e. purchases
entered into with the intent of helping to stabilize
and guarantees) and prohibiting any new obligations the financial markets and mitigating, as best as
for programs or initiatives that had not been publicly possible, any adverse impact on the economy; they
announced prior to June 25, 2010. Of the maximum
were not entered into to engage in the business
$475.0 billion authority under the EESA, OFS had
activities of the respective private entities. Based on
utilized (including purchases made, legal
this intent, the OFS concluded that such programs
commitments to make purchases and offsets for
are considered “bailouts,” under the provisions of
guarantees made) $455.7 billion as of September 30,
paragraph 50 of Statement of Federal Financial
2014 and $456.6 billion as of September 30, 2013.
Accounting Concepts (SFFAC) No. 2, Entity and
The reduction between 2014 and 2013 reflects the
Display. In addition, these entities are not included
deobligation of unused funds in certain programs.
in the Federal budget and, therefore, do not meet
the conclusive criteria in SFFAC No. 2. As such, the
During fiscal year 2014, the TARP administered the
OFS determined that none of these entities should
following programs: the Capital Purchase Program
be classified as a federal entity. Consequently, their
(CPP); the Community Development Capital
assets, liabilities and results of operations were not
Initiative (CDCI); the Public-Private Investment
consolidated in these OFS financial statements, but

NOTES TO THE FINANCIAL STATEMENTS

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

the value of such investments was recorded in the
OFS financial statements.
In addition, the OFS has made loans and
investments in certain Special Purpose Vehicles
(SPV)3. SFFAC No. 2, paragraphs 43 and 44,
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 equity
interests are included in Notes 2 and 6; see PPIP
and TALF Investment Programs.

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.

During fiscal year 2014, the OFS held an equity interest in an
SPV under the TALF program. During fiscal year 2013, the OFS
held an equity interest in SPVs under the TALF and PPIP
programs.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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

NOTES TO THE FINANCIAL STATEMENTS

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
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 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. Liabilities under the
FHA-Refinance Program are recognized at the net
present value of their estimated future cash flows
when the FHA guarantees loans.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

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.
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.
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, 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).
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, as of fiscal year
ends, include 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.

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.
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

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.
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
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.

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.
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.

NOTES TO THE FINANCIAL STATEMENTS

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 or
liquidation with suspension or termination of
collection action, or extinguishment of a debt
instrument by agreement and there is currently no
expectation of further collection. 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.

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. In fiscal year
2013, under the termination agreement, the FDIC
transferred certain Citigroup trust preferred
securities to the OFS, less any losses on FDIC’s
guarantee of Citigroup debt, which OFS then sold.
As of September 30, 2013, there were no remaining
securities under the Asset Guarantee Program. See
Note 6.

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

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

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, 2014 and 2013.

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
credit programs as of September 30, 2014 and 2013.
See Notes 6 and 7.

Principal Payable to the Bureau of
the Fiscal Service
Principal Payable to the Bureau of the Fiscal Service
(Fiscal Service) 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.

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, 2014 and
2013, 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.
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,
one of the Liabilities for Treasury Housing Programs
Under TARP, on the Balance Sheet. See Notes 4, 5
and 6.

Unexpended Appropriations
Unexpended Appropriations represents the OFS
undelivered orders and unobligated balances
reduced by canceled authority in budgetary
appropriated funds as of September 30, 2014 and
2013.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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. Cumulative
Results of Operations in 2014 and 2013 included $50
million reported as Cash on Deposit for Housing
Program on the Balance Sheet, see Note 4.

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.

Employee Health and Life Insurance
and Workers’ Compensation Benefits
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.

NOTES TO THE FINANCIAL STATEMENTS

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.

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.

Related Parties
There are no related parties for OFS.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

NOTE 3. FUND BALANCES WITH TREASURY
Fund Balances with Treasury, by fund type and status, as of September 30, 2014 and 2013, are presented in
the following table.
As of September 30,
(Dollars in Millions)

Fund Balances:
General Funds
Program Funds
Financing Funds
To t al Fund Balances
S t at us o f Fund Balances:
Unobligated Balances
Available
Unavailable
Obligated Balances Not Yet Disbursed
To t al S t at us o f Fund Balances

Collections relating to the AGP are deposited in the
Troubled Assets Insurance Financing Fund (TAIFF)
(which is within OFS Financing Funds balance) as

2014

2013

32,231
358
621
33,210

572
7,802
24,836
33,210

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

678
22,389
30,173
53,240

required by the EESA Section 102(d). In fiscal year
2013 the TAIFF was closed because the AGP
program was completed and investments sold.

NOTE 4. CASH ON DEPOSIT FOR HOUSING PROGRAM
As of September 30, 2014 and 2013, 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.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

NOTE 5. TREASURY HOUSING PROGRAMS UNDER TARP
Fiscal years 2014 and 2013 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

Housing Program

living situation. The programs fall into three
initiatives:
1) Making Home Affordable Program (MHA);
2) Hardest-Hit Fund (HHF); and
3) FHA-Refinance Program.
Features of these initiatives follow:

Features

MHA
Ho me Affo rdable Mo dificat io n Pro gram (HAMP)
First Lien Modification Program (Tier 1 and Tier 2) 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 (PRA)

Pays financial incentives to investors for principal reduction in conjunction
with a first lien HAMP modification.
Home Affordable Foreclosure Alternatives (HAFA ) 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.
Unemployment Forebearance Program (UP)
Offers assistance to unemployed homeowners through temporary
forebearance of a portion of their mortgage payments. This program does not

FHA-HAMP
Seco nd Lien Pro gram (2MP)
Rural Develo pment Pro gram (RD-HAMP)

HHF
FHA-Refinance Program

NOTES TO THE FINANCIAL STATEMENTS

require any payments from OFS.
Provides mortgage modifications similar to HAMP, but for FHA-insured or
guaranteed loans offered by the FHA, V A or USDA.
Offers financial incentives to participating servicers who modify second liens
in conjunction with a HAMP modification.
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.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

