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CITIZENS’ REPORT | FISCAL YEAR 2013

TABLE OF CONTENTS

CITIZENS’ REPORT | FISCAL YEAR 2013

Table of Contents
MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR FINANCIAL STABILITY ....................... v
About the Office of Financial Stability ..................................................................................................................... 1
Background ........................................................................................................................................................................ 1
OFS Organization Structure......................................................................................................................................... 1
OFS Operational Goals ................................................................................................................................................... 8
Operational Goal One: Complete the Wind-down of the Investment Programs.................................... 8
Capital Purchase Program.................................................................................................................................... 8
Targeted Investment Program ........................................................................................................................... 9
Asset Guarantee Program .................................................................................................................................... 9
Community Development Capital Initiative ................................................................................................. 9
Public Private Investment Program ............................................................................................................... 10
Term Asset-Backed Securities Loan Facility .............................................................................................. 10
Small Business Administration 7(a) Securities Purchase Program .................................................. 10
Automotive Industry Financing Program .................................................................................................... 11
American International Group (AIG) Investment Program ................................................................. 12
Operational Goal Two: Continue Helping Families in Need to Avoid Foreclosure ............................. 13
Operational Goal Three: Minimize Cost to Taxpayer ...................................................................................... 14
Operational Goal Four: Continue to Operate with the Highest Standards of Transparency,
Accountability, and Integrity .................................................................................................................................... 15
OFS Financial Performance ....................................................................................................................................... 18
WEBSITES .......................................................................................................................................... inside back cover

TABLE OF CONTENTS

iii

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR FINANCIAL STABILITY

CITIZENS’ REPORT | FISCAL YEAR 2013

MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR
FINANCIAL STABILITY
January 28, 2014
I am pleased to present the Office of Financial Stability’s (OFS) Citizen’s Report for the fiscal year
2013. This report describes our financial result and performance for the fifth year of the Troubled
Asset Relief Program (TARP). The Emergency Economic Stabilization Act (EESA) of 2008
established OFS within the Office of Domestic Finance at the Department of the 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.
In addition, OFS has made significant progress towards winding down TARP investments. As of
September 30, 2013, OFS had collected 96.2 percent of the $421.6 billion in program funds that were
disbursed under TARP, as well as an additional $17.5 billion from Treasury’s equity in AIG. Here is
where we stand concerning the four categories of TARP investment programs:

•

Banking Programs. OFS has collected a total of $273.4 billion (including $6.4 billion
collected in fiscal year 2013) for all TARP bank support programs through repayments, sales,
dividends, interest, and other income compared to $245.5 billion invested. As of September
30, 2013, $3.6 billion in banking program investments remained outstanding, primarily in
community banks, and OFS is continuing to wind-down these investments through
repurchases by banks, asset sales, and restructurings.

•

Credit Market Programs. OFS has substantially completed the wind-down of all of the
TARP credit market programs, including investments made under the 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 2013, OFS had
collected $23.5 billion as compared to $19.1 billion of disbursements under these programs.

•

Auto Industry Financing Program. As of September, 30 2013, OFS had collected $53.3
billion through sales, repayments, dividends, interest, and other income, compared to the
$79.7 billion in funds that were disbursed under the Automotive Industry Financing
Program (AIFP). Chrysler exited the program in July 2011 and OFS sold its remaining
General Motors (GM) shares in December 2013. In November 2013, OFS received additional
repayment of $5.9 billion from Ally Financial Inc. (Ally) under an agreement announced in
August and OFS sold approximately 410,000 common shares in a private placement for $3.0

MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR FINANCIAL STABILITY

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

billion in January 2014. OFS’ remaining AIFP holdings consist of approximately 572,000
shares of Ally common. As a result, OFS has recovered over 88% of the investment in Ally
Financial Inc. (Ally) through repayments, dividends, and proceeds in excess of costs. OFS is
actively seeking to wind-down the remaining investment in Ally.

•

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

While OFS carefully winds down the investment programs under TARP, we are continuing to
implement the TARP Housing Programs to help millions of struggling homeowners avoid foreclosure,
primarily through mortgage modifications and other forms of assistance. These programs (includes
government sponsored enterprise (GSE) and non-GSE) have also set new mortgage modification and
consumer protection standards which have helped to transform the mortgage servicing industry and
thereby help millions more families. On May 30, 2013, the Obama Administration extended the
application deadline for the Making Home Affordable Program through December 2015 in order to
provide struggling homeowners additional time to access sustainable mortgage relief.
The financial and performance data contained in this report are reliable and complete. For the fifth
consecutive year, OFS has earned unmodified opinions on its financial statements and its internal
control over financial reporting from the GAO. In 2013, OFS was also awarded its fourth consecutive
Certificate of Excellence in Accountability Reporting by the Association of Government Accountants.

