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CONGRESSIONAL OVERSIGHT PANEL

OCTOBER OVERSIGHT REPORT *

EXAMINING TREASURY’S USE OF
FINANCIAL CRISIS CONTRACTING
AUTHORITY

OCTOBER 14, 2010.—Ordered to be printed

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* Submitted under Section 125(b)(1) of Title 1 of the Emergency Economic
Stabilization Act of 2008, Pub. L. No. 110–343

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CONGRESSIONAL OVERSIGHT PANEL OCTOBER OVERSIGHT REPORT

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1

CONGRESSIONAL OVERSIGHT PANEL

OCTOBER OVERSIGHT REPORT *

EXAMINING TREASURY’S USE OF
FINANCIAL CRISIS CONTRACTING
AUTHORITY

OCTOBER 14, 2010.—Ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

61–540

:

2010

For sale by the Superintendent of Documents, U.S. Government Printing Office,
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* Submitted under Section 125(b)(1) of Title 1 of the Emergency Economic
Stabilization Act of 2008, Pub. L. No. 110–343

CONGRESSIONAL OVERSIGHT PANEL
PANEL MEMBERS
SEN. TED KAUFMAN, Chair
RICHARD H. NEIMAN
DAMON SILVERS
J. MARK MCWATTERS

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KENNETH TROSKE

(II)

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CONTENTS

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Page

Executive Summary .................................................................................................
Section One:
A. Background ..................................................................................................
B. Provisions that Govern TARP Contracts and Agreements ......................
1. EESA ......................................................................................................
2. Federal Acquisition Regulation ............................................................
3. Interim Final Rule on TARP Conflicts of Interest .............................
4. Treasury’s Internal Policies ..................................................................
5. Recommendations by Oversight Bodies ..............................................
C. How Treasury Decided What Functions to Outsource .............................
1. In-house vs. Outsourcing Determinations ...........................................
2. Distinctions Between Financial Agency and Contracting Arrangements ......................................................................................................
3. Additional Factors Affecting Initial Determinations ..........................
4. Unique Backdrop Weighed Heavily on Determinations ....................
D. Description of Contracts and Agreements .................................................
1. Procurement Contracts .........................................................................
2. Financial Agency Agreements ..............................................................
E. Evaluation of Treasury’s Contracting and Agreement Procedures and
Process ...........................................................................................................
1. Compliance with Legal Obligations .....................................................
2. Compliance with Treasury’s Internal Controls ...................................
3. Evaluation of How Treasury Selects Contractors and Agents ..........
4. Evaluation of Treasury’s Post-Award Management of Contracts
and Agreements .....................................................................................
F. Evaluation of Small Business Arrangements ............................................
G. Evaluation of Transparency and Accountability .......................................
1. Transparency .........................................................................................
2. Accountability ........................................................................................
H. Discussion of Conflicts of Interest ..............................................................
1. Treasury Gives Preferential Treatment to a Retained Entity ..........
2. Retained Entity Serves Its Own Interest and Not the Public Interest ............................................................................................................
3. Retained Entity Serves its Clients’ Interest and Not the Public
Interest ...................................................................................................
4. Retained Entity Uses Nonpublic Information to Benefit Itself or
its Clients ...............................................................................................
5. Does the IFR Alleviate Conflicts of Interest? .....................................
I. Activities of Other Oversight Bodies ...........................................................
J. Conclusion and Recommendations ..............................................................
Annex I: Fannie Mae and Freddie Mac: A Case Study ........................................
A. Role of Fannie Mae in HAMP .....................................................................
B. Role of Freddie Mac in HAMP ....................................................................
C. Analysis of Treasury’s Selection of Fannie Mae and Freddie Mac ..........
D. Discussion of Conflicts of Interest ..............................................................
(III)

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Annex I—Continued
E. Evaluation of Small Business Contracting ................................................
F. Evaluation of Treasury’s Monitoring ..........................................................
G. Performance Assessment Made Challenging by Insufficient Reporting .
H. Evaluation of Transparency .......................................................................
I. Conclusion .....................................................................................................
Annex II: Tables ......................................................................................................
Section Two: TARP Updates Since Last Report ....................................................
Section Three: Oversight Activities ........................................................................
Section Four: About the Congressional Oversight Panel .....................................

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OCTOBER OVERSIGHT REPORT

OCTOBER 14, 2010.—Ordered to be printed

EXECUTIVE SUMMARY *

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The Troubled Asset Relief Program (TARP) is a public program
in design and purpose: created by Congress, paid for by taxpayers,
and intended to stabilize the American economy. Yet private companies today perform many of the TARP’s most critical functions,
operating under 96 different contracts and agreements worth a
total of $436.7 million. These private businesses do not take an
oath of office, nor do they stand for election. They may have conflicts of interests, are not directly responsible to the public, and are
not subject to the same disclosure requirements as government actors. As such, it is critical that Treasury scrupulously oversee its
contractors and agents.
The TARP employs private agents through two means: procurement contracts, which are utilized across the federal government
and are governed by the Federal Acquisition Regulations (FAR),
and financial agency agreements, which are used only by Treasury
and which allow businesses to perform inherently governmental
functions on behalf of the United States. Under the law authorizing
the TARP, Treasury has extraordinary discretion in using both instruments. For example, the law explicitly allowed Treasury to
waive any provision of the FAR, and it arguably allowed Treasury
to hire financial agents for a broader range of duties than previously permitted. Such broad authority helped Treasury to establish the TARP in great haste during a moment of crisis, but this
expansive discretion must necessarily be accompanied by strict
oversight.
In general, Treasury has taken significant steps to ensure that
it has used private contractors appropriately, and indeed some ex* The Panel adopted this report with a 5–0 vote on October 13, 2010.

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2
perts have praised Treasury for going above and beyond the usual
standards for government contracting. Treasury provided for competitive bidding for most of its contracts, and it has established
several layers of controls to monitor contractor performance and to
prevent conflicts of interest. Further, despite the pressing needs of
the financial crisis, Treasury complied with the FAR, although it
could have waived its provisions.
This praise must be viewed in context, however. The government
contracting process is notoriously nontransparent, and although
Treasury appears to have performed well on a comparative basis,
significant transparency concerns remain. For example, contractors
and agents are immune to requests under the Freedom of Information Act. Contractors may hire subcontractors, and those subcontracts are not disclosed to the public. Important aspects of a
contractor’s work may be buried in work orders that are never published in any form. Further, Treasury publishes no information on
the performance of contractors during the life of the contract. In
short, as work moves farther and farther from Treasury’s direct
control, it becomes less and less transparent and thus impedes accountability.
The contracting process has also created confusion about the role
of small businesses in administering the TARP. In one case, Treasury awarded a contract to a ‘‘small disadvantaged business,’’ which
in turn delegated roughly 80 percent of the contract to a ‘‘large
business.’’ Thus, although on the surface it appears that the contract is being performed by a small business, in actuality a large
business is essentially responsible for performance. Additionally,
the Panel is concerned by the lack of outreach by Treasury to find
qualified minority-owned businesses to participate in the TARP. Although several minority-owned businesses have received TARP financial agency agreements, only one prime TARP contract has
been awarded to a minority-owned business.
The largest TARP financial agency agreements were those with
Fannie Mae and Freddie Mac to provide administration and compliance services for Treasury’s foreclosure mitigation programs. As
described in detail in the case study accompanying this report,
these agreements raise significant concerns. Both Fannie Mae and
Freddie Mac have a history of profound corporate mismanagement,
and both companies would have collapsed in 2008 were it not for
government intervention. Further, both companies have fallen
short in aspects of their performance, as Fannie Mae recently made
a significant data error in reporting on mortgage redefaults and
Freddie Mac has had difficulty meeting its assigned deadlines.
The largest TARP contracts have gone to law firms, investment
management firms, and audit firms. The nature of these firms’ relationship to the financial system inevitably gives rise to a wide
range of potential conflict issues, including the potential for conflicts of interest with these firms’ other clients, self-interested behavior in the management of TARP contracts, and the misappropriation of sensitive market information. Treasury has taken these
concerns seriously and performs regular reviews to prevent or mitigate any potential conflicts of interest, but the process relies primarily on contractors and agents to self-disclose their potential
conflicts. As a result, the public has only limited assurance that all
potential conflicts have been disclosed and addressed. Treasury

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should develop an independent mechanism for monitoring conflicts
that makes it less reliant on contractors and agents for information.
Concerns about private contracting are of particular significance
given the scale of the involvement of contractors and agents in the
TARP. Fannie Mae alone currently has 600 employees working to
fulfill its TARP commitments. By comparison, Treasury has only
220 staffers working on all TARP programs combined. In other
words, the vast majority of people working on the TARP today receive their paychecks from private companies, not the federal government. Although Treasury deserves credit for its efforts toward
improving the contracting process, given the extensive involvement
of private actors in a program of critical public significance, further
improvements can and should be made.

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SECTION ONE:
A. Background
Treasury’s use of its contracting authority in the execution of its
duties under the Troubled Asset Relief Program (TARP) has not
caught the public’s imagination to the same degree as some other
TARP-related topics. But Treasury has expended significant
amounts of money on obtaining important services from nongovernmental entities, and, in doing so, has raised important questions
with respect to the extent to which such services should be
outsourced and the best way to monitor non-governmental entities’
performance of those services. These questions are not unique to
Treasury and the TARP, and indeed some experts praise Treasury’s
performance in comparison to other government actors. While
Treasury should be pleased with the praise it has received for its
efforts, further improvements can and should be made in TARP
contracting practices.
The Emergency Economic Stability Act of 2008 (EESA) authorizes Treasury to enter into financial agency agreements and procurement contracts in order to fulfill its duties under EESA.1 Financial agency agreements allow Treasury to retain private companies to perform ‘‘inherently governmental’’ functions, while contracts are used to procure all other outside services Treasury requires to implement EESA.2 This report examines Treasury’s use
of financial agency agreements and contracts to obtain services
that Treasury cannot, or has chosen not to, perform itself. It evaluates the process by which Treasury decides to obtain services from
others, the procedures Treasury has in place to fulfill its oversight
responsibilities, and whether Treasury has the infrastructure to
oversee its agreements and contracts properly. Additionally, this
report considers in more detail the agreements with Fannie Mae
and Freddie Mac for the Home Affordable Modification Program
(HAMP), in light of the significant dollar amounts of those agreements and their centrality to that program, which the Panel has
examined in several previous reports.3
Other TARP oversight bodies are auditing performance under
agreements and contracts entered into by Treasury, and this report
does not duplicate that audit work.4 The Special Inspector General
for the Troubled Asset Relief Program (SIGTARP) is also currently
conducting an audit of professional services contract prices and re1 12

U.S.C. § 5211(c).
adoption of EESA introduced an element of legal uncertainty as to whether financial
agency agreements must be used only for ‘‘inherently governmental’’ functions or if they can be
used for a broader range of duties as well. For a more complete discussion of this uncertainty,
see Sections B.1.b and E.1.b, infra.
3 See Congressional Oversight Panel, March Oversight Report: Foreclosure Crisis: Working Toward a Solution (Mar. 3, 2009) (online at cop.senate.gov/documents/cop-030609-report.pdf) (hereinafter ‘‘March 2009 Oversight Report’’); Congressional Oversight Panel, October Oversight Report: An Assessment of Foreclosure Mitigation Efforts After Six Months (Oct. 9, 2009) (online at
cop.senate.gov/documents/cop-100909-report.pdf) (hereinafter ‘‘October 2009 Oversight Report’’);
Congressional Oversight Panel, April Oversight Report: Evaluating Progress on TARP Foreclosure Mitigation Programs (Apr. 14, 2010) (online at cop.senate.gov/documents/cop-041410-report.pdf) (hereinafter ‘‘April 2010 Oversight Report’’).
4 The Government Accountability Office (GAO) will release a two-year report on TARP in early
November, which will include a section on contracting; for a more detailed discussion of
SIGTARP’s activities, see Section I, infra.