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) and the U.S.
Department of Agriculture (USDA).
In fiscal year 2013, the deadline for applications
under the MHA programs was extended from
December 31, 2013, to December 31, 2015, and in
fiscal year 2014 it was announced that it would be
extended again at least a year to December 31,
2016. In addition, in fiscal year 2014, OFS made
changes to MHA programs to align with recently
issued Consumer Financial Protection Bureau
(CFPB) regulations and to address the interest
rate increase and enhance borrower awareness of
any payment change and resources available
should they need assistance.
All MHA disbursements are made to servicers
either for themselves or for the benefit of
borrowers and investors, and all payments are

contingent on borrowers remaining in good
standing.
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, consisting 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, receive
funding from the OFS. Approved states develop
and roll out their own programs with timing and
types of programs 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 2014, state HFAs continued to adapt
their programs to best meet borrower needs in
evolving economic and housing markets. A total
of fourteen HFAs now offer principal reduction to
induce a loan modification, refinance, or recast.
In addition to Florida, Illinois, and Ohio, now
Nevada and North Carolina provide HHF
resources to enhance modification of loans
purchased through distressed asset note sales.
Oregon continues to offer refinancing options to
underwater homeowners ineligible for other
options. Illinois, Indiana, and Ohio joined

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Michigan in allocating a portion of their HHF
funds to blight elimination in an effort to stabilize
neighborhoods and prevent foreclosures. Finally,
another five HFAs followed Rhode Island and
Illinois in closing their HHF application portals in
anticipation of full commitment of program funds:
the District of Columbia, New Jersey, Ohio,
Oregon, and Tennessee.

FHA-Refinance Program
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
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, 2014, and September
30, 2013, 3,015 loans had been refinanced.
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
additional claim payments were made in fiscal
year 2014. See Notes 4 and 6 for further details
about the deposit and the program. OFS paid
$0.8 million in fiscal year 2014 and $2 million in
fiscal year 2013 to maintain the letter of credit.
The table below recaps housing program
commitments as of September 30, 2014, and
payments and accruals as of September 30, 2014
and 2013.

Treasury Housing Programs Under TARP
Total Commitments as of
(Dollars in Millions)

MHA

September 30, 2014

HFA Hardest Hit Fund
FHA - Refinance
Totals

Fiscal Year Payments through September 30,

29,829

2014

7,600

38,454

2,739

1,560

1,025
$

4,300

2014

2,541

3,939

243

263
-

2
$

2013

1,396

1
$

Accruals as of September 30,

2013

263

Total commitments represent amounts obligated to support all of OFS's Housing programs. This differs from the $24,429 outstanding
commitments as of September 30, 2014, 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.

NOTES TO THE FINANCIAL STATEMENTS

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

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
Capital Purchase Program
Community Development Capital Initiative
Public-Private Investment Program
Term Asset-Backed Securities Loan Facility
Automotive Industry Financing Program
American International Group, Inc. Investment Program
Other Credit Programs
Asset Guarantee Program
FHA-Refinance Program

Program Type
Equity Investment/Subordinated Debentures
Equity Investment/Subordinated Debentures
Equity Investment and Direct Loan
Subordinated Debentures
Equity Investment and Direct Loan
Equity Investment
Asset Guarantee
Loss-sharing Program with FHA

Direct Loan and Equity Investment Programs
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 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

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.
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.
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
shares to financial institutions that were acquiring
the QFIs that have issued the preferred shares.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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 No. 2, these transactions are considered
workouts and not modifications. The changes in cost
associated with these transactions are captured in
the year-end reestimates.
During fiscal year 2014 and 2013, OFS continued
auction sales of selected remaining CPP
investments.
In fiscal year 2014, OFS sold 31 CPP investments in
6 separate auctions for total net proceeds of $289
million. These auction sales resulted in net proceeds
less than cost of $73 million. In addition, other sales
and redemptions for 31 institutions resulted in net
proceeds less than cost of $96 million.
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.

During fiscal year 2014, three institutions, in which
OFS had invested $27 million, were either closed by
their regulators or declared bankruptcy. During
fiscal year 2013, seven institutions, in which OFS
had invested $137 million, were either closed by
their regulators or declared bankruptcy. The
ultimate amount received, if any, from the
investments in institutions that filed for bankruptcy
and institutions closed by regulators primarily
depends upon the outcome of the bankruptcy
proceedings and of each institution’s
receivership. At closing or bankruptcy, they are
valued by OFS at zero.
During fiscal year 2014, 27 institutions that entered
bankruptcy or were closed by their regulators
between 2009 to 2014 were written off for $797
million, the amount of OFS’s original investments.
During fiscal year 2013, one CPP institution was
written off for $104 million. OFS had originally
invested $110 million and recovered $6 million. The
write-offs reduced gross investment outstanding and
subsidy allowance by equal offsetting amounts, since
the investments were valued at zero through the
subsidy cost reestimates.

The following tables provide key data points related to the CPP for the fiscal years ending September 30,
2014 and 2013:
CPP Part icipat ing Inst it ut io ns

Cumulative as of September 30,
2014
2013

Number of Institutions Funded
Institutions Paid in Full, Merged or Investments Sold
Institutions Transferred to CDCI
Institutions Refinanced to SBLF
Institutions Written Off After Bankruptcy or Receivership
Number of Institutions w ith Outstanding OFS Investments
Institutions in Bankruptcy or Receivership (not w ritten off)
Number of CPP Institutions Valued at Year-End

707
(469)
(28)
(137)
(30)
43
43
36

Fiscal Year 2014

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

707
(407)
(28)
(137)
(3)
132
(24)
108

Fiscal Year 2013

CPP Invest ment s
(Dollars in Millions)

Outstanding Beginning Balance, Investment in CPP Institutions, Gross
Repayments and Sales of Investments
Write-Offs
Losses from Sales and Repurchases of Assets
Outstanding Balance, Investment in CPP Institutions, Gross

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

NOTES TO THE FINANCIAL STATEMENTS

3,143 $
(1,454)
(797)
(267)
625 $

8,664
(4,752)
(104)
(665)
3,143

$
$

88 $
(169) $

262
(493)

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

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 2014, there were no CDCI
institutions written off. During fiscal year 2013, one
CDCI institution, in which the OFS invested $7
million, was written off.
In fiscal year 2014, OFS received $10 million in
repayments and $10 million in dividends and
interest from its CDCI investments with, as of
September 30, 2014, an outstanding balance of $465
million and value of $372 million. In fiscal year
2013, OFS received $86 million in repayments and
$11 million in dividends and interest from its CDCI
investments with, as of September 30, 2013, an
outstanding balance of $475 million and value of
$371 million.