Sincerely,

Timothy Bowler
Acting Assistant Secretary for Financial Stability

MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR FINANCIAL STABILITY

CITIZENS’ REPORT | FISCAL YEAR 2013

About the Office of Financial Stability
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.

Financial Agents, Office of the Chief Reporting
Officer, and Office of the Chief Compliance
Officer. A Chief Counsel’s Office reports to the
Assistant Secretary and to the Office of the
General Counsel in the Department of the
Treasury.
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.
The OFS organization chart follows:

Assistant Secretary for
Financial Stability

Office of the
Chief
Investment
Officer

Office of
Finance and
Operations

Office of the
Chief of
Home
Ownership
Preservation

Office of
Financial
Agents

Chief
Counsel

Office of the
Chief
Reporting
Officer

Office of the
Chief
Compliance
Officer

OFS Organization Structure
OFS is headed by the Assistant Secretary for
Financial Stability. Reporting to the Assistant
Secretary are six major organizations the: Office
of the Chief Investment Officer, Office of
Finance and Operations, Office of the Chief of
Home Ownership Preservation, Office of

ABOUT THE OFFICE OF FINANCIAL STABILITY

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 programs to help
stabilize the nation’s banking institutions. A
total of $245.5 billion was invested through
TARP bank support programs.

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

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

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 to prevent a loss of confidence in these
critical institutions. This could have resulted in
substantial disruption to financial markets,
threatened the financial strength of similarly
situated financial institutions and undermined
the overall economy.
OFS invested a total of $40.0 billion in two
institutions – Bank of America (BofA) and
Citigroup – under the TIP. These investments
were made in addition to those that the banks
received under the CPP. Similar to the CPP,
OFS invested in preferred stock and received
warrants to purchase common stock in each
institution.
The TIP investments provided for annual
dividends of eight percent, which was higher
than the initial CPP rate. The program also
imposed greater reporting requirements and
stricter 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.

ABOUT THE OFFICE OF FINANCIAL STABILITY

CITIZENS’ REPORT | FISCAL YEAR 2013

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

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

ABOUT THE OFFICE OF FINANCIAL STABILITY

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

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

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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

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.

Public-Private Investment Program

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

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

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

Small Business Administration 7(a)
Securities Purchase Program

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

ABOUT THE OFFICE OF FINANCIAL STABILITY

CITIZENS’ REPORT | FISCAL YEAR 2013

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

ABOUT THE OFFICE OF FINANCIAL STABILITY

financial system as a whole and firms were
trying to shore up their balance sheets by selling
risky assets, reducing exposure to other
financial institutions, and hoarding cash. At the
time, AIG was one of the most complex financial
firms in the world providing credit for other
financial products. When the financial crisis hit,
AIG had hundreds of billions of dollars in
commitments without the capital and liquid
assets to back them up. Millions of people
depended on AIG for their life savings and it had
a huge presence in many critical financial
markets, including municipal bonds. Therefore,
with AIG facing potentially fatal liquidity
problems and with the crisis threatening to
intensify and spread more broadly throughout
the economy, OFS and the Federal Reserve
provided assistance to AIG. This assistance was
provided because the consequences of a company
of AIG’s size and scope failing at that time, in
those circumstances, would have had farreaching and catastrophic effects for the
economy and for American families and
businesses.
During this time, the Federal Reserve and OFS
took a series of steps to prevent AIG’s disorderly
failure and to mitigate systemic risks. The
initial assistance to AIG was provided by the
FRBNY before the passage of EESA and the
creation of TARP. After EESA became law,
OFS and the FRBNY continued to work together
to address the challenges posed by AIG. In 2008
and 2009, OFS funds were used to provide
further support to AIG. In fiscal year 2011,
OFS, the FRBNY, the trustees of the AIG Credit
Facility Trust (the Trust)1 and AIG completed a
restructuring of the assistance provided by OFS
and the FRBNY. A series of integrated
transactions and corporate actions were
executed to accelerate the repayment of U.S.
taxpayer funds and to promote AIG’s transition

The independent trust established to manage the
Department of the Treasury’s beneficial interest in
Series C preferred AIG shares.
1

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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.