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cently completed a detailed examination of the Public-Private Investment Program (PPIP).5
In light of the pressing urgency of the financial crisis in the fall
of 2008, EESA allowed the Secretary of the Treasury to waive any
provision of the Federal Acquisition Regulations (FAR), which normally would govern Treasury’s exercise of its contracting authority,
and also arguably expanded Treasury’s authority to designate financial agents.6 There is some legal uncertainty as to whether
EESA broadened Treasury’s authority to execute financial agency
agreements, discussed in more detail below.7 As of September 30,
2010, Treasury had used its authority to enter into 15 financial
agency agreements and 81 contracts, together worth $436.7 million
in terms of obligated value.
These agreements and contracts range from the mundane purchasing of office chairs, to hiring asset managers to oversee Treasury’s TARP investments, to the wholesale delegation of the administration of multi-billion dollar programs to outside entities.8 Duties under the agreements and contracts are performed by private
actors, who may be subject to conflicts of interests, who are not directly responsible to the public, and whose actions are not subject
to the same disclosure requirements as government actors. Without
the traditional accountability mechanisms available to the public
for government actions, it is critical that Treasury scrupulously
oversee its contractors and agents.
This report examines Treasury’s use of the two instruments discussed earlier: financial agency agreements and procurement contracts (which the report refers to collectively as ‘‘arrangements’’).
• Financial agency agreements allow private companies to perform inherently governmental functions.9 These agreements,
permitted to Treasury since the National Bank Acts of 1863
and 1864, create an agency relationship between Treasury and
a private company. The company acts on behalf of Treasury
and is a fiduciary of the United States.10 For example, the
agreement between Treasury and AllianceBernstein L.P. to
manage TARP investments is a financial agency agreement.11
• Procurement contracts are the standard instrument by which
government agencies obtain goods and services from private
companies. They are governed by the FAR. Although contracts
5 Office of the Special Inspector General for the Troubled Asset Relief Program, Selecting Fund
Managers for the Legacy Securities Public-Private Investment Program (Oct. 7, 2010) (online at
www.sigtarp.gov/reports/audit/2010/
Selecting%20Fund%20Managers%20for%20the%20Legacy%20Securities%20PublicPrivate%20Investment%20Program%2009_07_10.pdf) (hereinafter ‘‘SIGTARP Report on PPIP’’).
PPIP arrangements are, strictly speaking, recipient funding under a TARP program. Agreements and contracts involve the expenditure of money in return for services, whereas recipient
funding is an investment from which Treasury expects a return.
6 12 U.S.C. § 5211(c); 12 U.S.C. § 5217(a).
7 For a more complete discussion of this uncertainty, see Sections B.1.b and E.1.b, infra.
8 See U.S. Department of the Treasury, Listing of Procurement Contracts and Agreements
Under EESA (online at www.financialstability.gov/impact/contractDetail2.html) (accessed Oct.
12, 2010) (hereinafter ‘‘List of Procurement Contracts and Agreements Under EESA’’).
9 But see discussion of whether such agreements must necessarily be for ‘‘inherently governmental’’ functions at Section E.1.b, infra.
10 U.S. Department of the Treasury, Procurement Contracts and Agreements (Jan. 29, 2010)
(online at www.financialstability.gov/impact/procurement-contracts-agreements.html) (hereinafter ‘‘Treasury Procurement Contracts and Agreements’’).
11 See Annex II, contract number TOFA–09–FAA–0005; General Services Administration, Department of Defense, and the National Aeronautics and Space Administration, Federal Acquisition Regulation, at Subpart 7.503 (Mar. 2005) (online at www.acquisition.gov/Far/current/pdf/
FAR.pdf) (hereinafter ‘‘Federal Acquisition Regulation’’).

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may be used to obtain virtually any type of good or service,
government agencies cannot allow contractors to perform functions that are ‘‘inherently governmental.’’ 12 For example, the
agreement for legal services between Treasury and Cadwalader
Wickersham & Taft, LLP, is a procurement contract.13
On October 3, 2010, Treasury’s authority under the TARP expired. This does not affect Treasury’s ability to enter into new contracts and agreements, although its needs for such arrangements
have changed.
The Congressional Oversight Panel is specifically required by
EESA to examine ‘‘[t]he use by the Secretary of authority under
this Act, including with respect to the use of contracting authority
and administration of the program.’’ 14 Several previous Panel reports have touched on the issue of contracting under the TARP, 15
but none have focused exclusively on the issue.
B. Provisions that Govern TARP Contracts and Agreements
1. EESA
As discussed above, under EESA and pre-existing law, the Secretary of the Treasury is authorized to use two separate mechanisms to employ private parties to provide goods and services necessary to the implementation of the statute. First, the Secretary
may enter into contracts.16 Second, the Secretary may designate financial institutions as ‘‘financial agents’’ to assist Treasury in implementing the statute.17
a. Contracting Authority
The Secretary’s contracting authority under EESA includes contracts for services as well as contracts for goods.18 EESA does not
bar contractors from hiring subcontractors or impose any conditions on the subcontracting process. EESA authorizes the Secretary
to waive ‘‘specific provisions’’ of the FAR, the regulation that typically governs the acquisition of goods and services and which is discussed in more detail below. This waiver authority was included to
permit a more ‘‘streamlined process’’ if the Secretary determined
that ‘‘urgent and compelling circumstances make compliance with
such provisions contrary to the public interest.’’ 19 Treasury has
not, however, made use of this authority.20 Treasury states that it
12 Id.

at Subpart 7.5.
Annex II, infra, contract number TOFS–09–D–0011.
14 12 U.S.C. § 5233(b)(1)(A)(i).
15 April 2010 Oversight Report, supra note 3, at 86; October 2009 Oversight Report, supra
note 3, at 44; Congressional Oversight Panel, February Oversight Report: Valuing Treasury’s Acquisitions, at 12 (Feb. 6, 2009) (online at cop.senate.gov/documents/cop-020609-report.pdf).
16 12 U.S.C. § 5211(c)(2).
17 12 U.S.C. § 5211(c)(3).
18 Contracts for services are permissible only if they are authorized by 5 U.S.C. § 3109, a provision governing the ‘‘employment of experts and consultants.’’ See 12 U.S.C. § 5211(c)(2). EESA
mentions only one potential contractor by name: the statute requires Treasury to consider the
FDIC during the process of selecting asset managers for residential mortgage loans and residential mortgage-backed securities. 12 U.S.C. § 5217(c).
19 12 U.S.C. § 5217(a).
20 Although Treasury has not waived any of the provisions of the FAR—and therefore the FAR
applies to all of the TARP procurement contracts—it has used the expedited procedures prescribed in the FAR. Treasury conversations with Panel staff (Aug. 30, 2010).

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determined it could accomplish its objectives in a timely fashion
without the need for a waiver.21
b. Financial Agent Authority
EESA authorized Treasury to employ a second, separate regime
to use private parties to assist with the statute’s implementation:
it permitted Treasury to designate ‘‘financial institutions’’ as ‘‘financial agents’’ to perform ‘‘all such reasonable duties related to
this Act as financial agents of the Federal Government as may be
required.’’ 22 Historically, financial agents could be employed to perform only ‘‘inherently governmental’’ functions.23 If an agency
wanted to hire a private entity to perform non-governmental functions, it was required to use a procurement contract. It may be the
case, however, that EESA broadened Treasury’s authority to employ financial agents to an extent that Treasury is no longer constrained by this limitation. EESA authorizes the Secretary to take
actions he ‘‘deems necessary to carry out the authorities in this
Act, including, without limitation,’’ the designation of financial
agents, and it states that those agents ‘‘shall perform all such reasonable duties related to this Act . . . as may be required.’’ 24
Unlike when it hires a contractor, an executive agency is not
bound by the FAR when it hires a financial agent. As a result,
there are essentially no restrictions on the process Treasury may
use for selecting financial agents. Although financial agents exist
outside the FAR’s regulatory regime, the law is well settled that a
financial agent must abide by the principles of agency law, since
the financial agent acts an agent for the government, the principal.
As a result, the fiduciary duties that would attach in any other
principal-agent relationship attach to financial agents, including
the duty of loyalty and the duty of care.25 Treasury describes financial agents as ‘‘an extension of Treasury to act on behalf of the Government in order to address the unique and often urgent needs of
TARP and OFS.’’ 26 If a financial agent decides to engage a subcontractor to assist in the performance of the agreement, it is ‘‘responsible for the acts or omissions of its affiliates and contractors as if
the acts or omissions were by the Financial Agent.’’ 27
21 Treasury

conversations with Panel staff (Sept. 16, 2010).
U.S.C. § 5211(c)(3).
Corp. v. United States, 91 F.3d 232 (D.C. Cir. 1996).
24 12 U.S.C. § 5211(c)(3) (emphasis added).
25 See, e.g., United States v. Citizens & Southern National Bank, 889 F.2d 1067, 1069 (Fed.
Cir. 1989) (‘‘[T]he government as principal and in its sovereign capacity delegates to its financial
agents some of the sovereign functions that the government itself would otherwise perform. . . .
The body of procurement law . . . by contrast, applies to Treasury only when it is acting as
a commercial purchaser of goods and services.’’); Treasury Procurement Contracts and Agreements, supra note 10 (‘‘Financial agents have the fiduciary obligation to protect the interests
of the United States. Financial Agency Agreements entered into by Treasury do not constitute
procurement contracts under the purview of Federal Acquisition Regulations.’’).
26 Congressional Oversight Panel, Joint Written Testimony of Gary Grippo, deputy assistant
secretary for fiscal operations and policy, and Ronald W. Backes, director of procurement services, U.S. Department of the Treasury, COP Hearing on Treasury’s Use of Private Contractors,
at 2 (Sept. 22, 2010) (online at cop.senate.gov/documents/testimony-092210-treasury.pdf) (hereinafter ‘‘Prepared Statement of Gary Grippo and Ronald Backes’’).
27 See, e.g., U.S. Department of the Treasury, Financial Agency Agreement Between U.S. Department of the Treasury and The Bank of New York Mellon, at 8 (Oct. 14, 2008) (Contract No.
TOFA–09–FAA–001)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
Bank%20of%20New%20York%20Mellon.pdf) (hereinafter ‘‘Financial Agency Agreement Between
Treasury and BNY Mellon’’).
22 12

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2. Federal Acquisition Regulation
Unless specifically exempted by statute or regulation, executive
agencies attempting to use appropriated funds to acquire goods and
services must comply with the FAR. The FAR is more than 1,900
pages long and contains eight subchapters and 53 parts. It includes
four guiding principles:
(1) Satisfying the customer in terms of cost, quality, and
timeliness of the delivered product or service;
(2) Minimizing administrative operating costs;
(3) Conducting business with integrity, fairness, and openness; and
(4) Fulfilling public policy objectives.28
The FAR governs areas as general as contractor selection, including requirements that certain contracts must be ‘‘set aside’’ for
small businesses, 29 and as specific as notification procedures for
the delivery of radioactive material.30 It prohibits a contractor from
offering a gratuity—defined as ‘‘an entertainment or gift’’—to a
government official in an attempt to secure a contract.31 It also
provides a variety of circumstances in which provisions may be suspended if ‘‘urgent and compelling’’ circumstances exist.32 Individual
federal agencies may also issue supplemental guidelines to assist
with their implementation of the FAR, and Treasury states that it
uses the ‘‘Department of the Treasury Acquisition Regulation supplement’’ as additional guidance for its TARP procurement contracts.33
The FAR does not prohibit contractors from hiring subcontractors
to perform the duties specified in the contract.34 While it requires
contractors to receive consent from the contracting executive agency prior to entering certain types of subcontracts, the FAR itself
generally does not apply to subcontractors.35 Although the primary
contractor has a direct relationship to the contracting agency, the
subcontractor does not; it is bound by the contract between it and
the primary contractor.
3. Interim Final Rule on TARP Conflicts of Interest
EESA required the Secretary to issue ‘‘regulations or guidelines
necessary to address and manage or to prohibit conflicts of interest
that may arise in connection with the administration and execution’’ of the statute.36 In accordance with this provision, Treasury
issued an Interim Final Rule (the IFR) on January 21, 2009.37
28 Federal

Acquisition Regulation, supra note 11, at Subpart 1.10.
Federal Acquisition Regulation, supra note 11, at Subpart 9.5. See also Section F, infra.
Acquisition Regulation, supra note 11, at Subparts 6, 9, 23.6.
31 Federal Acquisition Regulation, supra note 11, at Subparts 3.202, 52.203–3(a).
32 See, e.g., Federal Acquisition Regulation, supra note 11, at Subpart 31.10.
33 Treasury Procurement Contracts and Agreements, supra note 10.
34 See generally Federal Acquisition Regulation, supra note 11.
35 See Federal Acquisition Regulation, supra note 11, at Subpart 44 (stating that a consent
is required in certain types of contracts, and in others the contracting officer ‘‘may require’’ consent if he determines that it ‘‘is required to protect the Government adequately because of the
subcontract type, complexity, or value, or because the subcontract needs special surveillance.’’).
36 12 U.S.C. § 5218(a).
37 U.S. Department of the Treasury, TARP Conflicts of Interest, 74 Fed. Reg. 3431–3436 (Jan.
21, 2009) (codified as 31 CFR § 31) (hereinafter ‘‘TARP Conflicts of Interest’’). This Interim Final
Rule followed Treasury’s issuance of the Interim Guidelines for Conflicts of Interest on October
6, 2008, only three days after the passage of EESA. U.S. Department of the Treasury, Interim
Guidelines for Conflicts of Interest (Oct. 6, 2008) (online at www.treas.gov/press/releases/
hp1180.htm). Treasury has not yet issued a final rule, although it has indicated that it does
29 See