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.
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

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.
In fiscal year 2013, the six remaining PPIFs
liquidated investments and fully repaid investors,
including OFS. During fiscal year 2014, upon final
termination notice from five PPIF partnerships, the
OFS received $10 million, of which $6 million was
recognized as investment income and $4 million as
net proceeds in excess of cost. 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.
As of September 30, 2014, OFS had no PPIF equity
investments or loans outstanding. 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 represented
additional proceeds expected upon final liquidation
of remaining partnerships.
Of the legal commitments to disburse up to $984
million to remaining PPIFs as of September 30,
2013, $858 million were canceled in 2014 since all
PPIFs had ceased operations and termination
notices had been received from all but one of them.
There is little likelihood of additional disbursement
as they would only occur if a factor adjustment to a
trade was recognized, requiring additional funds
from the investors in the PPIF.

Term Asset-Backed Securities Loan
Facility (TALF)
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.
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

NOTES TO THE FINANCIAL STATEMENTS

consumer and commercial loans and commercial
mortgage backed securities (CMBS). The FRBNY
ceased issuing new loans on June 30, 2010. As of
September 30, 2014, one loan due to FRBNY of
approximately $14.3 million remained outstanding.
As of September 30, 2013, $101 million 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 to $1.4 billion. In fiscal
year 2013, the remaining commitment was
terminated.
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 2014, OFS received $62 million of
contingent interest, recorded as proceeds in excess of
cost.
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
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, 2014 or 2013, no TALF loans
were in default and consequently no collateral was
purchased by the TALF, LLC.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

Automotive Industry Financing Program
(AIFP)
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.
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
possession (DIP) financing while Old GM was in
bankruptcy. As of September 30, 2012, 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.
During fiscal year 2014, OFS sold its remaining 101
million shares of GM common stock for $3.8 billion.
The sales resulted in net proceeds less than cost of
$639 million. At September 30, 2014, the OFS
retained no ownership in the common stock of New
GM.
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.
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.
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 $1
million and $22 million in fiscal years 2014 and
2013, respectively, on the administrative claim. The
outstanding balance at September 30, 2013 was

$827 million. Because OFS does not expect to
recover any significant additional proceeds from this
claim, OFS recognized a write-off of the remaining
$826 million in fiscal year 2014 resulting in no
outstanding balance at September 30, 2014.
Chrysler Group LLC (New Chrysler) and
Chrysler Holding LLC (Old Chrysler)
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 write-offs, OFS had received loan
repayments, interest and additional payments
totaling $11.1 billion and had no remaining interest
in New Chrysler.
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.
Nothing was received from the trust in fiscal year
2014 or 2013. The underlying loan balance was
extinguished in the Chrysler bankruptcy, and was
written off by OFS in fiscal year 2010.
Ally Financial Inc. (formerly known as
GMAC)
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 2013, OFS had
received $5.7 billion in sales proceeds, dividends,
and additional payments 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

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

were convertible into at least 513,000 shares of
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 along with an additional $725
million for the elimination of certain rights under
the original agreement. This transaction resulted in
proceeds in excess of cost of $300 million. The
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 the private offering, OFS’s ownership was
reduced to 63.4 percent of Ally’s outstanding
common stock. A stock split of 310/1 was also
announced by Ally following the private offering.
The OFS received $141 million and $534 million in
dividends, respectively, from the Ally investment in
fiscal years 2014 and 2013.
During fiscal year 2014, OFS sold 410,000 pre-split
shares and 113 million post-split shares of Ally
common for $5.8 billion. The sales resulted in net
proceeds less than cost of $1.4 billion.
At September 30, 2014, the OFS held 64,110,418
shares of Ally common stock (post-split), with a
market value of $1.5 billion, representing 13.4
percent ownership in Ally.
At September 30, 2013, the OFS held 981,971 shares
of Ally common stock (pre-split), representing 73.8
percent ownership in Ally. The total 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.

American International Group, Inc. (AIG)
Investment Program
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

NOTES TO THE FINANCIAL STATEMENTS

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.
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.
As of September 30, 2013, OFS retained no
ownership interest in AIG, common or preferred, nor
any interests in SPVs.
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 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”).
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.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

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 using
market prices of similar securities to estimate an
appropriate market-adjusted discount rate 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,
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:


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 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.



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.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

The following table displays the assets held by the observability of inputs significant to the measurement of
each value:

As of September 30, 2014

(Dollars in Millions)

Quoted
Prices for
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

Pro gram
Capital Purchase Program

CDCI and TALF

175

281

38
$

372

410

1,483

Automotive Industry Financing Program
To t al TARP Pro grams

106

1,483

1,627

547

2,174

As of September 30, 2013

(Dollars in Millions)

Quoted
Prices for
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

Pro gram
Capital Purchase Program

CDCI and TALF

Financial Institution Equity Investments4
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
4

This consists of equity investments made under CPP and CDCI.

NOTES TO THE FINANCIAL STATEMENTS

1,668

1,793

451

3,647

Automotive Industry Financing Program

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.

Public-Private Investment Program
To t al TARP Pro grams

125

11,950

15,597

3,790

11,950

2,129

469

17,869

institution based on the strength of its balance
sheet. The model assumes a probabilistic approach
to estimate the projected cash flows due to the
Treasury based on market pricing data and the
strength of a given institution’s balance sheet. Each
institution’s performance is subject to uncertainty.
For a given institution, the model uses market
pricing data and the strength of its balance sheet to
estimate its future performance.
In fiscal year 2014, OFS implemented a new
estimation methodology in its model for its
remaining equity investments. The new model was
implemented as the risk profile of the remaining
equity investments within the TARP portfolio
evolved over time and as the portfolio as a whole
continued to wind down. Within the new model,

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

some institutions are increasingly likely to default
or to miss the preferred dividends as the quality of
their assets deteriorates or the level of capital they
have available to absorb losses declines as a share of
their assets. The probability of default was
estimated based on the performance of a large
sample of U.S. banks over time and on the historical
behavior of the TARP’s own equity investments. At
the other end of the spectrum, institutions are
increasingly likely to call their preferred shares over
time as their balance sheets improve. Inputs to the
model included institution-specific accounting data
obtained from regulatory filings, an institution’s
stock price volatility and historical bank failure
information, as well as market pricing data of
comparable securities trading in the market. The
market risk adjustment is estimated by grouping
institutions with similar financial performance and
applying credit spreads from similar securities.

traded are valued at the quoted market price as of
year end.