Making Home Affordable (MHA)
In early 2009, OFS launched the Making Home
Affordable® Program (MHA) to help struggling
homeowners avoid foreclosure and stabilize the
housing market. MHA is only one part of the
Administration’s broader efforts to strengthen
the housing market. Since its inception, MHA
has helped homeowners avoid foreclosure by
providing a variety of solutions to modify or
refinance their mortgages, get temporary
forbearance if they are unemployed, or
transition out of homeownership through a short
sale or a deed-in-lieu of foreclosure. OFS has
committed $29.9 billion under the MHA
program.
MHA is aimed at helping homeowners who are
experiencing financial hardships to remain in
their homes until their financial position
improves or they relocate to a more sustainable
living situation. In most cases, this means
making their monthly mortgage payments more
affordable and sustaining those new mortgage
terms over time so homeowners can avoid the
pain and substantial cost of foreclosure. At the
same time, MHA protects the interests of

taxpayers by disbursing funds only when
transactions are completed and only as long as
those contracts remain in place. Therefore, funds
will be disbursed over many years.
The cornerstone of MHA is the Home Affordable
Modification Program (HAMP), which provides
eligible homeowners the opportunity to reduce
their monthly mortgage payments to more
affordable levels. OFS also introduced
additional programs under MHA to help
homeowners who are unemployed, ―underwater‖
on their loan (those who owe more on their home
than it is currently worth), or are struggling
with a second lien. It also includes options for
homeowners who would like to transition to a
more affordable living situation through a short
sale or deed-in-lieu of foreclosure. In early 2012,
the Administration announced important
enhancements to MHA that expanded the pool of
eligible borrowers. Extending the reach of
HAMP will assist a broader pool of struggling
homeowners, offer support for tenants at risk of
displacement due to foreclosure, and provide
more robust relief to those who participate. On
May 30, 2013, the Administration extended the
application deadline for MHA programs to
December 31, 2015. Extending the program for
two years will benefit many additional families
while maintaining clear standards and
accountability for the mortgage industry. Taken
together, these enhancements will help the
housing market recover faster from an
unprecedented crisis.
In addition to HAMP, MHA includes several
additional programs to help homeowners
refinance or address specific types of mortgages,
in conjunction with the Federal Housing
Administration (FHA), the United States
Department of Agriculture (USDA), and the
Department of Veterans Affairs (VA).

ABOUT THE OFFICE OF FINANCIAL STABILITY

CITIZENS’ REPORT | FISCAL YEAR 2013

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

ABOUT THE OFFICE OF FINANCIAL STABILITY

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

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

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

billion in CPP repayments/sales, along with
$12.0 billion in dividends and interest, and $14.7
billion in gains associated from warrant and
common stock sales totaling $224.7 billion. As of
September 30, 2013, $3.1 billion in CPP gross
investments remained outstanding, including 24
institutions that are in bankruptcy or
receivership, representing an aggregate
investment of $771 million that is currently not
collectible.
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.
OFS received preferred stock or debt in each
bank in which it made an investment, as well as
warrants. Under the terms of the CPP,
participating financial institutions may repay
the funds they received at any time, so long as
they have the approval of their regulators. OFS
cannot demand repayment of CPP preferred
stock, nor is OFS’s approval required for
financial institutions to repay.
OFS announced a three-pronged exit strategy for
the program on May 3, 2012. That strategy
includes waiting for those banks that are
capable of repaying at par, selling banking
investments to private investors through
auctions in cases where the bank is not expected
to be able to repay in the near future, and, in a
limited number of cases, restructuring
investments. Throughout fiscal year 2013, OFS
continued to implement that exit strategy by
periodically selling preferred stock and
subordinated debt in CPP participants through
both public and private auctions. OFS held 14
auctions with combined proceeds of $1.5 billion
during fiscal year 2013 compared to 6 auctions
with $1.3 billion in proceeds in fiscal year 2012.

OFS OPERATIONAL GOALS

CITIZENS’ REPORT | FISCAL YEAR 2013

During fiscal year 2013 and 2012, 173 and 96
investments were repaid or sold for a total of
$4.8 billion and $8.2 billion, respectively.
Another component of OFS’s exit strategy for the
CPP is to restructure certain investments in
limited cases when the terms result in the best
return for taxpayers. This is typically done in
connection with a merger or the bank’s plan to
raise new capital and is generally proposed by
the bank. OFS agrees to receive cash (sometimes
at a discount to the original par value of the
investment) or other securities, which can be
more easily sold.
Under the CPP, OFS 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. As
of September 30, 2013, OFS has collected $7.9
billion in net proceeds from the sale of warrants
since inception. OFS periodically releases a
Warrant Disposition Report that provides detail
about its sale of warrants. These reports can be
found at:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Warrant-DispositionReports.aspx
Additional information on the CPP, including
details on the programs purpose, overview, and
status can be found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/cap/Pages/default.aspx