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30 Federal

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Many interested parties commented on aspects of the IFR.38 Although the rule technically remains ‘‘interim,’’ the public comment
period ended on March 23, 2009, and in practice, the rule has the
same binding force as any other agency regulation.39 The rule applies to any ‘‘retained entity’’ that seeks or holds ‘‘contracts or financial agency agreements . . . for services under the TARP.’’ It
applies to subcontractors and consultants, but not to entities hired
to provide ‘‘administrative services identified by the TARP Chief
Compliance Officer’’ or to ‘‘special government employees.’’ 40 The
rule emphasizes that it does not replace provisions of the FAR and
should instead be read as supplementing them.41
The IFR creates two separate schemes to govern two different
types of conflicts: organizational conflicts of interest (OCIs) and
personal conflicts of interest (PCIs). The rule defines an OCI as ‘‘a
situation in which the retained entity has an interest or relationship that could cause a reasonable person with knowledge of the
relevant facts to question the retained entity’s objectivity or judgment to perform under the arrangement, or its ability to represent
plan to issue one. Treasury conversations with Panel staff (Sept. 23, 2010). At the Panel’s hearing on contracting, Scott Amey of the Program on Government Oversight expressed concern that
a final rule had not yet been issued. Congressional Oversight Panel, Testimony of Scott Amey,
general counsel, Project on Government Oversight, Transcript: COP Hearing on Treasury’s Use
of Private Contractors (Sept. 22, 2010) (publication forthcoming) (online at cop.senate.gov/hearings/library/hearing-092210-contracting.cfm) (hereinafter ‘‘Transcript Testimony of Scott Amey’’).
38 During the 60-day public comment period, several organizations and individuals filed comments on the Interim Final Rule on TARP Conflicts of Interest. The bulk of these comments
were submitted by contractors, potential contractors, and organizations that represent contractors or potential contractors. See Letter from Michael W. Mutek, chair, Section of Public Contract Law, ABA, & Karl J. Ege, chair, Section of Business Law, ABA, to the executive secretariat, Office of Financial Stability, U.S. Department of the Treasury, Interim Rule on TARP
Conflicts of Interest (Mar. 24, 2009) (online at www.regulations.gov/search/Regs/
home.html#documentDetail?R=090000648092db60) (stating that the Interim Final Rule is too
cumbersome to follow, imposes unrealistic deadlines, needs more clarification and illustrative
examples, and shifts too much of the work away from Treasury and onto the retained entities);
Letter from Hugh Ching, Post-Science Institute, to the executive secretariat, Office of Financial
Stability, U.S. Department of the Treasury, Decisions Should Be Based On Expected Rate of Return, Not Just Conflict of Interest (Mar. 23, 2009) (online at www.regulations.gov/search/Regs/
home.html#documentDetail?R=0900006480929889) (stating that the government should focus on
expected rates of return, not on conflicts of interest, and that conflicts of interest are only a
problem when they reduce expected rates of return); Letter from PricewaterhouseCoopers LLP,
to the executive secretariat, Office of Financial Stability, U.S. Department of the Treasury, Interim Rule on TARP Conflicts of Interest (Mar. 23, 2009) (online at www.regulations.gov/search/
Regs/home.html#documentDetail?R=090000648092a315) (stating that the Interim Final Rule
needs more clarification because conflict-of-interest standards must be clear and unambiguous);
Letter from Mark R. Manley, senior vice president and deputy general counsel,
AllianceBernstein, to the executive secretariat, Office of Financial Stability, U.S. Department of
the Treasury, TARP Conflicts of Interest—Comments on Interim Rule (Mar. 23, 2009) (online at
www.regulations.gov/search/Regs/home.html#documentDetail?R=09000064809290be)
(stating
that the Interim Final Rule is too burdensome and costly because it would require
AllianceBernstein to reallocate a disproportionate amount of compliance resources); Letter from
Ben A. Plotkin, executive vice president, Stifel Nicolaus, to the executive secretariat, Office of
Financial Stability, U.S. Department of the Treasury, TARP Conflicts of Interest: Interim Rule
31 CFR Part 31 (Feb. 18, 2009) (online at www.regulations.gov/search/Regs/
home.html#documentDetail?R=0900006480931588) (stating that the Personal Conflicts of Interest section of the Interim Final Rule should be narrowed to focus on those retained entities
whose financial obligations might actually give rise to a conflict of interest in connection with
their performances of services).
39 As discussed in more detail above, formal regulations are not the sole constraints on financial agents. As agents of the federal government, financial agents are bound by two primary
fiduciary duties: a duty of loyalty and duty of care. The duty of loyalty encompasses a prohibition on self-dealing, which would prevent a financial agent from entering into many transactions
that would raise conflict-of-interest questions.
40 For the purposes of this provision, administrative services include commercially-available
services, such as LexisNexis or other computer database services. No ‘‘special government employees’’ have been exempted under this provision. All ‘‘special government employees’’ are required to comply with Treasury’s ethics processes. Treasury conversations with Panel staff (Oct.
4, 2010).
41 TARP Conflicts of Interest, supra note 37.

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the Treasury.’’ 42 OCIs are prohibited unless they are disclosed to
Treasury and either mitigated under a Treasury-approved plan or
waived by Treasury.43
The rule defines a PCI as a ‘‘personal, business, or financial interest of an individual, his or her spouse, minor child, or other family member with whom the individual has a close personal relationship, that could adversely affect the individual’s ability to perform
under the arrangement, his or her objectivity or judgment in such
performance, or his or her ability to represent the interests of the
Treasury.’’ 44 A retained entity must ‘‘ensure’’ that ‘‘all management officials’’ working on the contract or agreement do not have
PCIs unless the conflict has been either ‘‘neutralized’’ by mitigation
measures or waived by Treasury. All retained entities and their
employees are prohibited from accepting certain gifts and ‘‘favors.’’ 45
The IFR includes several additional requirements that apply to
the selection process. Retained entities are barred from making an
offer of ‘‘future employment’’ to a Treasury employee and from giving ‘‘any money, gratuity, or other thing of value’’ to a Treasury
employee. The rule also places limitations on the use of nonpublic
information, stating that retained entities shall not ‘‘solicit or obtain’’ from a Treasury employee any nonpublic information that
was ‘‘prepared for use by Treasury for the purpose of evaluating an
offer, quotation, or response to enter into an arrangement.’’ 46
These prohibitions are aimed at ensuring that the selection process
is open, competitive, and fair.47
Treasury also has established a set of procedures to implement
and enforce the principles articulated in the IFR. During the inception phase, before Treasury enters an arrangement, it considers the
proposed work plan and the nature of the entity selected to do the
work in order to devise a list of potential conflicts. Treasury includes provisions on conflicts of interest in the text of the arrangements after discussions with the entity, so that the provisions are
individually tailored to each entity. These provisions include requirements that the entity self-disclose relevant information, requirements that are customized to match monitoring needs based
on the entity’s type of business. To ensure that such provisions
were included in arrangements entered into prior to the promulgation of the IFR, those early contracts were renegotiated so as to incorporate the IFR. Treasury also reviews the mitigation plans developed by the entities to ensure that they are sufficient.48 Treasury, and not the retained entity, is responsible for determining the
42 31

CFR § 31.201.
CFR § 31.211(a); 31 CFR § 31.211(e).
CFR § 31.201.
45 31 CFR § 31.213(a)(1).
46 31 CFR § 31.216(a).
47 See Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 4–5 (‘‘Treasury works diligently to identify and prevent any potential conflicts of interest related to its use
of financial agents and contractors within OFS. In enforcing the TARP conflicts of interest interim final rule (31 CFR Part 31), Treasury works with its contractors and financial agents, as
well as independently, to identify and mitigate potential organizational and personal conflicts
of interest that may arise during the retention of financial agents, the awarding of procurement
contracts and blanket purchase agreements, and during the performance periods of such agreements and contracts.’’).
48 Treasury conversations with Panel staff (Sept. 23, 2010). See also Prepared Statement of
Gary Grippo and Ronald Backes, supra note 26, at 2.
43 31

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44 31

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sufficiency of the mitigation measures.49 Treasury then engages in
ongoing discussions with the entities to monitor their compliance,
and it receives quarterly reports from them. If the business structure changes, for example, Treasury may revisit and revise the
original mitigation plan. Finally, contractors and agents submit inquiries on conflicts issues, which Treasury tracks in a database.
Treasury estimates that it receives an average of approximately 40
inquiries per month.50
4. Treasury’s Internal Policies
Treasury developed a set of internal rules to provide additional
guidance regarding its relationships with financial agents and contractors. While most procurement policies and procedures are described in detail in the FAR and in Department of the Treasury Acquisition Regulation (DTAR) supplements, 51 OFS supplements
these policies and procedures with implementing guidance related
to six areas: submitting purchase requests, Contracting Officer
Technical Representative (COTR) nomination and file organization,
contact and inquiries, web publications, contract and agreement
distribution, and acquisition planning. The ‘‘Policies and Procedures’’ for Financial Agents cover seven separate areas: compensation procedure, guidance and direction procedure, oversight policy,
selection and designation procedure, access control procedure, vendor approval, and performance measurement.52 For the most part,
these documents contain general information on aspects of financial agent selection, performance, and monitoring, but they do not
add substantial specific detail to the information included in the financial agency agreements themselves. The ‘‘oversight policy’’ document, for example, states simply that Treasury is required to work
to ‘‘ensure that service levels are being met.’’ 53
5. Recommendations by Oversight Bodies
SIGTARP and the Government Accountability Office (GAO) have
also played a meaningful role in guiding Treasury’s implementation
of its contracting authority.

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a. SIGTARP
During the early months of the TARP, SIGTARP made two recommendations related to the Secretary’s contracting authority:
(1) That all TARP contracts be posted on the Treasury website;
and
(2) That transparency and oversight-related language be inserted
in recent TARP contracts.
49 Congressional Oversight Panel, Testimony of Gary Grippo, deputy assistant secretary for
fiscal operations and policy, U.S. Department of the Treasury, Transcript: COP Hearing on
Treasury’s Use of Private Contractors (Sept. 22, 2010) (publication forthcoming) (online at
cop.senate.gov/hearings/library/hearing-092210-contracting.cfm) (hereinafter ‘‘Testimony of Gary
Grippo’’) (‘‘[E]ven though we ask all our agents and contractors to identify conflicts and come
up with plans, ultimately we are the ones who are determining whether the conflicts have been
mitigated.’’).
50 Treasury conversations with Panel staff (Sept. 23, 2010). See also Prepared Statement of
Gary Grippo and Ronald Backes, supra note 26, at 2.
51 See Section B.2, supra.
52 Documents provided to Panel staff by Treasury staff (Aug. 27, 2010).
53 U.S. Department of the Treasury, Financial Agent Oversight Policy, at 4 (Apr. 30, 2010)
(hereinafter ‘‘Treasury Financial Agent Oversight Policy’’).

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Treasury took steps to address these recommendations, as described in SIGTARP’s initial report to Congress on February 6,
2009. According to SIGTARP, Treasury adopted the first recommendation ‘‘in full.’’ With respect to the second recommendation,
Treasury did not adopt such language in its initial contracts, but
it did adopt it in some subsequent agreements with large financial
institutions.54 SIGTARP asserted that these subsequent agreements were ‘‘far superior than earlier contracts from an oversight
perspective.’’ 55

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b. GAO
In several of its reports, GAO provided Treasury with recommendations for improving its contracting procedures. For example, in its March 19, 2009 report on the ‘‘Status of Efforts to Address Transparency and Accountability Issues,’’ GAO recommended
that Treasury ‘‘expedite efforts to ensure that sufficient personnel
are assigned and properly trained to oversee the performance of all
contractors, especially for contracts priced on a time-and-materials
basis.’’ 56 Similarly, in its June 2009 report, GAO recommended
that Treasury should ‘‘explore options for providing to the public
more detailed information on the costs of TARP contracts and
agreements, such as a dollar breakdown of obligations and/or expenses.’’ 57 Several additional recommendations are included in
other GAO reports. For example, GAO recommended that ‘‘[f]or
contracting oversight . . . Treasury review and renegotiate existing
conflict-of-interest mitigation plans, as necessary, to enhance specificity and conformity with the new interim conflicts of interest regulation and that it take continued steps to manage and monitor
conflicts of interest and enforce mitigation plans.’’ 58
According to both Treasury and GAO, Treasury took meaningful
steps to address several of these recommendations. In its February
24, 2009 and March 19, 2009 reports, for instance, GAO noted that
‘‘consistent with our recommendation about contracting oversight,
Treasury has enhanced such oversight by tracking costs, schedules,
and performance and addressing the training requirements of personnel who oversee the contracts.’’ 59 Treasury also tracks some of
these recommendations, noting the status of its progress and pro54 Office of the Special Inspector General for the Troubled Asset Relief Program, Initial Report
to the Congress, at 5 (Feb. 6, 2009) (online at www.sigtarp.gov/reports/congress/2009/
SIGTARP_Initial_Report_to_the_Congress.pdf) (hereinafter ‘‘SIGTARP Initial Report to the Congress’’).
55 Id. at 5.
56 See U.S. Government Accountability Office, Troubled Asset Relief Program: Status of Efforts
to Address Transparency and Accountability Issues, at 3, 12 (Mar. 19, 2009) (GAO–09–484T) (online at www.gao.gov/new.items/d09484t.pdf) (hereinafter ‘‘March 2009 GAO Report on Transparency and Accountability’’). This recommendation was included in other GAO reports as well.
See, e.g., U.S. Government Accountability Office, Troubled Asset Relief Program: Status of Efforts to Address Transparency and Accountability Issues, at 3 (Feb. 24, 2009) (GAO–09–417T)
(online at www.gao.gov/new.items/d09417t.pdf) (hereinafter ‘‘February 2009 GAO Report on
Transparency and Accountability’’).
57 U.S. Government Accountability Office, Troubled Asset Relief Program: June 2009 Status
of Efforts to Address Transparency and Accountability Issues, at 84 (June 2009) (GAO–09–658)
(online at www.gao.gov/new.items/d09658.pdf) (hereinafter ‘‘June 2009 GAO Report on Transparency and Accountability’’).
58 See, e.g., March 2009 GAO Report on Transparency and Accountability, supra note 56, at
13.
59 February 2009 GAO Report on Transparency and Accountability, supra note 56, at 5; March
2009 GAO Report on Transparency and Accountability, supra note 56, at 4.