For equity valuations at September 30, 2013, the
OFS model assumed that institutions managed their
asset-to-liability ratios in such a way that they
revert over time to a target level. Historical
volatility was used to scale the likely evolution of
each institution’s asset-to-liability ratio. When
equity decreased, i.e. the asset-to-liability ratio fell,
institutions were increasingly likely to default,
either because they entered bankruptcy or were
closed by regulators. The probability of default was
estimated based on the performance of a large
sample of U.S. banks. At the other end of the
spectrum, institutions called their preferred shares
when the present value of expected future dividends
exceeded the call price; this occurred when equity
was high and interest rates were low. Inputs to the
model included 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 was obtained through a calibration
process to the market value of certain trading
securities of financial institutions within TARP
programs or other comparable financial
institutions.

During fiscal year 2013, the OFS model derived the
cash flows to the SPV and ultimately the OFS, based
on the performance of underlying collateral under
various economic scenarios. Loss probabilities on
the underlying collateral were calculated based on
analysis of historical loan performance by credit
sector and subsector. Scenario outcomes consisting
of a range of loss scenarios were probabilityweighted to generate the expected net present value
of future cash flows.

For both its September 30, 2013 model and its new
model implemented in fiscal year 2014, 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

Public-Private Investment Program
At September 30, 2014 and 2013, since the PPIFs no
longer held security portfolios, their valuation
represented expected proceeds to OFS upon final
liquidation notice from the remaining PPIFs.
Term Asset-Backed Securities Loan Facility
For fiscal year 2014, the valuation represents
expected proceeds to the OFS upon final wind down
of the Federal Reserve Bank of New York (FRBNY)
TALF LLC SPV because the OFS loan was fully
repaid in fiscal year 2013 and only one FRBNY
TALF loan remained outstanding as of September
30, 2014.

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. Traded but
not settled shares as of September 30, 2013, were
valued based on the actual trade proceeds. OFS had
no investment in GM common stock remaining as of
September 30, 2014.
At September 30, 2014, shares of common stock in
Ally, 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, 2014. Traded but not
settled shares as of September 30, 2014, were valued
based on the actual trade proceeds.
To value its holdings in Ally at September 30, 2013,
OFS considered observable market data from the

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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.

For fiscal years 2014 and 2013, financial statement
reestimates for all programs were performed using
actual financial transaction data through September
30. For fiscal year 2013, a mix of market and
security specific data publicly available as of
September 30 and August 31 were used for all
programs. For fiscal year 2014 market and security
specific data publicly available as of September 30
were used.

American International Group, Inc.
Investment Program

Net downward reestimates for the fiscal years ended
September 30, 2014 and 2013, totaled $1.5 billion
and $11.8 billion, respectively. Descriptions of the
reestimates, by OFS Program, are as follows:

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

CPP

Asset Guarantee Program
As of September 30, 2013, no instruments remained
under the Asset Guarantee Program.

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.
During fiscal year 2014, there were no modifications
to any of the remaining programs.
During fiscal year 2013, modifications occurred in
the AGP and TALF programs that resulted in
subsidy income of $94 million and $55 million,
respectively.
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.

NOTES TO THE FINANCIAL STATEMENTS

The $88 million downward reestimate for CPP for
the fiscal year ended September 30, 2014 was the
result of a reduction in the projected number of
institutions that would be sold via asset sales,
revenues from asset sales in 2014 being higher than
projected, and repayments.
The $1.1 billion downward reestimate for CPP for
the fiscal 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.
CDCI
The CDCI program experienced improved market
values and repayments in full, resulting in a $6
million downward reestimate for the fiscal year
ended September 30, 2014.
The CDCI program experienced improved
investment performance with several institutions
repaying in full, resulting in a $32 million
downward reestimate for the fiscal year ended
September 30, 2013.
PPIP
There was a nominal reestimate for the PPIP for the
fiscal year ended September 30, 2014, due to the
wind-down of expenses being nearly as projected.
The $380 million net downward reestimate for the
PPIP for the fiscal year ended September 30, 2013,
was primarily due to accelerated repayments.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

TALF
The investments in the TALF experienced lower
than anticipated expenses resulting in a $1 million
downward reestimate for the fiscal year ended
September 30, 2014.
The investments in the TALF experienced improved
market conditions and accelerated repayments,
resulting in a $33 million downward reestimate for
the fiscal year ended September 30, 2013. The $55
million downward modification reflected principal
and interest repayments occurring in February
2013, with contingent interest paid over time
beginning in February 2013. Prior to the
modification, principal, interest and contingent
interest would have occurred in March 2015.
AIFP
Improvements in the value of Treasury’s investment
in Ally resulted in $1.0 billion in downward
reestimates and improvements in Treasury’s
investments for GM resulted in $349 million for a
total of $1.4 billion in downward reestimates for
AIFP for the year ended September 30, 2014. In
April, 2014 an initial public offering (IPO) of Ally
common stock occurred with Treasury selling 95
million shares at $25.00 per share. In May 7.2
million shares were sold at that price. As of
September 30, 2014 the remaining shares of Ally
common were valued at $23.14 per share.
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 the
November 2013 repurchase of the Series F-2
mandatorily convertible preferred securities per the
August 2013 agreement and the valuation of
remaining shares at an observable market value.
AIG Investment Program
The $32 million net upward reestimate for the fiscal
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.

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 fiscal years ended
September 30, 2014 and 2013. OFS authority
expired October 3, 2010 and no commitments were
made thereafter, so there were no budget execution
subsidy rates for fiscal years 2014 and 2013.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Troubled Asset Relief Program Loans and Equit y Invest ment s
(Dollars in Millions)

TOTAL

As o f Sept ember 30, 2014
Direct Lo ans and Equit y Invest ment Pro grams:
Direct Loans and Equity Investments Outstanding, Gross
Subsidy Cost Allow ance
Direct Loans and Equity Investments Outstanding, Net

Obligations for Loans and Investments not yet Disbursed
Reco nciliat io n o f Subsidy Co st Allo wance:
Balance, Beginning of Period
Interest and Dividend Revenue
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
Reco nciliat io n o f Subsidy Co st (Inco me):
Subsidy Cost (Income) for Modifications
Subsidy Reestimates Upw ard (Dow nw ard)
Total Direct Loan and Equity Investment Programs
Subsidy Cost (Income)

AIFP

CDCI-TALF

AIG

625 $
(344)
281 $

- $
- $

1,763 $
(280)
1,483 $

- $
- $

126 $

- $

126 $

- $

5,627 $
245

1,350 $
88

(10) $
6

4,281 $
141

- $
-

6
10

(1,786)
(826)

62
-

(169)
(797)