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

OFS OPERATIONAL GOALS

fiscal year 2010 for $1.2 billion and the
Citigroup warrant in fiscal year 2011 for $190
million. Additional information on TIP,
including details on the programs purpose,
overview, and status can be found at the
following website:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/tip/Pages/default.aspx

Asset Guarantee Program
As of September 30, 2013, OFS has fully wound
down the AGP and received more than $4.1
billion in proceeds from the AGP without
disbursing any claim payments. Additional
information on the AGP, including details on the
programs purpose, overview, and status can be
found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/agp/Pages/default.aspx

Community Development Capital Initiative
Unlike the CPP, OFS did not take substantial
actions during fiscal year 2013 to wind-down the
CDCI because of the unique circumstances
facing participating institutions. In particular,
many CDCI participants lack the same access to
capital markets that CPP institutions have,
making it more challenging for them to repay
their investments.
OFS completed funding through this program in
September 2010 with a total investment amount
of $570 million for 84 institutions. Of this
amount, $363 million (nearly $356 million from
principal and nearly $8 million from warrants)
represented exchanges by 28 CPP institutions
converting into the CDCI. During fiscal years
2013 and 2012, OFS collected a total of $97
million and $14 million, respectively, in
repayments, dividends and interest from
institutions in the CDCI program. As of
September 30, 2013, $475 million in CDCI
investments remained outstanding.

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

OFS will continue to closely monitor the
performance of the CDCI and make decisions
regarding the program’s wind-down at a later
date. Additional information on CDCI, including
details on the program’s purpose, overview, and
status can be found at the following website:
http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/cdci/Pages/default.aspx

Credit Market Programs

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

Public Private Investment Program
During fiscal year 2013, OFS completed the
wind-down of the PPIP. During fiscal year 2013
and 2012, 6 and 2 PPIFs wound down, repaying
$5.7 billion and $5.6 billion in debt and $4.1
billion and $1.7 billion in equity capital invested
by OFS, respectively. In addition, during fiscal
years 2013 and 2012, OFS received $271 million
and $1.4 billion in interest and investment
income and $1.2 billion and $223 million in net
proceeds in excess of costs, respectively from
these PPIFs. The final outstanding equity
repayment was made in June 2013. As of
September 30, 2013, no debt or equity
investments are outstanding.
The latest PPIP Quarterly Report includes a
summary of PPIP capital activity, portfolio
holdings and current pricing, and program and
fund performance through September 30, 2013.
OFS has published 16 quarterly reports on PPIP
to date. These reports 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. OFS’s commitment was later reduced to
$4.3 billion in July 2010 after the program
closed to new lending. In June 2012, the Federal
Reserve Board and OFS agreed that it was
appropriate to further reduce the credit
protection OFS provides the TALF, LLC to $1.4
billion from $4.3 billion as the underlying TALF
loan portfolio decreased through scheduled and
voluntary payments. During 2013 this amount
was further reduced to $100 million – the initial
loan amount disbursed to fund the TALF, LLC.
During fiscal year 2013, OFS’s original
disbursed investment through the program was
fully repaid with interest. As of September 30,
2013, the balance of outstanding TALF loans
provided by FRBNY had declined to $101 million
from $1.5 billion on September 30, 2012, due to
scheduled and voluntary prepayments by
borrowers. All loans that have not been repaidin-full are current in their payments of principal
and interest and are fully collateralized by the
residual balance held by the TALF, LLC. As of
September 30, 2013, accumulated income earned
from investments in TALF, LLC totaled $583
million, all of which occurred during fiscal year
2013.
Additional information on TALF, including
details on the programs 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

OFS OPERATIONAL GOALS

CITIZENS’ REPORT | FISCAL YEAR 2013

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

Automotive Industry Financing Program
OFS made substantial progress in the winddown of the AIFP during fiscal year 2013. In
total, OFS disbursed $79.7 billion in loans and
equity investments to the auto industry through
the AIFP. As of September 30, 2013, OFS has
collected $53.3 billion through sales,
repayments, dividends and interest under this
program.
In December 2012, OFS announced its intent to
fully exit its investment in GM within the next
12-15 months. Concurrently with that
announcement, GM purchased 200 million
shares of GM common stock from OFS, for
proceeds of $5.5 billion. In early 2013, OFS
commenced the disposition of its remaining 300
million common shares of GM common stock
through a series of pre-arranged written trading
plans. In June 2013, OFS sold an additional 30
million shares of GM common stock in an
underwritten sale in connection with the
inclusion of GM common stock in the S&P 500
index for proceeds of $1.0 billion. The total
amount collected for fiscal year 2013 was $12.0
billion. As of September 30, 2013, 101 million
common shares remained outstanding valued at
$3.6 billion. OFS completed the disposition of all
remaining shares in December 2013.