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viding extensive detail on the steps it has taken to address the recommendations.60
C. How Treasury Decided What Functions to Outsource

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1. In-house vs. Outsourcing Determinations
The acquisition decisions of the Office of Financial Stability
(OFS), the office that oversees the TARP, are overseen by the
OFS’s Contract and Agreement Review Board (CARB), which is
composed of program and procurement executives. CARB centralizes decisions regarding the office’s contracting and financial agency requirements, serving as the deliberative body for determining
whether to perform a function in-house or to outsource it.61 This
formalized process was established in March 2009, after the urgency of the initial stages of the financial crisis had subsided.
In testimony before the Panel, Treasury outlined the key factors
that govern the decision-making process regarding the potential acquisition of contracting and financial agent services.62 In addition
to other issues, including the availability of resources in other
parts of the federal government (which are explored in more detail
below), Treasury cited three main factors that it considers in determining whether outside assistance is needed, either in the form of
a contractor or a financial agent:
• Infrastructure: The ability of the government to build efficiently or leverage in-house resources may be overly expensive
or unnecessary to scale for the particular task at hand. For example, Treasury does not have a trading desk to execute capital markets transactions or the extensive capital markets
transaction experience or in-house expertise in certain industries (for example, the automotive industry) that would match
that of a large law firm. Further, the utility of establishing
long-term infrastructure for a program that by definition was
billed as temporary was also a factor.
• Objective Third Party: Treasury may require an independent
third party opinion to assess the valuation of an asset or the
wisdom of a proposed transaction. This may be particularly im60 Data provided by Treasury staff to Panel staff (Sept. 2, 2010). The list provided to Panel
staff included only seven recommendations in total, derived from only two GAO reports: December 2008 and January 2009. Several of these recommendations were reiterated in later reports,
such as the March 19, 2009 report. According to the data provided by Treasury staff, the status
of all of these recommendations is ‘‘closed.’’ However, while Treasury and GAO agree that Treasury has addressed several of the recommendations, it is not clear that the list provided to Panel
staff is fully complete, as it omits the recommendation that Treasury provide more detailed information on TARP contracts and agreements. The Panel has received no information about
whether Treasury is tracking progress on this recommendation.
61 Once a decision to outsource is made, separate processes govern the procurements or financial agency agreements, which are discussed in more detail later in the report. In terms of
deliverables, the process for these determinations are as follows (Treasury conversations with
Panel staff (Sept. 16, 2010)):
a. Procurement contracts: For most contracts, the program officer who would like a contractor
to perform a particular service will send a document outlining the scope of work to be performed
to the relevant COTR, the specially certified officials who manage the contracts day to day. The
COTR will then translate that scope of work into specific deliverables that will be included in
the contract or task order. For complex or large contracts, Treasury has a more formal system
that requires program officers to submit a work request.
b. Financial agency agreements: An informal process exists for determining specific
deliverables for all financial agents other than Fannie Mae and Freddie Mac. For Fannie and
Freddie, the process is more elaborate (and discussed in greater detail in Annex I, infra). Treasury maintains a deliverables list for both Fannie and Freddie. These lists are constantly updated to reflect Treasury’s needs and are reviewed weekly by two committees.
62 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 2–3.

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14
portant to assess the financial and strategic assumptions underpinning contemplated transactions with taxpayer money
(for example, similar to a fairness opinion provided by an independent financial advisor to the board of a company assessing
a proposed transaction).
• Expediency or Timing Considerations: Particularly in the context of the crisis backdrop in the wake of the TARP’s passage,
efforts to build internal capabilities organically may have been
prohibitively slow given the length of time needed to reach critical mass, as well as Treasury’s expectation that TARP programs would be wound down as quickly as possible.
In discussions with Panel staff, Treasury addressed additional
factors that often limit its ability to assume more work in-house,
necessitating the use of contractual and financial agent resources.63
(See Annex I for an example of the factors informing Treasury’s decision to hire Fannie Mae and Freddie Mac.) These include the
availability of in-house or other government agency expertise.
While other agencies, such as the Federal Reserve Board (FRB)
and the Federal Deposit Insurance Corporation (FDIC), may have
staff with the appropriate expertise, Treasury explained that there
are practical limitations associated with pursuing this route, given
that other agencies are hesitant to ‘‘loan’’ key staff, particularly
when that expertise is required in-house. A related factor is the difficulty in identifying and hiring the appropriate full-time staff (and
the ability to terminate/reassign in-house employees after completion of the task), compared to the relative ease of seeking temporary outside help. In many instances, Treasury is more likely to
outsource a potential task if there is limited long-term utility from
the project (for example, its expected duration is less than six
months).64 In any case, Treasury did of course make selective hires
of specialists to manage specific areas of the department’s TARP
mandate (restructuring specialists, for example), including financial agent and contracting service providers.
2. Distinctions Between Financial Agency and Contracting
Arrangements
Decisions to task financial agents differ from contracting services, reflecting the recognition that contracting involves the ‘‘acquisition of goods and services from the marketplace,’’ whereas financial agents ‘‘serve as an extension of Treasury to act on behalf of
the Government in order to address the unique and often urgent
needs of TARP and OFS.’’ 65
When determining whether to contract services, the following
questions, outlined in Treasury testimony, are most important:
(1) Are the required goods and/or services other than something
that is inherently governmental?
(2) Can the services be obtained at a competitive price from the
private sector?
(3) Can the services be acquired without creating an immitigable
conflict of interest?
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63 Treasury

conversations with Panel staff (Sept. 16, 2010 and Oct. 4, 2010).
conversations with Panel staff (Sept. 16, 2010).
65 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 2–3. See Section
E.3, infra, for discussion of contracting vs. financial agency agreements.
64 Treasury

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(4) Will it be more cost-effective, for duration or other reasons,
to outsource the work? 66
The decision to employ a financial agent focuses on the following
two factors:
(1) Does the work entail the direct management of public assets,
such as the purchase, valuation, custody, or disposition of investments or cash? (Financial agent authority is used to obtain the infrastructure, inherent capabilities, or special expertise of a financial institution.)
(2) Does the work entail close collaboration between Treasury
and a provider such that a fiduciary relationship is required? Simply put, does OFS require the services of an agent who can act as
an extension of Treasury? 67
3. Additional Factors Affecting Initial Determinations
Treasury maintains that it will not engage a financial agent or
contractor if it is unable to mitigate an identified conflict. In terms
of potential conflicts of interest that would disqualify certain tasks
from being outsourced to a particular entity,68 Treasury stated that
hiring a TARP recipient to manage TARP assets or a law firm that
represented a client on the other side of a transaction with Treasury are examples of conflicts that cannot be mitigated.69 In the
cases of The Bank of New York Mellon Corporation (BNY Mellon)
and Morgan Stanley, two TARP recipients, Treasury noted that
BNY Mellon was not making investment decisions in its role as
master custodian of the TARP,70 and that Morgan Stanley had
paid back its TARP funds prior to receiving the job of managing
TARP assets.71 It could be argued, however, that by taking government money in the first place, even if acceptance of the money was
mandatory and it was subsequently repaid, certain TARP recipi66 Prepared

Statement of Gary Grippo and Ronald Backes, supra note 26, at 2.
Statement of Gary Grippo and Ronald Backes, supra note 26, at 2–3.
68 As discussed in more detail in Section H, infra, EESA does not require Treasury to bar all
conflicts of interest outright. Rather, the statute permits Treasury to develop procedures to ‘‘address and manage or to prohibit’’ conflicts (see 12 U.S.C. § 5218(a)).
69 Testimony of Gary Grippo, supra note 49; Treasury conversations with Panel staff (Sept.
23, 2010 and Oct. 4, 2010).
70 Treasury contracted BNY Mellon’s securities services unit to ‘‘provide the accounting of
record for the portfolio, hold all cash and assets in the portfolio, provide for pricing and asset
valuation services and assist with other related services. The Bank of New York Mellon will
serve as auction manager and conduct reverse auctions for the troubled assets.’’ See Bank of
New York Mellon, The Bank of New York Mellon Chosen to Assist the U.S. Department of the
Treasury (Oct. 14, 2008) (online at bnymellon.mediaroom.com/index.php?s=43&item=316). To
date, BNY Mellon’s actual duties performed under TARP have been limited to custodial services.
71 While Morgan Stanley was not engaged as a financial advisor to Treasury in connection
with its sale of Citigroup shares until March 29, 2010—after its $10 billion repayment of TARP
funds on June 9, 2009 and the subsequent repurchase of its TARP warrant for $950 million on
August 6, 2009—the firm was previously retained as a financial advisor to Treasury in connection with its restructuring of Fannie Mae and Freddie Mac on August 5, 2008. See U.S. Department of the Treasury, Treasury Announces Plan to Sell Citigroup Common Stock (Mar. 29, 2010)
(online at www.treas.gov/press/releases/tg615.htm); Morgan Stanley, Morgan Stanley Statement
on Paying Back TARP Funds (June 9, 2009) (online at www.morganstanley.com/about/press/
articles/580e1eb2-54f3-11de-96f6-3f25a44c9933.html); Morgan Stanley, Morgan Stanley Agrees to
Repurchase Warrant from the U.S. Government (Aug. 6, 2009) (online at
www.morganstanley.com/about/press/articles/42d008d5-8209-11de-b5d1-6d6288639586.html);
Morgan Stanley, Morgan Stanley to Advise U.S. Department of the Treasury Regarding Fannie
Mae and Freddie Mac (Aug. 5, 2008) (online at www.morganstanley.com/about/press/articles/
6742.html). Separately, the firm was also engaged by the Federal Reserve Bank of New York
on October 16, 2008 in connection with the restructuring of AIG. See Federal Reserve Bank of
New York, Agreement Between Morgan Stanley and the Federal Reserve Bank of New York Regarding American International Group, Inc. (Oct. 16, 2008) (online at www.nyfrb.org/
aboutthefed/Morgan_Stanely_AIG.PDF).

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67 Prepared

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16
ents had a special status that should have disqualified them from
acting as a financial advisor in relation to TARP funds.
Conflict identification and mitigation efforts not only inform the
competitive bidding process, 72 they are also addressed earlier in
the process, shortly after an external need is identified, but before
solicitations are released for proposals. OFS assesses the nature of
potential conflicts, taking into account the business structure of
likely offerors. Based on this analysis, OFS compiles contract language that is targeted to identifying likely conflicts at the outset
of the process.73 For both contracts and financial agency agreements, Treasury solicits information related to ‘‘actual, potential, or
apparent organizational and personal conflicts of interest.’’ 74 These
inputs form the basis for conflict mitigation plans that are reviewed and approved by Treasury.
Treasury officials maintain that they have not identified any instances where wholesale potential conflicts within a certain segment of the industry prevented Treasury from following through on
seeking outside assistance. And while OFS has disqualified individual contractors based on perceived conflicts in the bidding process, Treasury informed the Panel that there have been no instances
of financial agents that had otherwise been selected who have been
rejected based on conflicts that have been uncovered during the
process.75
Treasury also claims that eligibility for financial agent roles is
limited to institutions ‘‘without material or debilitating regulatory
findings’’ or ‘‘any findings that would represent a risk to Treasury.’’ 76 Treasury noted that there are procedures in place, supplemented by an internal information database, that allow ‘‘appropriate information-sharing mechanisms’’ with other regulators to
assess if there is a potential reputational problem for Treasury.77
In the contracting realm, issues related to reputational risk may
be handled differently; reputational risk may be defined somewhat
narrowly to focus on problematic business units or broad-based financial wrongdoing. For example, although Fannie Mae and
Freddie Mac were awarded financial agency agreements after they
went into government receivership, the agreements were for functions that did not rely on credit risk assessments. (It is difficult to
envision a scenario wherein these contracts had any material bearing on either firm’s financial health, given the relative small size
of the contracted amount, in the context of the more than $90 billion in losses reported between the two firms in 2009.) 78
72 Conflicts

are discussed in greater detail in Sections G and H, infra.
conversations with Panel staff (Sept. 23, 2010).
74 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 5.
75 Treasury conversations with Panel staff (Sept. 23, 2010).
76 Testimony of Gary Grippo, supra note 49.
77 Testimony of Gary Grippo, supra note 49. The quotations specifically reference determinations for financial agents, although procedures for contractors are similar. Treasury conversations with Panel staff (Oct. 4, 2010).
78 The revenue from the TARP contracts for Fannie Mae and Freddie Mac had no material
impact on either firm’s financial results given that both firms suffered aggregate losses of $93.6
billion in 2009. As of October 8, 2010, $111.3 million and $79 million have been expended
through Treasury’s TARP financial agency agreements with Fannie Mae and Freddie Mac, respectively. This represents 2.2 percent of Fannie Mae’s and 0.5 percent of Freddie Mac’s 2009
net revenue. While the $111.3 million expended under the TARP contract with Fannie Mae represented 14.4 percent of the firm’s $773 million earned from fees and other income in 2009, the
amount is still diminutive when compared to total revenues.