(189)
2,171
(1,492)
679 $

(40)
432
(88)
344 $

- $

(133)
1,677
(1,397)
280 $

- $

(16)
62
(7)
55

- $
(1,492)

- $
(88)

- $
-

- $
(1,397)

- $
-

(7)

(1,492) $

(88) $

- $

(1,397) $

- $

(7)

TOTAL

Obligations for Loans and Investments not yet Disbursed

CPP

PPIP

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

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

984 $

- $

22,842 $
(55)
1,092

2,930 $
262

Reco nciliat io n o f Subsidy Co st Allo wance:
Balance, Beginning of Period
$
Subsidy Cost (Income) for Disbursements and Modifications
Interest and Dividend Revenue
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
$

4
-

465
(55)
410

(1,889)
(1,623)

As o f Sept ember 30, 2013
Direct Lo ans and Equit y Invest ment Pro grams:
Direct Loans and Equity Investments Outstanding, Gross
Subsidy Cost Allow ance
Direct Loans and Equity Investments Outstanding, Net

NOTES TO THE FINANCIAL STATEMENTS

PPIP

2,853 $
(679)
2,174 $

(Dollars in Millions)

Reco nciliat io n o f Subsidy Co st (Inco me):
Subsidy Cost (Income) for Modifications
Subsidy Reestimates Upw ard (Dow nw ard)
Total Direct Loan and Equity Investment Programs
Subsidy Cost (Income)

CPP

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)

(5,361)
-

(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)

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

Other Credit Programs
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.

In December 2009, the USG Parties and Citigroup
agreed to terminate the guarantee agreement.
At the beginning of fiscal year 2013, $800 million of
a TruPS-related receivable from the FDIC valued at
$967 million was on the OFS Balance Sheet. 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 fiscal year 2013.
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.
The AGP program was closed out in fiscal year 2013.
The following table details the changes in the
receivable account and the AGP subsidy cost during
fiscal year 2013:

Reco nciliat io n o f Asset Guarant ee Pro gram Receivable:
Fiscal Year
2014

(Dollars in Millions)

Balance, Beginning of Period

2013
- $

967

Subsidy Income for Modifications

Dividend Revenue

(200)

Proceeds from Sales in Excess of Cost

(894)

Net Interest Expense on Borrow ings from Fiscal Service and Financing Account Balance

(24)

Balance, End of Period, Before Reestimates and Modification
Subsidy Reestimates - Dow nw ard
Balance, End of Period

Reco nciliat io n o f Subsidy Co st (Inco me)
Subsidy Income for Modifications
Subsidy Reestimates - (Dow nw ard)
To t al Subsidy Co st (Inco me)

- $

- $
- $

(94)
(24)
(118)

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

FHA-Refinance Program
As discussed in Note 5, the OFS entered into a losssharing 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.
During fiscal year 2014, no new loans were
guaranteed by FHA under this program that
required a Treasury contribution.
During fiscal year 2013, $182 million of loans were
guaranteed by the FHA. As of September 30, 2014
and 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 and throughout
fiscal year 2014.

OFS’s maximum exposure related to FHA’s
guarantee totaled $34 million and $59 million at
September 30, 2014 and 2013, respectively. OFS’s
guarantee resulted in a liability of $6 million at
September 30, 2014 and a liability of $9 million at
September 30, 2013. 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 FHA
guaranteed loans. As of September 30, 2013,
$47,840 of claims had been paid by OFS under the
program. No additional claims were paid by OFS
during fiscal year 2014 under the program.
At September 30, 2014 and 2013, OFS’s obligation
for subsidy for potential new FHA guaranteed loans
under the program was $1.0 billion.
Budget subsidy rates for the program, entirely for
defaults, were set at 2.48 percent for loans
guaranteed in fiscal year 2013.
The program recorded a $3 million downward
reestimate, for each of the fiscal years 2014 and
2013, due to 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 2014 and 2013:

Reco nciliat io n o f FHA-Refinance Pro gram Liabilit y
Fiscal Year
2014

(Dollars in Millions)

Balance, Beginning of Period

2013
9 $

Subsidy Cost for Guaranties (Defaults)

Balance, End of Period, Before Reestimates

Subsidy Reestimates - Upw ard (Dow nw ard)
Balance, End of Period

Reco nciliat io n o f Subsidy Co st (Inco me)
Subsidy Cost for Guaranties (Defaults)
Subsidy Reestimates - Upw ard (Dow nw ard)
To t al Subsidy Co st (Inco me)

NOTES TO THE FINANCIAL STATEMENTS

(3)

- $
(3)
(3) $

5
(3)
2

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

NOTE 7. DUE TO THE GENERAL FUND
As of September 30, 2014, the OFS accrued $1.5
billion of downward reestimates payable to the
General Fund. As of September 30, 2013, the OFS

accrued $8.1 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, 2014 and 2013 were as follows:

As of September 30,
(Dollars in Millions)

2014

Beginning Balance, Principal Payable t o t he Fiscal Service
New Borrow ings
Repayments
Ending Balance, Principal Payable t o t he Fiscal Service

2013

11,949 $
749
(11,394)
1,304 $

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

Borrowings from the Fiscal Service by TARP program, outstanding as of September 30, 2014 and 2013, were
as follows:
As of September 30,
(Dollars in Millions)

Capital Purchase Program
CDCI and TALF
Public-Private Investment Program
Automotive Industry Financing Program
To t al Bo rro wings Out st anding

As of September 30, 2014, borrowings carried
remaining terms ranging from 2 to 27 years, with
interest rates from 2.5 percent to 3.8

2014
$

291
418
7
588
1,304

2013
$

1,210
551
305
9,883
11,949

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 percent.

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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 materially adverse effect on the OFS
financial statements, except for the pending legal
action described below which may have a materially
adverse impact on the financial statements
depending on the outcome of the case. Contingent
liabilities related to litigation are recorded in the
financial statements if and when losses are
determined to be probable and estimable.
Contingent liabilities are disclosed where the
conditions for liability recognition have not been met
and the likelihood of unfavorable outcome is more
than remote. If litigation losses are to be paid by the
Treasury Judgment Fund, the related cost is
allocated to the appropriate federal entity, which
records the cost and an offsetting financing source in
its financial statements.