invested through GM). As of September 30,
2013, OFS’s outstanding investment in Ally
stood at $14.6 billion. Ally made substantial
progress in completing the two strategic
initiatives OFS previously said were critical to
maximize recovery of the investment – the
Chapter 11 proceeding of Ally’s mortgage
subsidiary, Residential Capital LLC (―ResCap‖),
to address Ally’s legacy mortgage liabilities and
the sale of its international auto finance
operations. During fiscal year 2013, Ally,
ResCap, and ResCap’s major creditors reached a
settlement agreement regarding certain claims
against Ally. The bankruptcy court approved
this agreement and ResCap's plan of
reorganization in December 2013. Ally also sold
or entered into agreements to sell all of its
international auto finance operations for a total
of $9.2 billion.
On August 19, 2013, Ally entered into private
placement agreements with investors for Ally
common stock at an aggregate price of $1.0
billion (later increased to $1.3 billion in
November 2013). Concurrently, Ally entered into
agreements with OFS to repurchase all of the
outstanding MCP stock and terminate the
MCP’s Share Adjustment Right (SAR), which
provided OFS with the right to receive
additional common stock of Ally under certain
circumstances if certain events occurred prior to
December 30, 2016. Ally repurchased all of its
MCP stock from OFS for $5.2 billion in
November 2013. In addition, OFS received an
additional $725 million for the elimination of the
SAR. OFS is actively seeking to wind-down the
remaining investment in Ally, which represents
approximately 63 percent of Ally’s common stock
after Ally’s private placement settled in
November 2013.
Additional information on the AIFP, including
details on the programs purpose, overview, and
status can be found at the following website:

OFS invested $17.2 billion in Ally Financial
(Ally) under TARP (includes $884 million

OFS OPERATIONAL GOALS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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. During the financial crisis,
OFS’s and the FRBNY’s peak support for AIG
totaled $182.3 billion. That included $69.8
billion that OFS committed and $112.5 billion
committed by the FRBNY, including $22.1
billion of these commitments which were later
cancelled. As a result of the combined efforts of
AIG, OFS, and the Federal Reserve, $22.7 billion
in excess of the total of funds disbursed has been
recovered through sales and other income.
In fiscal year 2011, Treasury, including OFS, the
FRBNY, the trustees of the AIG Facility Trust
(Trust)2 and AIG completed a restructuring of
government investments in AIG. As part of the
restructuring, Treasury received 1.7 billion AIG
shares (1.1 billion TARP shares and 563 million
additional Treasury shares from the trust
established by the FRBNY for the benefit of
Treasury). Following the restructuring, OFS
managed both the TARP and additional
Treasury shares and sold them on a pro-rata
basis.
During fiscal year 2012, AIG completed the
repayment of OFS’s preferred interests in the
AIG SPVs for proceeds of $9.6 billion. In
addition, OFS conducted four offerings that sold
a total of 1.2 billion shares of AIG common stock
(including 806 million TARP shares) at prices
that ranged from $29.00 per share to $32.50 per
share. Total proceeds from these sales
amounted to $38.2 billion, consisting of $25.2
billion in proceeds to OFS and additional
proceeds to the Treasury for the additional
Treasury shares of $13.0 billion. The proceeds

to OFS from such common stock sales were $9.9
billion less than cost.
During fiscal year 2013, OFS sold its and
Treasury’s remaining 234 million shares of AIG
common stock in two underwritten public
offerings for aggregate proceeds of
approximately $7.6 billion. The proceeds from
these sales consisted of $5.0 billion to OFS and
additional proceeds to the Treasury for
additional Treasury shares of $2.6 billion. On
March 1, 2013, AIG repurchased warrants
issued to OFS in 2008 and 2009 for
approximately $25 million. OFS disbursed a
total of $67.8 billion to AIG, and following this
sale, OFS’s cumulative net proceeds from
repayments, sales, dividends, interest, and other
income related to AIG assets totaled $55.3
billion, and OFS has no residual interest in AIG.
OFS sold all the TARP and additional Treasury
shares at an average price of $31.18 per share.
Because the additional Treasury shares came
from the trust, the additional Treasury shares
were provided to Treasury at no cost and are not
included in the OFS financial statements. The
TARP shares had a cost basis of $43.53 per
share. However, the figure of $28.73 per share
was often referred to as Treasury’s ―break-even‖
price for AIG common stock sales in order for
Treasury to recover the TARP AIG investment
because that number averages the cost over the
TARP shares and the additional Treasury
shares. Thus, the average price realized was in
excess of that break-even price. While TARP
recovered less than its total investment, this was
offset by the proceeds from the additional
Treasury shares of AIG, resulting in overall
proceeds exceeding disbursements for Treasury.