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73 Treasury

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To minimize the potential conflict between bank regulators and
policymakers, financial agent and contracting decisions are vested
with non-regulatory offices within Treasury (i.e., outside the Office
of the Comptroller of the Currency and the Office of Thrift Supervision), with determinations made by career government officials
rather than policy officials or political appointees.79
4. Unique Backdrop Weighed Heavily on Determinations
An assessment of Treasury’s decisions to seek outside help with
implementing and managing TARP versus staffing projects internally must necessarily be viewed in the context of the emergency
backdrop following the passage of EESA. This backdrop understandably altered the decision tree that would have otherwise held
sway. The expertise, infrastructure, and associated time-to-market
required for Treasury to achieve the necessary scale within its infrastructure were compromised by the fast-moving nature of the
crisis. This process was further complicated by the broad fallout of
the crisis, which arguably left few financial institutions (and potential contractors or financial agents) that could claim not to have
benefited from either direct or indirect government support.80 Finally, building a significant in-house infrastructure would not have
been consistent with the intent of EESA, which established TARP
as a temporary program to stabilize the financial system. Accordingly, the actions by Treasury reflect a bias to push hard to mitigate potential conflicts versus building out internal resources or
leveraging other government agencies.
D. Description of Contracts and Agreements

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There are 81 TARP-related procurement contracts awarded pursuant to the FAR and 15 financial agency agreements awarded
Drilling down further, looking at pre-crisis net revenue for each firm, the expended amount
of the Fannie Mae TARP contract represented 1.0 percent of the average 2004–2006 net revenue
while the expended amount of the Freddie Mac TARP contract constituted 1.2 percent of 2004–
2006 net revenues. Net revenues are calculated here as the sum of net interest income and noninterest income. Federal National Mortgage Association, Form 10–K for the Fiscal Year Ending
December 31, 2009, at 262 (Feb. 26, 2010) (online at www.sec.gov/Archives/edgar/data/310522/
000095012310018235/w77413e10vk.htm); Federal Home Loan Mortgage Corporation, Form 10–
K for the Fiscal Year Ended December 31, 2009, at 57 (Apr. 12, 2010) (online at www.sec.gov/
Archives/edgar/data/1026214/000102621410000019/f71244e10vkza.htm); Federal National Mortgage Association, Form 10–K for the Fiscal Year Ending December 31, 2006, at F–4 (Aug. 26,
2007)
(online
at
www.sec.gov/Archives/edgar/data/310522/000095013307003508/
w36762e10vk.htm); Federal Home Loan Mortgage Corporation, 2006 Annual Report, at 96
(2006) (online at www.freddiemac.com/investors/ar/pdf/2006annualrpt.pdf).
79 See Section E.2, infra, for discussion of Treasury’s internal controls.
80 The statute’s language is somewhat ambiguous as to whether Treasury can seek the assistance of non-U.S. financial agents and contractors. A financial institution is defined as an institution ‘‘established and regulated under the laws of the United States . . . and having significant
operations in the United States, but excluding any central bank of, or institution owned by, a
foreign government.’’ 12 U.S.C. 5202(5). This definition might be read to include a financial institution incorporated and regulated in the United States, but owned by a non-U.S. institution.
Treasury’s financial agency agreement with AllianceBernstein, a subsidiary of a French holding company (AXA), is the only example of a financial agency agreement with a foreign-owned
institution (AllianceBernstein, in turn, subcontracted work to the U.S. subsidiary of Deutsche
Bank). EESA’s financial institution definition does not apply to contracting, which can include
non-financial institutions. However, the governing language on the contracting side permits foreign contracting under certain circumstances (e.g., Federal Acquisition Regulation, at Subpart
25).
In any case, as explored in the Panel’s August 2010 report, national distinctions in the global
financial marketplace are increasingly difficult to delineate, given the cross-border nature of
markets and operations. See Congressional Oversight Panel, August Oversight Report: The Global Context and the International Effects of the TARP (Aug. 12, 2010) (online at cop.senate.gov/
documents/cop-081210-report.pdf) (hereinafter ‘‘August 2010 Oversight Report’’).

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pursuant to the financial agent authority granted under EESA.81
Under these arrangements, there are a total of 98 subcontracts, 40
of which are procurement contracts, and the remaining 58 of which
are financial agency agreements.82 The principal metrics used to
describe the contracts and agreements are ‘‘obligated value’’ and
‘‘expended value.’’ ‘‘Obligated value’’ is the amount that Treasury is
obliged to pay, provided that the contractor or financial agent performs in accordance with the terms of the arrangement, 83 while
‘‘expended value’’ is the amount that Treasury owes for goods and
services already delivered under the contract or agreement.84 The
obligated value of these contracts and agreements is $436.7 million,
with $109.3 million attributable to procurement contracts and
$327.4 million attributable to financial agency agreements.85 The
expended value under these contracts and agreements totals $363.0
million, with procurement contracts accounting for $87.0 million
and financial agency agreements accounting for the remaining
$276.0 million.
In terms of obligated value, Fannie Mae is the largest financial
agent, with $126.7 million, while PricewaterhouseCoopers LLP
(PricewaterhouseCoopers) is the largest contractor, with $25.8 million of obligated value. Figure 1 lists the largest contractors and financial agents providing services under different arrangements
with OFS.
81 Unless otherwise noted, all information in this Section was derived from data updated
through September 30, 2010 and provided by Treasury to the Panel staff (Oct. 8, 2010). Base
contracts, novations, modifications, and task orders all count as a single contract. However, task
orders under Treasury contracts for Phacil Inc. and the MITRE Corporation were counted as
separate contracts. There were two novations, a contract with the law firm Thacher Proffitt &
Wood was novated to a contract with Sonnenschein Nath & Rosenthal LLP, and a contract with
McKee Nelson LLP was novated to Bingham McCutchen LLP. For the purposes of this analysis,
the novations count as a single contract. The total number of procurement contracts includes
eight contracts, which were awarded by other branches within the Procurement Services Division pursuant to a common Treasury service level and subject to a reimbursable agreement with
the Office of Financial Stability, or were awarded by other agencies on behalf of the Office of
Financial Stability and not administered by the Procurement Services Division. The obligated
and expended values of these eight contracts are approximately $477,000 and $143,000, respectively. These contracts were not included in the analysis in Sections D.1 and F, infra.
82 The information on subcontractors was derived solely from information produced by Treasury. For procurement contracts the information is as of July 31, 2010. Treasury indicated that
it is the responsibility of the prime contractor to report any information on the subcontracts and
the subcontractors. Treasury’s view is that since there is no privity of contract between Treasury
and the subcontractors, financial agents and contractors are responsible for the management of
the subcontractors. For the financial agency agreements, Fannie Mae engaged several subcontractors not listed, but payment was made to them based on arrangements between Fannie
Mae and OFS. Treasury conversations with Panel staff (Sept. 16, 2010). See Sections D.1.f and
D.2.b, infra.
83 For procurement contracts, the obligated value is the value indicated on either the contract
or task order. In a fixed price contract, the contractor is entitled to invoice for the full obligated
value (the negotiated price), however, for labor hour or time and materials contracts, the contractor can only invoice for the hours actually worked plus allowable and allocable costs incurred. For financial agency agreements, the obligated value represents the funds that are specifically allocated by Treasury to a given agreement based on Treasury’s estimate of the funds
that will be earned pursuant to the compensation terms of the financial agency agreements.
Treasury conversations with Panel staff (Oct. 4, 2010).
84 The expended value includes both the value that has been invoiced by the contractor/financial agent and, to the extent Treasury has the information, work that has been performed but
has yet to be invoiced. Treasury conversations with Panel staff (Sept. 16, 2010 and Oct. 4, 2010).
85 Interagency agreements were not included in this analysis. These agreements have an obligated value of $76.5 million, and the bulk of that value relates to office space, personnel, various
administrative functions, and oversight, including $53.5 million for administrative support in
the form of financial management, human resources, information technology, general counsel
and other reimbursable support services and $23.0 million in oversight costs. However, $7.8 million of that obligated value stems from an agreement between Treasury and the Pension Benefit
Guarantee Corporation, which then subcontracted that financial advisory services work for the
TARP’s Automotive Industry Financing Program (AIFP) to Rothschild, Inc. Documents provided
by Treasury to Panel staff (Oct. 8, 2010).

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19
FIGURE 1: LARGEST CONTRACTORS AND FINANCIAL AGENTS BY OBLIGATED VALUE
Contractor

Type of
Arrangement

Fannie Mae ...........................................

Financial Agency
Agreement.
Financial Agency
Agreement.
Financial Agency
Agreement.
Contract ................
Financial Agency
Agreement.
Financial Agency
Agreement.
Contract ................
Contract ................
Financial Agency
Agreement.
Contract ................
...............................

Freddie Mac ..........................................
The Bank of New York Mellon Corp. ....
PricewaterhouseCoopers LLP ................
Morgan Stanley & Co. ..........................
AllianceBernstein L.P. ...........................
Cadwalader Wickersham & Taft LLP ...
Ernst & Young LLP ...............................
FSI Group LLC .......................................
Simpson Thacher & Bartlett LLP .........
Total ............................................

Obligated
Value

Potential
Contract
Value 86

Expended
Value 87

$126,712,000

..............................

$111,339,451

88,850,000

..............................

79,296,499

28,495,412

..............................

23,777,002

25,781,474
23,577,000

$50,252,231
..............................

23,525,631
13,175,423

22,399,943

..............................

21,207,253

21,939,919
11,397,968
11,102,500

147,645,619
33,391,392
..............................

19,069,083
10,710,092
10,770,000

10,827,988
$371,084,204

21,025,000
N/A

5,479,614
$318,350,048

86 See footnote 89, infra, for a more complete discussion of the term ‘‘potential contract value.’’
87 The expended value does not include $3.9 million attributable to Cadwalader as a subcontractor under a procurement agreement and
$3.4 million and $21.5 million to PricewaterhouseCoopers and Ernst & Young, respectively, for subcontract work performed under financial
agency agreements.

A complete list of the procurement contracts and financial agency
agreements appears as Annex II to this report.

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1. Procurement Contracts
To date, Treasury has entered into 73 procurement contracts
with 53 contractors; 46 of those contracts are currently active.88
The total obligated value under all the procurement contracts is
$108.8 million, and the total potential contract value is $407.3 mil-

88 Eight contracts, which were awarded by other branches within the Procurement Services
Division pursuant to a common Treasury service level and subject to a reimbursable agreement
with the Office of Financial Stability, or were awarded by other agencies on behalf of the Office
of Financial Stability and not administered by the Procurement Services Division with a total
obligated value of approximately $477,000, were not considered as part of this analysis. The five
contracts with other branches of the procurement services division were with American Furniture Rentals, Immix Technology (two contracts), Heery International, and the Washington
Post. In addition the other three contracts were entered into with the IRS and they were with
CSC Systems and Solutions, Turner Consulting and KnowledgeBank. Active contracts are those
contracts that have a performance end date after September 30, 2010.