Starr International Co., Inc. v. United States:
Plaintiffs’ principal class claim in this case, filed in
the U.S. Court of Federal Claims, arises out of the
receipt by the United States of a 79.9 percent equity
interest in AIG as part of the consideration for the
extension of an $85 billion, 2-year revolving credit
facility to AIG by the Federal Reserve Bank of New
York in September 2008 and prior to the passage of
the Emergency Economic Stabilization Act.
Plaintiffs claim that the transfer of the equity
interest, which was in the form of Series C preferred
stock held by a trust for the benefit of the United
States Treasury, was an illegal exaction under
Section 13(3) of the Federal Reserve Act or
constituted a taking of AIG shareholders’ property
for which just compensation is due under the Fifth
Amendment to the United States Constitution. In a

separate class claim, plaintiffs allege that an illegal
exaction, or taking for which just compensation is
due, occurred when the United States allegedly
caused AIG to conduct a reverse stock split in June
2009 without a separate class vote of the then
outstanding common shareholders. Plaintiffs seek
compensatory damages from the government,
including an amount related to the exchange by the
United States of Series E and F preferred shares,
purchased with TARP funds, for common shares of
AIG in January 2011, which common shareholders
allegedly could have blocked but for the reverse
stock split. The United States has denied all
liability. The Department of Justice (DOJ), which is
representing the United States Treasury and the
Board of Governors of the Federal Reserve System
in this lawsuit, is unable to determine the likelihood
of an unfavorable outcome or make an estimate of
potential loss at this time. In addition, if an
unfavorable outcome were to occur, OFS believes
that the settlement would be paid by the Treasury
Judgment Fund. Accordingly, if an unfavorable
outcome were deemed probable and measureable
and the related cost is allocated to OFS, then OFS
would record an imputed cost and offsetting
financing source in its financial statements.
In addition, the OFS pays for a portion of the
STARR litigation expenses incurred by DOJ based
on an Inter-Agency Agreement (IAA) between the
OFS and DOJ. Under the terms of the IAA, OFS
paid $747,766 to DOJ for expenses invoiced during
fiscal year 2014.
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 to promote domestic economic
growth and stability while continuing reforms of the
financial system. The OFS has determined that all
initiatives and programs under the TARP fall within
this strategic goal.

NOTES TO THE FINANCIAL STATEMENTS

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 DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

The OFS SNC for fiscal year 2014 includes $218
million of intragovernmental costs relating to
interest expense on borrowings from the Fiscal
Service and $29 million in intragovernmental
revenues relating to interest income on financing
account balances. 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.

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. 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 $56 million and $671 million
of subsidy allowance amortization for fiscal years
2014 and 2013, respectively.

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 fiscal year ended
September 30, 2014, the OFS’s total resources in
budgetary accounts were $8.1 billion and resources
in non-budgetary financing accounts, including
borrowing authority and spending authority from
collections of loan principal, liquidation of equity
investments, interest, dividends and fees were $9.1
billion. For the fiscal year ended September 30,
2013, the OFS’s total resources in budgetary
accounts were $22.4 billion and resources in nonbudgetary financing accounts were $15.6 billion.

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
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.

Borrowing Authority
The OFS is authorized to borrow from the Fiscal
Service to pay interest costs in excess of interest
income and to fund downward reestimates transfers
to the General Fund. For the fiscal year ended
September 30, 2014, the OFS had borrowing
authority available of $90 million, of the $839
million current year authority authorized. For the
fiscal year ended September 30, 2013, the OFS had
no borrowing authority available, of the $208 million
authorized, since the authority was used.
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.

Apportionment Categories of
Obligations Incurred: Direct versus
Reimbursable Obligations
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

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Undelivered Orders
Undelivered orders as of September 30, 2014 were
$24.5 billion in budgetary accounts and $0.1 billion
in non-budgetary financing accounts. Undelivered
orders as of September 30, 2013 were $29.1 billion in
budgetary accounts and $1.0 billion in nonbudgetary financing accounts.

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 President’s Budget for 2016, with the “Actual”
column completed for fiscal year 2014, 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 2015. It will be available from the
Government Printing Office.
The 2015 President’s Budget, with the “Actual”
column completed for the fiscal year ended
September 30, 2013, was published in March 2014,
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.

NOTES TO THE FINANCIAL STATEMENTS

THE DEPARTMENT OF THE TREASURY I 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, 2014 and 2013 follows:

Fiscal Year
(Dollars in Millions)

2014

2013

Resourc es Used t o Financ e Ac t ivit ies:
Budget ary Resourc es Obligat ed
Obligations Inc urred

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

8,797

14,879

(18,471)
(8,238)

Other Resourc es

(13,218)

(17,912)

Offsetting Rec eipts
Net Obligat ions

(48,668)
(47,007)

Tot al Resourc es Used t o Financ e Ac t ivit ies

(17,912)

(47,006)

Resourc es Used t o Financ e It ems Not Part of Net Cost of Operat ions:
Net Obligations in Direc t Loan, Equity Inv estment and Other Credit Programs Financ ing Funds

9,707

27,322

Change in Resourc es Obligated for Goods, S erv ic es and Benefits Ordered but not y et Prov ided

4,523

11,164

Resourc es that Fund Prior Period Expenses and Reestimates

8,138

8,957

22,368

47,443

4,456

437

Tot al Resourc es Used t o Financ e It ems Not Part of Net Cost of Operat ions
Tot al Resourc es Used t o Financ e t he Net Cost of Operat ions
Component s of Net Cost of ( Inc ome from) Operat ions t hat Will Not Require or Generat e
Resourc es in t he Current Period:
Ac c rued Net Downward Reestimates at Year-End

(1,486)

Other
Tot al Component s of Net Cost of ( Inc ome from) Operat ions t hat Will Not Require or
Generat e Resourc es in t he Current Period
Net Cost of ( Inc ome from) Operat ions

(8,139)

(1,485)
$

2, 971

(8,138)
$

( 7, 701)

NOTES TO THE FINANCIAL STATEMENTS

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

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, 2014
(Unaudited)
2014
Combined

Dollars in Millions

T ARP Programs

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

T ARP Administrative

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

BUDGETARY RESOURCES
Unobligated Balanc es Brought Forward, Oc tober 1
Rec ov eries of Prior-Year Unpaid Obligations

21,606
261

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

1,462
865

21,290
235

1,462
865

316

Unobligated Balanc e from Prior-Year Budget Authority , Net

(1,444)

(14,120)

Canc eled Authority

(1,444)
-

(14,024)

(96)

7,747

883

7,501

883

246

308

218

Borrowing Authority

839

Spending Authority from Offsetting Collec tions

7,394

Appropriations

TOTAL BUDGETARY RESOURCES (Not e 11)