The independent trust established to manage the
Treasury’s beneficial interest in preferred AIG shares
from the FRBNY.
2

OFS OPERATIONAL GOALS

CITIZENS’ REPORT | FISCAL YEAR 2013

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 eligible homeowners as possible. As of
September 30, 2013, 91 non-GSE servicers are
participating in MHA. As of September 30,
2013, OFS has commitments to fund up to $29.9
billion in MHA payments and has disbursed $6.5
billion since inception.
OFS publishes quarterly assessments of servicer
performance containing data on compliance with
program guidelines as well as program results
metrics. OFS believes that these assessments
have set the standard for transparency about
mortgage servicer efforts to assist homeowners
and encourage servicers to improve processes
and performance for foreclosure prevention
activities.
MHA performance highlights for fiscal year 2013
can be found at:

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

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

OFS OPERATIONAL GOALS

reduced monthly mortgage payments that are
affordable and sustainable over the long-term.
As of September 30, 2013, approximately 1.3
million homeowners have received permanent
modifications through HAMP.3 This includes
modifications on both non-Government
Sponsored Enterprise (GSE) loans (for which the
cost is paid by TARP) and GSE loans (for which
the cost is paid by the GSEs). Homeowners
participating in HAMP have collectively
experienced nearly a 40 percent median
reduction in their mortgage payments—
representing more than $546 per month. MHA
has also encouraged the mortgage industry to
adopt similar programs that have helped
millions more at no cost to taxpayers by
establishing standards and best practices for
loss mitigation evaluations. As of September 30,
2013, homeowners in HAMP have had their
principal reduced by an estimated $22.3 billion.
On May 30, 2013, the Administration extended
the application deadline for MHA programs
through December 2015 to provide struggling
homeowners additional time to access
sustainable mortgage relief, and to align the end
dates for key assistance programs. OFS and the
U.S. Department of Housing and Urban
Development (HUD) announced that the new
deadline was determined in coordination with
the Federal Housing Finance Agency (FHFA) to
align with extended deadlines for the Home
Affordable Refinance Program (HARP) and the
Streamlined Modification Initiative for
homeowners with loans owned or guaranteed by
Fannie Mae and Freddie Mac.

Housing Finance Agency Innovation Fund
for the Hardest Hit Housing Markets
(Hardest Hit Fund)
In addition to MHA, OFS operates the Hardest
Hit Fund, which allows participating HFAs in
the nation’s hardest hit housing and
3

667,093 of these modifications were OFS funded.

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

unemployment markets to design innovative,
locally-targeted foreclosure prevention
programs. As of September 30, 2013, all 19 of
the participating HFAs are fully operational and
have created extensive infrastructures to
operate these programs, including selecting and
training networks of housing counselors to assist
with applications, creating homeowner portals to
aid homeowners in applying for assistance, and
hiring underwriters and other staff to review
and approve applications. The five largest
servicers (Bank of America, JPMorgan Chase,
Wells Fargo, Citibank, and GMAC) are currently
participating in programs in all 19 jurisdictions,
primarily through mortgage payment assistance
and mortgage loan reinstatement assistance.
As of September 30, 2013, the 19 HFAs have
collectively drawn approximately $2.9 billion
(38.3 percent) of the $7.6 billion allocated under
the program. For fiscal years 2013 and 2012,
this program has disbursed $1.4 billion and $861
million, respectively. Each state draws down
funds as they are needed, but must have no
more than five percent of their allocation on
hand before they can draw down additional
funds. States have until December 31, 2017, to
enter into agreements with borrowers.
Each HFA submits a quarterly report on the
progress of its program. These reports include
the states’ performance on metrics set by OFS on
various aspects of their programs. Direct links
to each state’s most recent performance report
can be found at:
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/Pages/ProgramDocuments.aspx.
Additional information on the Hardest Hit Fund,
including details on the program’s purpose,
overview, and status can be found at the
following website:

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

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

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

OFS OPERATIONAL GOALS

CITIZENS’ REPORT | FISCAL YEAR 2013

OFS’s exit strategies for TARP investment
programs vary for each investment and are
subject to market conditions. In disposing of
TARP investments, 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.
Utilizing auctions promotes competition and
produces prices that are market-driven.