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20
lion.89 Active contracts account for $282.5 million of the remaining
potential contract value.90

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a. Types of Procurement Contracts
Treasury’s procurement contracts have two different structures:
(i) task or delivery order contracts; and (ii) definitive contracts.91
Task or delivery order contracts are structured such that exact
times and exact quantities of future deliveries and services are not
known at the time of the contract award, and that information is
supplied later through the use of task and/or delivery orders.92
Task or delivery order contracts do not have fixed fees for services,
and the value of the contracts appears in the specific task orders
and modifications to those contracts.93 For example, OFS’s contract
with Debevoise & Plimpton for restructuring legal services is a
task or delivery order contract.94
89 The ‘‘potential contract value’’ is the program ceiling for task or delivery order contracts and
the total amount of the award for definitive contracts. For the three contracts without a ceiling,
it was assumed that the potential contract value was equal to the potential contract values that
Treasury indicated were recorded on task orders and modifications. For multiple contract
awards, the total program value is counted once for aggregate numbers, while on an individual
basis the potential contract value is included for each awardee as if it would receive task orders
for the full amount of the award. Language in many of the contracts indicates that a firm could
receive the entire award. For example, in each of the three contracts for a multiple award with
a total potential contract value of $20,687,500, the contract stated that, ‘‘the contract ceiling
value of all contracts awarded under this solicitation, individually and collectively, is
$20,687,500.’’ See, e.g., U.S. Department of the Treasury, Contract Between U.S. Department of
the Treasury and Debevoise & Plimpton, LLP (July 30, 2009) (Contract No. TOFS–09–D–0012)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
Debevoise%20&%20Plimpton.pdf) (hereinafter ‘‘Contract Between Treasury and Debevoise &
Plimpton’’). However, each awardee under a multiple award IDIQ contract must receive a guaranteed minimum; therefore the total potential contract value is slightly less than the full program amount. Since these amounts are relatively small (and not always denoted in terms of
dollars), they were not factored into the potential contract ceilings used. Treasury indicated that
it would be unlikely that one contractor would receive the full potential contract value in a multiple award contract or that, in fact, the full potential value of the program would be expended.
However, Treasury also indicated that if one firm consistently proposes outstanding technical
or management approaches, a positive record of past performance, and competitive pricing, they
may win more task orders than other contractors. Treasury conversations with Panel staff (Sept.
28, 2010 and Oct. 4, 2010).
90 This amount is calculated by subtracting the obligated value from the potential contract
value for all contracts with a performance end date after September 30, 2010. The remaining
potential contract value does not include the potential contract value for the three contracts
without ceilings. Four of the multiple award contracts account for $235.4 million of the remaining potential contract value.
91 For the purposes of this analysis, ‘‘task or delivery order contracts’’ includes both contracts
classified as indefinite delivery/indefinite quantity (IDIQ) contracts and blanket purchase agreements (BPAs) placed against multiple award schedules under the FAR. Federal Acquisition Regulation, supra note 11, at Subparts 16.504 and 8.405–3. The principal difference derives from
the sourcing; IDIQ contracts are new contracts formed for a specific purpose based on a ‘‘statement of work,’’ whereas BPAs piggyback on existing government contracts found on the GSA
Schedule. See Section D.1.d, infra.
92 Under the FAR, an IDIQ contract ‘‘provides for an indefinite quantity, within stated limits,
of supplies or services during a fixed period’’ and a BPA is a mechanism used to ‘‘fill repetitive
needs.’’ Federal Acquisition Regulation, supra note 11, at Subparts 16.50(a) and 8.405–3.
93 See Federal Acquisition Regulation, supra note 11, at Subparts 8.405–3, 16.504, 16.505, and
16.702. However, the IDIQ contracts are required to have a minimum amount that is not de
minimis. For instance, for the legal contracts, the minimum has been expressed in terms of dollar amounts and hours of work. A contract with the law firm Debevoise & Plimpton LLP had
a minimum dollar amount of $25,000, while a contract with the law firm of Sonnenschein Nath
& Rosenthal LLP has a guaranteed minimum of 100 labor hours. See, e.g., Contract Between
Treasury and Debevoise & Plimpton, supra note 89; U.S. Department of the Treasury, Contract
Between U.S. Department of the Treasury and Sonnenschein Nath & Rosenthal, LLP (Dec. 10,
2008)
(Contract
No.
TOS09–014C)
(online
at
www.financialstability.gov/docs/
ContractsAgreements/Sonnenschein%20TOS09-014C%20redacted.pdf).
94 Contract Between Treasury and Debevoise & Plimpton, supra note 89. There has been one
modification under this contract (to extend the contract term) and one task order with an obligated value of $159,175.

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21
OFS designates contracts with defined terms as definitive contracts.95 OFS has entered into the following types of definitive contracts: cost-reimbursement plus fixed price, fixed price, fixed price
or time, and materials and labor-hour. Fixed price contracts have
been used, for example, for the purchase of office equipment.96
OFS has awarded 48 task or delivery order contracts and 25 definitive contracts, accounting for obligated values of $101.9 million
and $6.9 million, and potential contract values of $398.1 million
and $9.2 million, respectively.97
The majority of the task or delivery order contracts have potential contract values.98 Of the 48 task or delivery order contracts, 45
have these ceilings, 99 and three have no potential contract value
specified in the base contracts.100 The potential contract values
range from $250,000 to $100.0 million.
OFS has awarded 25 definitive contracts awarded to specific contractors.101 The total obligated value and total potential contract
value under these contracts is $6.9 million and $9.2 million, respectively. The potential value under these contracts ranges from less
than $3,000 to $2.7 million.
The FAR uses different mechanisms to foster competition. For
example, for task or delivery order contracts not issued under the

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95 Federal

Acquisition Regulation, supra note 11, at Subparts 16.2, 16.3, and 16.6.
96 U.S. Department of the Treasury, Contract Between U.S. Department of the Treasury and
Herman Miller, Inc. (Apr. 17, 2009) (Contract No. TOFS–09–O–0003) (online at
www.financialstability.gov/docs/ContractsAgreements/Herman%20Miller.pdf); U.S. Department
of the Treasury, Contract Between U.S. Department of the Treasury and Whitaker Brothers Business Machines, Inc. (Jan. 27, 2009) (Contract No. TDOX090038) (online at
www.financialstability.gov/docs/ContractsAgreements/
Whitaker%20Brothers%20Bus%20Machines%20Contract.pdf).
97 See Section B, supra. Based on the information provided by Treasury, the Phacil task order
was considered a task or delivery order contract and the MITRE arrangement was considered
a definitive contract. For this analysis, the contract with Locke Lord Bissell & Liddell, LLP was
considered a task or delivery order contract, based on the language of the contract even though
it was classified as a definitive contract by Treasury. U.S. Department of the Treasury, Contract
Between U.S. Department of the Treasury and Locke Lord Bissell & Liddell, LLP (Feb. 12, 2009)
(Contract No. TOS0922) (online at www.financialstability.gov/docs/ContractsAgreements/
Locke%20CONTRACT(FINAL)%2002′12′09.pdf). The difference between the obligated and potential values for the definitive contracts is primarily due to the availability of options under two
contracts; one for the lease of parking spaces and the other for a subscription for financial, regulatory and market data, and services. See U.S. Department of the Treasury, Contract Between
U.S. Department of the Treasury and Colonial Parking, Inc. (Jan. 7, 2009) (Contract No. TOS09–
017)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
Colonial%20Parking,%20Inc.%20Contract.pdf); U.S. Department of the Treasury, Contract Between U.S. Department of the Treasury and Colonial Parking, Inc. (Sept. 30, 2009) (Contract No.
TOFS–09–O–0016)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
Colonial%20Parking,%20Inc.%20Contract.pdf).
98 Under the FAR, IDIQ contracts have a ‘‘stated limit’’ where quantity limits may be stated
as number of units or as dollar values; however, BPAs ‘‘shall address the frequency of ordering,
invoicing, discounts, requirements (e.g. estimated quantities, invoicing, discounts, requirements
(e.g. estimated quantities, work to be performed), delivery locations, and time.’’ Federal Acquisition Regulation, supra note 11, at Subpart 16.50.
99 Twelve contracts have been modified to increase the potential contract value.
100 All three of those task or delivery order contracts are BPAs that were awarded under a
GSA Schedule Competition. The contracts were with PricewaterhouseCoopers LLP, Ernst &
Young LLP, and FI Consulting Inc. with obligated values of $24.5 million, $11.4 million, and
$1.9 million, respectively. U.S. Department of the Treasury, Blanket Purchase Agreement Between U.S. Department of the Treasury and PricewaterhouseCoopers (Oct. 8, 2008) (Contract No.
T2009–TARP–0001)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
PWC%20T2009TARP0001%20redacted.pdf); U.S. Department of the Treasury, Blanket Purchase
Agreement Between U.S. Department of the Treasury and Ernst & Young, LLP (Oct. 18, 2008)
(Contract
No.
T2009–TARP–0002)
(online
at
www.financialstability.gov/docs/
ContractsAgreements/ErnstYoung%202009-TARP-0002%20redacted.pdf); U.S. Department of the
Treasury, Contract Between U.S. Department of the Treasury and FI Consulting, Inc. (Mar. 31,
2009)
(Contract
No.
TOFS–09–B–0001)
(online
at
www.financialstability.gov/docs/
ContractsAgreements/FI%20Consulting.pdf).
101 A complete list of these contracts is included as Annex II, infra.

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22
GSA schedule, the FAR encourages multiple award contracts.102
Furthermore, when contracts are issued under multiple award task
or delivery order contracts or the GSA schedule, unless an exemption applies, the FAR requires that there be a fair opportunity for
all eligible contractors to compete.103 Under a multiple award contract, contract awards are made to two or more contractors under
a single solicitation. Seven multiple awards account for 30 of the
48 task or delivery order contracts. The potential program values
of the multiple awards range from $5.0 million to $100.0 million,
and the total value of these contract awards is $289.2 million. Of
the $42.3 million in obligated value under the multiple awards,
$17.5 million is attributable to legal services for the Automotive Industry Financing Program performed by Cadwalader.104
b. Programs to which Contracts Relate
Some procurement contracts relate to a specific TARP program,
while others have been categorized as relating to multiple programs and program operations.105 However, three of the contracts
designated as applying to multiple programs have task orders
issued under them for specific programs, and one contract designated for the Automotive Industry Financing Program has an obligated value of $3.6 million relating to work on the Small Business
Administration 7(a) Loan Program.106 Of the 73 contracts, 21 relate to one TARP program, and 52 contracts relate to multiple
TARP programs (including program operations).107 Work for the
Automotive Industry Financing Program was performed under
seven contracts, for an obligated value of $24.3 million. The following table details the obligated value and the potential contract
value by program.
FIGURE 2: CONTRACT BREAKDOWN BY TARP PROGRAM 108
Number
of
Contracts

Program

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Multiple Programs ...............................................................................
Automotive Industry Financing Program (AIFP) ..................................
Capital Purchase Program (CPP) .......................................................
Public-Private Investment Program (PPIP) .........................................
Program Operations ............................................................................
SBA 7(a) Securities Purchase Program ..............................................
Capital Assistance Program (CAP) .....................................................
Home Affordable Modification Program (HAMP) .................................

38
7
6
4
18
3
2
3

Obligated
Value

$47,845,708
24,320,992
14,794,781
8,292,540
4,402,477
4,007,085
2,612,032
2,507,251

Potential
Contract
Value

$233,652,903
37,888,603
12,880,161
2,897,400
115,604,144
1,870,626
0
2,507,251

102 For IDIQ contracts, with a few exceptions, for advisory and assistance services, which exceed three years and $10 million, a contracting officer is required to make multiple awards. Federal Acquisition Regulation, supra note 11, at Subpart 16.50. See footnotes 92 and 98, supra,
for the distinction between IDIQ contracts and BPAs.
103 Federal Acquisition Regulation, supra note 11, at Subpart 16.504(c).
104 See Section D.1.e, infra.
105 Program operations includes services that relate to all TARP programs, including FOIA
and IT services. Treasury conversations with Panel staff (Oct. 4, 2010).
106 Work for CPP, PPIP and CAP was performed under multiple program contracts. The obligated value for the CPP, PPIP and CAP work was $5.7 million and $3.0 million and $2.6 million, respectively. However, the potential contract value for these contracts is accounted for
under multiple programs.
107 Five contracts identified as relating to ‘‘antifraud,’’ administrative services, or not identifying a specific program were included in the Program Operations category. These contracts accounted for less than $30,000 in obligated value and potential program value.

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23
FIGURE 2: CONTRACT BREAKDOWN BY TARP PROGRAM 108—Continued
Number
of
Contracts

Program

Total 109 .....................................................................................

Obligated
Value

N/A

Potential
Contract
Value

$108,782,867

$407,301,088

108 It

is possible for the potential contract value to be less than the obligated value. This is because all of the obligated value for task or
delivery order contracts is attributable to the task and delivery orders, while the potential contract value stems from the base contract and
modifications that increased the contract ceiling, if any. Furthermore, there are instances where task orders under a contract specify a program while the base contract lists the program as a multiple program. For example, the obligated value under the CAP, a program that was
never implemented, stems from task orders created under a base contract for multiple programs, therefore there is the anomalous situation of
having obligated value for a program while there is no potential contract value for that program.
109 The total number of contracts will exceed the actual number of procurement contracts as work performed under several programs will
count as a contract under each of those programs.

c. Type of Work Performed under Procurement Contracts
Seven categories of work are performed under the TARP procurement contracts. Of the 73 contracts, 35 are for legal advisory work.
Legal advisory work accounts for the largest obligated and potential contract values, $55.6 million and $203.4 million, respectively.
The following table details the obligated and potential contract
value of the procurement contracts by category of work.
FIGURE 3: PROCUREMENT CONTRACT BREAKDOWN BY TYPE OF WORK PERFORMED
Number of
Contracts

Category

Legal Advisory ...........................................................................
Accounting/Internal Controls ....................................................
Financial Advisory .....................................................................
Information Technology .............................................................
Administrative Support .............................................................
Facilities Support ......................................................................
Compliance ...............................................................................
Total .................................................................................