8, 055

9, 116

7, 591

9, 116

464

295

8,502

205

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

558

7,500

246

7,760

Total Unobligated Balanc e

558

7,746

Unapportioned
TOTAL STATUS OF BUDGETARY RESOURCES

614

7,500

614

260

8, 055

29,406

9, 116

7, 590

993

29,221

9, 116

465

993

185

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

295

Gross Outlay s

8,502

205

(4,612)

Unpaid Obligat ions, End of Y ear

(4,390)

(8,503)

(222)

(261)

Rec ov eries of Prior-Year Unpaid Obligations

(8,503)
(865)

(235)

(865)

(26)

24,828

127

24,686

127

142

Unc ollec t ed Payment s from Federal Sourc es:
Unc ollec ted Pay ments Brought Forward, Oc tober 1

(226)

Change in Unc ollec ted Pay ments

197

142

Unc ollec t ed Payment s from Federal Sourc es, End of Y ear
Obligat ed Balanc e, Net , End of Y ear

24,828

(29)
98

24,686

(29)
98

OBLIGATED BALANCES
(Net of Unpaid Obligat ions and Unc ollec t ed Payment s Above)
Obligat ed Balanc e, Net , Brought Forw ard, Oc t ober 1

29, 406

767

29, 221

767

185

Obligat ed Balanc e, Net , End of Y ear

24, 828

24, 686

142

8,233

218

BUDGET AUTHORITY AND OUTLAY S, NET
Budget Authority , Gross

308

Ac tual Offsetting Collec tions
Change in Unc ollec ted Customer Pay ments from Federal Sourc es

BUDGET AUTHORITY , NET
Gross Outlay s

308

4,612

(17,541)

(9, 111) $
8,503

90
-

197

Ac tual Offsetting Collec tions

8,233
(17,541)

197

4,390

(9, 111) $
8,503

218
222

(17,541)

Net Outlay s

4,612

(9,038)

4,390

(9,038)

222

Distributed Offsetting Rec eipts

(8,238)

AGENCY OUTLAY S, NET

REQUIRED SUPPLEMENTARY INFORMATION

(3, 626) $

(9, 038)

(8,238)
$

(3, 848) $

(9, 038) $

222

THE DEPARTMENT OF THE TREASURY I 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, 2013
(Unaudited)
2013
Combined

Dollars in Millions

T ARP Programs

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

T ARP Administrative

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

BUDGETARY RESOURCES
Unobligated Balanc es Brought Forward, Oc tober 1
Rec ov eries of Prior-Year Unpaid Obligations

14,350
7,246

17,631
4,941

14,071

7,219

17,631
4,941

279

Borrowing Authority Withdrawn

(2,611)

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

(17,738)

Unobligated Balanc e from Prior-Year Budget Authority , Net

21,596

TOTAL BUDGETARY RESOURCES (Not e 11)

306

483

305

208

Spending Authority from Offsetting Collec tions

2,223

Borrowing Authority

21,290

788

Appropriations

2,223

13,131

22, 385

15, 562

21, 773

15, 562

612

779

14,100

483

14,100

296

STATUS OF BUDGETARY RESOURCES
Obligations Inc urred

Unobligated Balanc e:
Apportioned

TOTAL STATUS OF BUDGETARY RESOURCES

668

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 Obligat ions:
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)

Unpaid Obligat ions, End of Y ear

29,406

993

29,221

993

185

Unc ollec t ed Payment s from Federal Sourc es:
Unc ollec ted Pay ments Brought Forward, Oc tober 1

(349)

Change in Unc ollec ted Pay ments

123

185

Unc ollec t ed Payment s from Federal Sourc es, End of Y ear
Obligat ed Balanc e, Net , End of Y ear

29,406

(226)
767

29,221

(226)
767

OBLIGATED BALANCES
(Net of Unpaid Obligat ions and Unc ollec t ed Payment s Above)
Obligat ed Balanc e, Net , Brought Forw ard, Oc t ober 1

40, 548

5, 577

40, 384

5, 577

164

Obligat ed Balanc e, Net , End of Y ear

29, 406

767

29, 221

767

185

483

13,339

306

BUDGET AUTHORITY AND OUTLAY S, NET
Budget Authority , Gross

Ac tual Offsetting Collec tions

Gross Outlay s

788

4,675

(1)
4,674

Distributed Offsetting Rec eipts

(13,218)
$

123

Net Outlay s

13,339
(36,604)

Ac tual Offsetting Collec tions

AGENCY OUTLAY S, NET

(1)

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

789

(8, 544) $

(23, 142) $
14,092

(36,604)

123

483

4,427

305
248

(36,604)

(22,512)

4,427

(22,512)
-

$
$

247
-

(22, 512)

(13,218)
$

(8, 791) $

(22, 512) $

(1)

247

d Sup

(23, 142) $
14,092

(1)

REQUIRED SUPPLEMENTARY INFORMATION

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

OTHER INFORMATION

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

OTHER INFORMATION

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Part 3: Other Information (Unaudited)
Section A – Schedule of Spending
Office of Fina ncia l Sta bility - T rouble d Asse t R e lie f Progra m

SCHEDULE OF SPENDING
For the Ye a rs Ende d Se pte mbe r 30, 2014 a nd 2013
2014

Dollars in Millions

2013

Budgetary
Accounts

Nonbudgetary
Financing
Accounts

Budgetary
Accounts

WHAT IS AVAILABLE TO SPEND?
Total Resourc es per Statement of Budgetary Resourc es (SBR)
Less Amount Apportioned (not y et agreed to be spent)

9,116

22,385

15,562

(14)

(558)

(11)

(668)

(7,746)

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

8,055

(56)

(21,595)

(794)

295

8, 502

779

14, 100

HOW WAS THE AMOUNT SPENT?
Personnel Compensation
Personnel Benefits

Trav el and Transportation

Supplies and Materials

189

272

218

856

8,238

483

13,218

Other Serv ic es
Interest
Subsidies, inc luding Reestimates for Prev iously
Disbursed Loans and Inv estments Outstanding 1
AMOUNT AVAILABLE TO SPEND - OBLIGATIONS INCURRED PER SBR

295

8, 502

779

14, 100

114

8,456

505

14,074

TO WHOM WERE THE OBLIGATIONS MADE?
Federal Agenc ies and Entities
Non-Federal Companies - Freddie Mac /Fannie Mae for Housing

129

215

Non-Federal Companies - All Other

Non-Federal Indiv iduals

AMOUNT AVAILABLE TO SPEND - OBLIGATIONS INCURRED PER SBR

295

8, 502

779

14, 100

Subsidies obligated in nonbudgetary 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 transactions occur in the same fiscal year as the obligations.