Risk Assessment

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

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

OFS OPERATIONAL GOALS

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 ensure that servicers’
obligations under MHA requirements are being
met. In fiscal year 2011, OFS began publishing
quarterly assessments of the largest servicers
comprising approximately 89% of the HAMP
mortgage servicing market and continued
publishing these quarterly assessments
throughout fiscal year 2013. These assessments
have helped drive the industry to improve its
practices.

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 on the
Financial Stability section of the Treasury.gov
website, which can be found at:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx
These reports include:

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY












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 monthly report on Making Home
Affordable;
A report of each transaction (such as an
investment or repayment) within two
business days of each transaction;
A quarterly report on the Hardest Hit
Fund;
A quarterly report on PPIP that provides
detailed information on the funds, their
investments, and returns. It is typically
released within one month after the end
of each quarter; and
A semi-annual report on warrant
dispositions.

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

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Annual-AgencyFinancial-Reports.aspx
In its five years of operation, TARP’s financial
statements have received five unmodified audit
opinions from its auditor, the GAO. OFS also
received a Certificate of Excellence in
Accountability Reporting (CEAR) from the
Association of Government Accountants for
fiscal years 2012, 2011, 2010 and the period
ending September 30, 2009.

TARP Retrospective Reports and the TARP
Tracker
In March 2013, OFS published the Troubled

Asset Relief Program Four Year Retrospective
Report - An Update on The Wind-Down of
TARP. This serves as an update to OFS’s TARP
Three-Year Anniversary report, which was
published in October 2011. In October 2010,
OFS published the TARP Two Year
Retrospective, which contains a comprehensive
history of each TARP program. These reports
include information on TARP programs and the
effects of TARP and additional emergency
measures taken by the federal government to
stabilize the financial system following the 2008
crisis.
In addition, during fiscal year 2013, OFS
launched an expanded version of its existing
TARP Tracker, which is an online, interactive
tool that allows users to track the flow of TARP
funds in greater detail over the lifetime of each
individual TARP investment area. The expanded
capability allows users to view each investment
area separately to get a clearer sense of what
has occurred in a particular program, including
a scroll of events, major transactions, and
legislative actions that have impacted the
program.
Readers are invited to refer to these documents
at: http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx

OFS OPERATIONAL GOALS

CITIZENS’ REPORT | FISCAL YEAR 2013

Oversight by Four Separate Agencies
Congress also established four avenues of
oversight for TARP:





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

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.

Congressional Hearings and Testimony

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

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

OFS OPERATIONAL GOALS

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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

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

OFS FINANCIAL PERFORMANCE

CITIZENS’ REPORT | FISCAL YEAR 2013

Table 1: TARP Summary
From TARP Inception through September 30, 2013
(Dollars in billions)
Purchase Price
or Guarantee
Amounts

Investment
Sales and
Repayments

Total $
Disbursed

Write-offs
and
3
Losses

Received
from
Investments

Outstanding
4
Balance

Bank Support Programs
6

$ (3.9)

$ 3.1

$ 26.8

40.0

(40.0)

4.4

5.0

4.1

0.6

(0.1)

0.5

19.6

18.6

(18.6)

3.8

Term Asset-Backed Securities
Loan Facility

0.1

(0.1)

0.6

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

0.4

(0.4)

79.7

(47.1)

(12.7)

19.9

6.2

67.8

(54.3)

(13.5)

1.0

418.1

412.1

(358.5)

(30.1)

23.5

46.9

9.5

N/A

$ 204.9

40.0

Asset Guarantee Program
Community Development
Capital Initiative

Capital Purchase Program

Targeted Investment Program

$ (197.9)

Credit Market Programs
Public-Private Investment
Program

American International Group
2
Investment Program
Sub-total for Investment
Programs
Treasury Housing Programs
under TARP