35
4
4
5
17
4
4
73

Obligated Value

$55,559,077
39,115,309
7,890,379
3,942,820
2,017,870
257,412
0
$108,782,867

Potential Contract
Value

$203,375,064
41,592,642
16,770,190
101,200,526
21,737,430
631,812
21,993,424
$407,301,088

d. Competition
Treasury used a competitive process to select the contractors.
Under the FAR, contracts must be made through full and open
competition, unless there is an exemption.110 Permitted exemptions
allow for limited competition during circumstances of unusual and
compelling urgency.111 Contracts issued under the GSA Schedule
are considered to be issued under full and open competition.112 The
following table details the obligated and potential contract value
based on the method for awarding the original base contract. GSA
Schedule awardees accounted for the largest obligated and potential contract value at $54.9 million and $193.0 million, respectively.113
110 Federal

Acquisition Regulation, supra note 11, at Subpart 6.2.
Acquisition Regulation, supra note 11, at Subpart 6.302–2.
Federal Acquisition Regulation, supra note 11, at Subparts 8.404 and 6.10.
113 GSA establishes long-term government wide contracts with commercial firms, and those
contracts are listed on the GSA schedule, creating a simplified process so that simplified process
for obtaining commercial supplies and services at prices associated with volume. Sourcing
through the GSA Schedule is required before sourcing through general commercial providers.
Federal Acquisition Regulation, supra note 11, at Subparts 8.002 and 8.4.
111 Federal

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112 See

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24
FIGURE 4: PROCUREMENT CONTRACT BREAKDOWN BY COMPETITION AT SELECTION 114
Number of
Contracts

Competition

GSA Schedule Competition .................................................................
Limited Competition—Unusual and Compelling Urgency .................
Full and Open with Small Business Set-aside ..................................
Full and Open .....................................................................................
Sole Source—Only Responsible Source ..............................................
Full and Open after Exclusion of Sources (Total Small Business
Set-Aside) .......................................................................................
SAP—Competed 115 ............................................................................
SAP—Not Competed 116 .....................................................................
GSA Schedule—Sole Source ...............................................................
Total ...........................................................................................

Obligated
Value

Potential
Contract
Value

22
19
13
10
3

$54,861,486
50,131,135
1,997,820
953,782
750,526

$193,033,966
86,471,942
99,791,842
21,214,694
750,526

1
2
2
1
73

50,000
24,975
9,930
3,213
$108,782,867

6,000,000
24,975
9,930
3,213
$407,301,088

114 Task orders and modifications are grouped by the form of competition for the initial base contract. One contract from Treasury
(TOS09–007) was classified as a GSA Schedule Competition with a task order indicating Limited Competition. The potential contract value on
the base contract was $500,000, and the contract was analyzed as a limited competition contract.
115 SAP or simplified acquisition procedure is used for purchases under a certain dollar threshold. Federal Acquisition Regulation, supra
note 11, at Part 13.
116 Federal Acquisition Regulation, supra note 11, at Part 13.

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e. Largest Contractors
The largest contractor in terms of obligated value is
PricewaterhouseCoopers. PricewaterhouseCoopers was the recipient of three contracts, one of which for internal controls has $24.5
million in obligated value, $22.4 million of which has been expended. In addition, PricewaterhouseCoopers has been granted one
of the multiple awards for program compliance support services,
with a potential program value of $22.0 million.
The largest contractor in terms of potential contract value was
Cadwalader.117 Cadwalader has four contracts, two of which are
currently active. Under these contracts, Cadwalader has $21.9 million in obligated value, $19.1 million of which has been expended
by the Treasury. These contracts include a multiple award contract. Cadwalader was one of 13 law firms awarded a contract for
the omnibus procurement for legal services; the total potential program value for the 13 contracts is $99.8 million. In addition,
Cadwalader worked as a subcontractor under another law firm’s
contract with Treasury. To date, the expended value of this subcontract is $3.9 million.
Ernst & Young has the largest amount of expended value attributable to its work. Ernst & Young has performed work as a contractor under a procurement contract as well as a subcontractor
under financial agency agreements. Of the $32.2 million in expended value attributable to Ernst & Young, $10.7 million is re117 The total expended value attributed to Cadwalader as the prime contractor, from the onset
of the program until September 30, 2010, is equivalent to 4.2 percent of the firm’s total revenue
in 2009. The amount of funds expended under the contract is used in the calculation of this
ratio rather than the obligated amount in order to provide a more accurate reflection of its impact on firm revenue. Data on amounts expended provided by Treasury (Oct. 8, 2010); American
Lawyer, The Am Law 100 2010—Gross Revenue: Baker & McKenzie Tops Skadden (online at
www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202448484841) (accessed Oct. 12, 2010). Cadwalader indicated that the rate it billed Treasury was a ‘‘30% discount from the firm’s 2009 median
rate for each professional category as determined in accordance with the guidelines issued by
the governing professional bodies that include a variety of factors leading to the establishment
of billing rates for similar matters of similar complexity and with similar demands on the firm
and its resources.’’ Data provided by Treasury and Cadwalader to Panel staff (Oct. 5, 2010).
Cadwalader invoiced Treasury $525 per hour for partners (partners normally charge $625 to
$1,050 per hour), $287.50 per hour for associates (normally charged out at a rate of $310 to
$575) and $440 per hour for special counsel (normally charged out at a rate of $590 to $880
per hour). Treasury documents provided to Panel staff (Oct. 8, 2010).

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25
lated to a procurement contract for accounting services, and $21.5
million is related to subcontracts under financial agency agreements, $17.7 million of which was expended under a subcontract
with Freddie Mac and the remaining $3.8 million was expended
under a subcontract with Fannie Mae. In addition, Ernst & Young
has been granted the same $22.0 million multiple awards as
PricewaterhouseCoopers.
Cadwalader had the largest concentration of legal work. In terms
of obligated and expended value, respectively, Cadwalader accounts
for 39 percent and 48 percent of all the legal advisory work under
TARP.118 Approximately 80 percent of Cadwalader’s obligated
value and 90 percent of its expended value stems from
Cadwalader’s role as lead counsel for the Automotive Industry Financing Program.119 Although some firms have argued that TARP
legal work should have been awarded to a larger number of firms,
some of these contracts by their nature are not easily divisible due
in part to the need for coordination across different practice areas
and disciplines required in time-sensitive, complex financial transactions. Four law firms accounted for approximately 80 percent of
the legal work on an obligated and expended value basis.120
For accounting and internal control work, there was a more significant amount of concentration. Together, Ernst & Young and
PricewaterhouseCoopers performed 95 percent of this work in
terms of obligated value, with PricewaterhouseCoopers accounting
for 66 percent of the total obligated value.
f. Subcontracts
There are 40 subcontracts under 12 procurement contracts.121
The total value of these subcontracts is $11.3 million dollars, with
an average contract value of $0.3 million. The largest obligated
value under a subcontract is $3.9 million to Cadwalader for legal
services.

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2. Financial Agency Agreements
There are currently 15 financial agency agreements and 58 subcontracts.122 The obligated value under these agreements is $327.4
118 These amounts do not include the $3.9 million that was expended to Cadwalader under
a subcontract.
119 Treasury conversations with Panel staff (Sept. 28, 2010).
120 The four largest law firms as a percentage of obligated and expended value, respectively
were: Cadwalader (39 percent, 48 percent); Simpson Thacher & Bartlett LLP (19 percent, 14
percent); Squire Sanders & Dempsey LLP (13 percent, 8 percent); and Sonnenschein Nath &
Rosenthal LLP (9 percent, 12 percent).
121 A table of the subcontracts is attached as Figure 12 in Annex II, infra.
122 The agreements are listed in Figure 13 in Annex II, infra. Some of these agreements have
incentive clauses or provide that an incentive arrangement will be established within a year.
See generally, U.S. Department of the Treasury, Financial Agency Agreement Between U.S. Department of the Treasury and FSI Group, LLC (Apr. 20, 2009) (Contract No. TOFA–09–FAA–
0006)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
FSI%20FAA%20Equity%20Asset%20Manager%20FINAL.pdf) (hereinafter ‘‘Financial Agency
Agreement Between U.S. Department of the Treasury and FSI Group, LLC’’). For example, both
Fannie Mae and Freddie Mac were eligible to receive incentive payments, up to 20 percent,
based on specified metrics determined by Treasury. Neither GSE has received any incentive pay
under these agreements. U.S. Department of the Treasury, Financial Agency Agreement Between
U.S. Department of the Treasury and Fannie Mae (Feb. 18, 2009) (Contract No. TOFA–09–FAA–
0002)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
Fannie%20Mae%20FAA%20021809%20.pdf) (hereinafter ‘‘Financial Agency Agreement Between
U.S. Department of the Treasury and Fannie Mae’’); U.S. Department of the Treasury, Financial
Agency Agreement Between U.S. Department of the Treasury and Freddie Mac (Feb. 18, 2009)
Continued

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26
million, and the expended value for these agreements is $276.0 million. The largest obligated value under an agreement is with
Fannie Mae for $126.7 million. Figure 5 lists the financial agency
agreements in order of obligated value.123
FIGURE 5: FINANCIAL AGENCY AGREEMENTS
Obligated
Value

Financial Agent

Description

Fannie Mae .............................................
Freddie Mac ............................................
The Bank of NY Mellon Corporation .......
Morgan Stanley & Co. ............................
AllianceBernstein L.P. .............................
FSI Group LLC .........................................
Lazard Freres & Co. LLC ........................
Piedmont Investment Advisors LLC ........
KBW Asset Management, Inc. ................
Earnest Partners .....................................
Howe Barnes Hoefer & Arnett, Inc. ........
Lombardia Capital Partners, LLC ...........
Paradigm Asset Management Co., LLC
Avondale Investments, LLC ....................
Bell Rock Capital, LLC ...........................
Total ..............................................

HAMP Administration .............................
HAMP Compliance .................................
Custodian ..............................................
Disposition Services ..............................
Asset Management Services .................
Asset Management Services .................
Transaction Structuring Services ..........
Asset Management Services .................
Asset Management Services .................
Small Business Assistance Program ....
Asset Management Services .................
Asset Management Services .................
Asset Management Services .................
Asset Management Services .................
Asset Management Services .................
................................................................

Expended
Value

$126,712,000
88,850,000
28,495,412
23,577,000
22,399,943
11,102,500
7,500,000
5,615,000
3,803,333
4,050,000
1,250,000
1,250,000
1,250,000
750,000
750,000
$327,355,188

$111,339,451
79,296,499
23,777,002
13,175,423
21,207,253
10,770,000
2,166,667
5,120,000
3,279,167
1,955,000
950,000
937,500
925,000
562,500
575,000
$276,086,462

a. Programs Using Financial Agency Agreements
The 15 financial agency agreements are categorized in Figure 6,
below, by the type of service provided. There are 12 agreements to
provide asset services, two agreements for HAMP, and one agreement for custodial services.124 There was a variety of asset work,
including asset management (for both the CPP and SBA 7(a) program), disposition, and transaction structuring services. The largest obligated and expended values, $215.6 million and $190.6 million, respectively, are for HAMP. Figure 6 details the obligated and
expended values by type of service provided.
FIGURE 6: FINANCIAL AGENCY AGREEMENT BREAKDOWN BY PROGRAM TYPE
Number of
Contracts

Service Provided

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HAMP ...................................................................................................
Asset Management Services ...............................................................
Custodian ............................................................................................
Disposition Agent ................................................................................
Transaction Structuring (AIFP) ...........................................................
SBA 7(a) Program ...............................................................................
Total ...........................................................................................

2
9
1
1
1
1
15

Obligated Value

$215,562,000
48,170,776
28,495,412
23,577,000
7,500,000
4,050,000
$327,355,188

Expended Value

$190,635,950
44,326,420
23,777,002
13,175,423
2,216,667
1,955,000
$276,086,462

(Contract
No.
TOFA–09–FAA–0003)
(online
at
www.financialstability.gov/docs/
ContractsAgreements/Freddie%20Mac%20Financial%20Agency%20Agreement.pdf) (hereinafter
‘‘Financial Agency Agreement Between Treasury and Freddie Mac’’); Treasury conversations
with Panel staff (Sept. 16, 2010).
123 These companies are considered together because they are all financial agents. Treasury
formed financial agency agreements with entities with which it needed a fiduciary relationship.
For instance, Treasury decided it required this type of relationship with AllianceBernstein for
its asset management services, BNY Mellon for its custodial work, and Fannie Mae and Freddie
Mac for their role in the administration and compliance of HAMP.
124 BNY Mellon performs custodial services for many of the TARP programs, while the asset
managers’ work is related to assets from the CPP, CDCI, SSFI, AIFP, and AGP portfolios. Data
provided by Treasury to Panel staff (Sept. 29, 2010).

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27
The agreements provide for several different types of payment
structures. For instance, asset managers are compensated with a
flat fee for each financial institution whose TARP assets they manage.125 BNY Mellon’s arrangement is more complex due the variety
of services it provides for the different programs and its compensation structure reflects this mix. Its fee schedule includes flat fees,
per transaction fees, as well as variable fees.126
b. Subcontractors
Six financial agents engaged a total of 58 subcontractors for a reported subcontract value of $81.7 million.127 Freddie Mac used the
most subcontractors at 26 for an expended value of $43.2 million.
The average expended value per subcontract was $1.4 million and
ranged from $7,000 to $17.8 million. Freddie Mac engaged Ernst &
Young for an expended value of $17.8 million for business process
support.