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.
The section “How Was the Amount Spent”
presents obligations committed to in each
fiscal year for services received, supplies

OTHER INFORMATION

purchased, subsidies and program loans or
investments made, even if actual receipt of
services or goods has not yet occurred or
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.

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

Section B – IPIA (as amended by IPERA)
On July 22, 2010, President Obama signed
into law the Improper Payments Elimination
and Recovery Act (IPERA, Pub. L. 111-204).
IPERA amends the Improper Payments
Information Act (IPIA), generally repeals the
Recovery Auditing Act, and significantly
increases agency payment recapture efforts by
expanding the types of payments to be
reviewed and lowering the dollar threshold of
annual payments that requires agencies to
conduct payment recapture audit programs.
Agencies continue to be required to review
their programs and activities periodically to
identify those susceptible to significant
improper payments. OMB Circular No. A-123,

Management’s Responsibility for Internal
Control, Appendix C, “Requirements for

Effective Measurement and Remediation of
Improper Payments” (A-123, Appendix C),
amended April 14, 2011, defines “significant
improper payments” as gross annual improper
payments in a program exceeding both the
threshold of 1.5 percent and $10 million, or
exceeding $100 million regardless of the
improper payment percentage. A-123,
Appendix C, also requires agencies to review
all programs with annual payments of $1
million or more, if cost-effective.
OFS 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 2014 IPERA review per
Treasury-wide guidance and did not assess
any programs or activities as susceptible to
significant improper 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.
In fiscal year 2014, OFS concluded that a
payment recapture audit was not costeffective 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 other compliance activities to
corroborate risk assessment results, as well as
the Bureau of the Fiscal Service’s testing
results over administrative disbursements.
The Improper Payments Elimination and
Recovery Improvement Act of 2012 (IPERIA,
Pub. L. 112-248) was signed into law by the
President on January 10, 2013, and also
amends IPIA. It is important to note that
Section 5 of IPERIA, regarding the “Do Not
Pay” Initiative, is treated separately from
Circular No. A-136 reporting requirements.
The Bureau of the Fiscal Service partnered
with the Saint Louis and Kansas City Federal
Reserve Banks to operate the “Do Not Pay
Business Center” as part of a government
wide “Do Not Pay” solution. During fiscal
year 2013, OFS implemented the “Do Not
Pay” solution to monitor administrative
disbursements to ensure, to the extent
permitted by law, a thorough review of
available databases with relevant information
on eligibility occurs before the release of any
Federal funds. To date, the “Do Not Pay”
Business Center has not identified any
potential OFS improper payments.

OTHER INFORMATION

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Part 4: Appendices

APPENDIX A: TARP GLOSSARY

THE DEPARTMENT OF THE TREASURY I 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.

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).

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.
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.
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.
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
OFS that promotes economic revitalization
and community development.

Government-Sponsored Enterprises (GSEs):
Private corporations created by the U.S.
Government. Fannie Mae and Freddie Mac
are GSEs.

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.
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.
Mortgage-Backed Securities (MBS): A type of
ABS representing an interest in a pool of
similar mortgages bundled together by a
financial institution.
Mandatory Convertible Preferred (MCP):
Preferred stock that includes an option for the
holder to convert the preferred shares into a
fixed number of common shares, usually any
time after a predetermined date.

APPENDIX A: TARP GLOSSARY

AGENCY FINANCIAL REPORT | FISCAL YEAR 2014

Non-Agency Residential Mortgage-Backed
Securities: RMBS that are not guaranteed or
issued by Freddie Mac, Fannie Mae, any other
GSE, Ginnie Mae, or a U.S. federal
government agency.
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.
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.
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.
Residential Mortgage-Backed Securities
(RMBS): A financial instrument representing
an interest in a group of residential real estate
mortgages.
SBA: U.S. Small Business Administration.
SBA 7(a) Securities Purchase Program: A
TARP program under which OFS purchased

APPENDIX A: TARP GLOSSARY

securities backed by the guaranteed portions
of the SBA 7(a) loans.
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.
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.
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 stabilize the
financial system and help prevent a systemic
collapse.
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.
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

THE DEPARTMENT OF THE TREASURY I OFFICE OF FINANCIAL STABILITY

Appendix B: Abbreviations and Acronyms
ABS

Asset-Backed Securities

MBS

Mortgage-Backed Security

AGP

Asset Guarantee Program

MCP

Mandatory Convertible Preferred

AIFP

Automotive Industry Financing Program

MHA

Making Home Affordable Program

AIG

American International Group, Inc.

OFS

Office of Financial Stability

CAP

Capital Assistance Program

OMB

Office of Management and Budget

CDFI

Community Development Financial Institution

PPIF

Public-Private Investment Fund

CMBS

Commercial Mortgage-Backed Securities

PPIP

Public-Private Investment Program

CPP

Capital Purchase Program

QFI

Qualifying Financial Institution

CDCI

Community Development Capital Initiative

RMBS

Residential Mortgage-Backed

DIP

Debtor-In-Possession

EESA

Emergency Economic Stabilization Act of

Securities
SBR

Statement of Budgetary Resources

2008

SBLF

Small Business Lending Fund

FCRA

Federal Credit Reform Act of 1990

SCAP

Supervisory Capital Assessment

FHA

Federal Housing Administration

FRBNY Federal Reserve Bank of New York

Program
SIGTARP Special Inspector General for the
Troubled Asset Relief Program

GAO

Government Accountability Office

General Motors

GMAC

General Motors Acceptance Corporation

GSE

Government-Sponsored Enterprise

HAFA

Home Affordable Foreclosure Alternatives

HFA

Housing Finance Agency

TARP

Troubled Asset Relief Program

HHF

Hardest Hit Fund

TIP

Targeted Investment Program

HAMP

Home Affordable Modification Program

TruPS

Trust Preferred Securities

USDA

U. S. Department of Agriculture

SPV

Special Purpose Vehicle

TAIFF

Troubled Assets Insurance
Financing Fund

TALF

Term Asset-Backed Securities Loan
Facility

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

Additional References:
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 2014, 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 I OFFICE OF FINANCIAL STABILITY

APPENDIX B: ABBREVIATIONS AND ACRONYMS

Full text of Agency Financial Report : Fiscal Year 2014

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