38.5

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

OFS FINANCIAL PERFORMANCE

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

Most TARP funds were used to make
investments in preferred stock or to make loans.
OFS has generally received dividends on the
preferred stock and interest payments on the
loans from the institutions participating in
TARP programs. These payments represent
additional proceeds received on OFS’s TARP
investments. From inception through
September 30, 2013 OFS received a total of
$24.2 billion in dividends and interest.
OFS has conducted several sales of its
investments in banking institutions as part of its
exit strategy for winding down TARP. OFS plans
to continue to sell its investments in banks that
are not expected to repay OFS in the foreseeable
future. These sales are being conducted over
time and in stages and include both common and
preferred stock and debentures. During fiscal
years 2013 and 2012, OFS sold its investments
in 113 and 40 banks for combined proceeds of
$1.5 billion and $1.3 billion, respectively,
through individual public and private auctions.
These auctions resulted in net proceeds less
than cost of $455 million and $180 million for
those investments, respectively.
OFS also received warrants in connection with
most of its investments, which provides an
opportunity for OFS on behalf of taxpayers to
realize additional proceeds on investments.
Since the program’s inception, through
September 30, 2013, OFS has received $9.5
billion in gross proceeds from the disposition of
warrants associated with 204 CPP investments,
both TIP investments, AGP, and AIG, consisting

of (i) $4.0 billion from issuer repurchases at
agreed upon values and (ii) $5.5 billion from
auctions. TARP’s Warrant Disposition Report is
posted on the OFS website at the following link:
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Warrant-DispositionReports.aspx.

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

OFS FINANCIAL PERFORMANCE

CITIZENS’ REPORT | FISCAL YEAR 2013

Table 2: Summary of TARP Direct Loans and Equity Investments
(Dollars in billions)
Estimated
Outstanding
Value of
Balance as
Investment
of
as of
September
September
1
Program
30, 2013
30, 2013
Bank Support Programs
Capital Purchase Program
$ 3.1
$ 1.8
Community Development
0.5
0.4
Capital Initiative
Credit Market Programs
Public-Private Investment
0.0
0.0
Program
Term Asset-Backed
0.0
0.1
Securities Loan Facility

Other Programs
Automotive Industry
Financing Program
American International
Group Investment
Program
Total
1
Before subsidy cost allowance.

Estimated
Value of
Investment
as of
September
30, 2012

$ 8.7

$ 5.7

0.6

0.4

9.8

10.8

0.1

0.7

19.9

15.6

37.2

17.5

0.0

6.7

5.1

$ 23.5

$ 17.9

$ 63.1

$ 40.2

The ultimate cost of TARP will not be known for
some time, but it is not expected to change
significantly from costs reflected in table 3. The
largest remaining driver in cost is the Treasury

OFS FINANCIAL PERFORMANCE

Outstanding
Balance as
of
September
1
30, 2012

Hosing Programs Under Tarp. Actual usage of
the program will greatly depended on financial
conditions of homeowners going forward.

THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

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

Table 3: Estimated Lifetime TARP Costs (Income)
(Dollars in billions)
Program
Bank Support Programs
Capital Purchase Program
Targeted Investment Program
2
Asset Guarantee Program
Community Development Capital
Initiative
Credit Market Programs
Public-Private Investment Program
Term Asset-Backed Securities Loan
Facility
SBA 7(a) Securities Purchase Program

This table assumes that most disbursements for
Treasury housing programs under TARP are
completed, and adhere to general government
budgeting guidance. 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.
The cost amounts in Table 3 are based on
assumptions regarding future events, which are
inherently uncertain.

2009

Estimated Lifetime Cost (Income) as of September 30
2010
2011
2012

2013

$ ( 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)

0.4

0.3

0.2

0.1

1.4

( 0.7)

( 2.4)

( 2.7)

( 0.3)

( 0.4)

( 0.5)

( 0.6)

N/A

---

Other Programs
Automotive Industry Financing
34.5
14.7
23.6
24.3
14.7
Program
American International Group
56.8
36.9
24.3
15.3
15.2
3
Investment Program
Subtotal
74.1
32.1
24.6
14.1
2.6
Treasury Housing Programs under
50.0
45.6
45.6
45.6
37.7
4
TARP
Total
$ 124.1
$ 77.7
$ 70.2
$ 59.7
$ 40.3
1
Estimated program costs (+) or savings (in parentheses) over the life of the program, including interest on re-estimates
and excluding administrative costs.
2
Prior to the termination of the guarantee agreement, OFS guaranteed up to $5.0 billion of potential losses on a $301.0
billion portfolio of loans.
3
The amounts for AIG reflect only the operations of TARP and do not reflect proceeds received from the sale of shares of
AIG common stock held by Treasury outside of TARP (additional Treasury shares). For further details, see the discussion of
the American International Group Investment Program, beginning on page 5.
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.

OFS FINANCIAL PERFORMANCE

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 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

Full text of Citizens' Report on the Troubled Asset Relief Program (TARP) : Summary of Performance and Financial Results : Fiscal Year 2013

FRASER