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c. Largest Financial Agents
The five largest financial agents were Fannie Mae, Freddie Mac,
BNY Mellon, Morgan Stanley, and AllianceBernstein L.P. Both
BNY Mellon and Morgan Stanley received TARP funds through the
CPP.128 All five financial agents are U.S. companies, although
AllianceBernstein is a subsidiary of AXA, a French holding company. Fannie Mae was the single largest financial agent with
$126.7 million in obligated value and $111.3 million in expended
value as part of HAMP.129 For HAMP, Fannie Mae reported that
it engaged 15 subcontractors, which accounted for $28.9 million of
its expended value.130
Other financial agents have made significant amounts of money
not from fees paid by Treasury, but from commissions. For example, as a requirement of EESA, Treasury was given warrants for
common stock of the financial institutions it made investments in
125 For instance, the FSI Group, LLC receives a flat annual fee for each financial institution
whose assets it manages. The fee is $50,000 for the first 50 financial institutions under management, $40,000 for the next fifty, and $30,000 thereafter for each financial institution with assets
under FSI Group’s management. Financial Agency Agreement Between Treasury and Freddie
Mac, supra note 122.
126 For instance, for CPP, BNY Mellon receives an annual rate of 0.0015 percent of the daily
average aggregate acquisition value of specified financial instruments in its custody. Financial
Agency Agreement Between Treasury and Freddie Mac, supra note 122.
127 The subcontractor information is reported by the financial agents to Treasury and is as
of August 31, 2010. Two of the subcontractors were engaged by two different financial agents.
Ernst & Young was engaged by both Fannie Mae and Freddie Mac, which accounted for an expended value of $21.5 million, while Williams, Adley & Company, LLP was engaged by BNY
Mellon and Freddie Mac for a total expended value of $1.2 million.
128 On October 28, 2008, Treasury purchased $3 billion of preferred stock with warrants in
BNY Mellon and $10 billion of preferred stock with warrants in Morgan Stanley. BNY Mellon
and Morgan Stanley both repaid Treasury’s investment on June 17, 2009. U.S. Department of
the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 1 (Oct. 4, 2010) (online at financialstability.gov/docs/transaction-reports/104-10%20Transactions%20Report%20as%20of%209-30-10.pdf) (hereinafter ‘‘Treasury Transactions
Report’’).
129 For further discussion of the size and effect of the TARP contracts with Fannie Mae and
Freddie Mac see footnote 78, supra.
130 Treasury indicated that Fannie Mae also engages numerous marketing, site hosting, and
IT vendors that are not individually reported on due to the quantity of these contractors, their
low average dollar-value, and the associated costs of these contracts. OFS pays a fixed fee to
Fannie Mae pursuant to its financial agency agreement with them, which is approximately
$700,000 for marketing costs and 44 percent of the $8–$10 million of estimated costs for other
services, including site hosting and IT vendors. Treasury conversations with Panel staff (Sept.
16, 2010).

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28
through the CPP.131 Treasury has disposed of these warrants by either selling them back to the issuing institution or through a
‘‘Dutch Auction,’’ a form of public offering that is registered with
the Securities and Exchange Commission (SEC).132 Deutsche Bank
Securities Inc. (Deutsche Bank) was retained as a subcontractor to
act as the primary financial agent executing these sales. In this
role, Deutsche Bank has earned from 1 percent to 5 percent of the
gross proceeds from the sale of these securities.133 For example,
Deutsche Bank acted as the sole book-running manager for the sale
of the Bank of America warrants Treasury received for its assistance to that company. Deutsche Bank earned 1.5 percent, or $23.5
million, of the gross proceeds from this sale.134 To date, the TARP
has paid $110 million in underwriting fees in order to sell warrants
publicly that have produced $5 billion in gross proceeds.135
E. Evaluation of Treasury’s Contracting and Agreement
Procedures and Process

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As discussed above, the use of private contractors and financial
agents to fill short- and long-term needs has been a key factor in
Treasury’s ongoing efforts to help implement, operate, and administer the TARP. In this section of the report, the Panel evaluates
the process underlying Treasury’s contracting and agreement procedures. In order to assess whether Treasury could or should have
done anything differently, the Panel analyzes whether Treasury’s
stated procedures comply with both the legal regime under which
it operates and with its internal controls, and evaluates Treasury’s
monitoring and supervision of contract and financial agent compliance and performance.

131 If the CPP recipient is a private institution, Treasury received and immediately exercised
warrants to purchase additional shares of preferred stock since warrants for common stock
shares were not available. U.S. Department of the Treasury, Troubled Asset Relief Program
Transactions Report for Period Ending Sept. 16, 2010, at 17 (Sept. 20, 2010) (online at
financialstability.gov/docs/transaction-reports/9-20-10 Transactions Report as of 9-16-10.pdf)
(hereinafter ‘‘Treasury Transactions Report’’).
132 U.S. Department of the Treasury, Treasury Announces Intent to Sell Warrant Positions in
Dutch Auctions (Nov. 19, 2009) (online at www.financialstability.gov/latest/tg_11192009b.html)
(‘‘These offerings will be executed using a modified Dutch auction methodology that establishes
a market price by allowing investors to submit bids at specified increments above a minimum
price specified for each auction.’’).
133 Data provided by Dealogic. In comparison, Zions Bancorp, a TARP participant, sold two
sets of non-TARP warrants publicly. The first sale, completed May 19, 2010, was valued at $185
million and the gross underwriting fee was three percent. The second sale was completed September 22, 2010 and raised $36.8 million with a gross underwriting fee of four percent.
134 Treasury sold three different sets of Bank of America warrants: The first investment, associated with the original assistance through the CPP, grossed $186,342,969 in proceeds. The second sale associated with the CPP—the investment originally made in Merrill Lynch—grossed
$124,228,646 in proceeds. Finally, the Treasury made gross proceeds of $1,255,639,099 from the
Bank of America warrants it received in conjunction with its Targeted Investment Program. In
aggregate, this represents $1,566,210,714 in gross proceeds. Following the pricing of these securities, Treasury announced that the ‘‘aggregate net proceeds to Treasury from the offerings are
expected to be approximately $1,542,717,552.79.’’ Treasury Transactions Report, supra note 131,
at 17; U.S. Department of the Treasury, Treasury Department Announces Pricing of Public Offerings of Warrants to Purchase Common Stock of Bank of America Corporation (Mar. 1, 2010)
(online at www.financialstability.gov/latest/pr_03042010.html).
135 Data provided by Dealogic. Deutsche Bank employs other financial services firms as ‘‘comanagers’’ for these offerings and therefore does not retain the entirety of its percentage on each
deal.

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29
1. Compliance with Legal Obligations
a. Contracting and the FAR
Treasury’s use of procurement contracts is governed by the
FAR.136 EESA permitted the Secretary, upon a finding of ‘‘urgent
and compelling circumstances,’’ to waive any provision of the
FAR.137 Treasury, however, has not exercised this power.138 The
Panel commends this decision as an important commitment to following contracting best practices.
According to the GAO, Treasury has complied with FAR requirements in its selection of contractors.139 To date, companies that bid
for but did not win contracts have not filed any protests with either
GAO or the Court of Federal Claims alleging that Treasury used
improper procedures in selecting the winning company.140 Indeed,
at times Treasury has done more than it was required to do. For
example, the FAR allows for contracts to be awarded with less than
full and open competition in certain circumstances, such as when
there are circumstances of unusual and compelling urgency.141 In
several instances, Treasury determined that there were urgent and
compelling circumstances but nevertheless solicited and received
competitive bids.142
b. Financial Agency Agreements
The exact contours of Treasury’s legal authority to use financial
agency agreements are not clear after the enactment of EESA.
Only financial institutions can be financial agents,143 but the FAR
does not apply to financial agency agreements, and although financial agents are bound by the duties imposed by agency law, this
does not restrict Treasury’s discretion in selecting financial agents
or administering financial agency agreements.
Treasury has had the authority to designate financial agents
since the National Bank Acts of 1863 and 1864, and case law prior
to EESA suggests that financial agents must be used only to perform inherently governmental functions and that financial agents
must be paid from non-appropriated funds.144 EESA, though, arguably has broadened Treasury’s financial agent authority to displace
the case law restrictions. EESA mandates that financial agents
may perform ‘‘all such reasonable duties related to this Act . . . as
may be required.’’ 145 Though still untested in court, such broad
language can be read to give Treasury statutory authority to em136 For

a more complete description of the FAR requirements, see Section B.2, supra.
U.S.C. § 5217(a).
conversations with Panel staff (Aug. 30, 2010).
139 Government Accountability Office conversations with Panel staff (Aug. 26, 2010).
140 Treasury conversations with Panel staff (Oct. 5, 2010).
141 Federal Acquisition Regulation, supra note 11, at Subpart 6.302–2(a)(2); Government Accountability Office conversations with Panel staff (Aug. 26, 2010). See also Section I, infra.
142 Government Accountability Office conversations with Panel staff (Aug. 26, 2010).
143 12 U.S.C. § 5211(c)(3). Financial institutions are defined as ‘‘any institution, including, but
not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States, the District of Columbia, Commonwealth of Puerto
Rico, Commonwealth of Northern Mariana Islands, Guam, American Samoa, or the United
States Virgin Islands, and having significant operations in the United States, but excluding any
central bank of, or institution owned by, a foreign government.’’ 12 U.S.C. § 5202(5).
144 Transactive Corp. v. United States, 91 F.3d 232 (D.C. Cir. 1996); Marketing & Management
Information, Inc. v. United States, 57 Fed. Cl. 665 (Fed. Cl. 2003).
145 12 U.S.C. § 5211(c)(3).
137 12

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138 Treasury

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30
ploy financial agents for a much wider spectrum of duties than just
inherently governmental functions.
In exercising the financial agency agreement authority, Treasury
has not made any in-depth analysis of this legal ambiguity public.
As discussed above, in Section C, Treasury’s primary consideration
in deciding when to execute a financial agency agreement was
whether Treasury needed a close, fiduciary relationship with the
company providing the service. According to officials in OFS’s Office of Financial Agents (OFA), which is responsible for selecting,
administering, managing day-to-day, and overseeing financial agency agreements, the OFA did not consider whether a service was inherently governmental or not. OFA officials stated that they had
never taken the discussion that far.146
Despite not having published a legal justification for its use of
financial agency agreement authority, Treasury’s practice in
awarding financial agency agreements relies on an interpretation
of EESA as having displaced prior case law. First, all the financial
agents were paid from appropriated funds. Second, at least some
of the financial agency agreements were for functions that were not
inherently governmental, such as those for whole loan or securities
management. Historically, these services have been obtained
through procurement contracts, which cannot be used for inherently governmental functions.147
If this broad reading of EESA is accepted, Treasury has likely
fulfilled its legal obligations. Nevertheless, Treasury’s departure
from prior limits on financial agency agreement authority, and the
fact that a broad reading of EESA has not yet been tested in court,
means that Treasury’s use of its financial agency agreement authority may be open to debate.
It is important to note, however, that this does not imply that
Treasury has misused its broad financial agency agreement powers. Under a broad reading of EESA, Treasury had unprecedented,
unfettered authority to make financial agency agreements. Though
the Panel does question specific decisions elsewhere in this report, 148 the Panel has no reason to believe that Treasury abused
its discretion, despite the real possibility afforded by such unconstrained authority. Indeed, at times Treasury has voluntarily gone
beyond what was required, without any legal obligation. For example, when selecting a financial agent to be a custodian, Treasury
had no legal obligation to bid the agreement competitively. Nevertheless, Treasury publicly sought bids for the financial agency
agreement and received 70. Of these 70, 10 met minimum eligibility requirements, and three institutions were asked to give presentations to Treasury before The Bank of New York Mellon was ultimately selected as the financial agent.149

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146 Treasury

conversations with Panel staff (Sept. 16, 2010).
147 James J. McCullough & William S. Speros, These Agents Act for the Treasury Department,
Legal
Times
(Nov.
10,
2008)
(online
at
www.ffhsj.com/siteFiles/Publications/
C770B7734821251EE89B86279A25212E.pdf).
148 See Sections G, H, and Annex I, infra.
149 U.S. Government Accountability Office, Troubled Asset Relief Program: Additional Actions
Needed to Better Ensure Integrity, Accountability, and Transparency, at 37 (Dec. 2, 2008) (GAO–
09–161) (online at www.gao.gov/new.items/d09161.pdf) (hereinafter ‘‘December 2008 GAO Report’’).

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2. Compliance with Treasury’s Internal Controls
EESA requires Treasury to establish and maintain an effective
system of internal controls consistent with the standards prescribed under Section 3512(c) of Title 31, U.S. Code, to provide reasonable assurance of ‘‘the effectiveness and efficiency of operations,
including the use of the resources of the TARP,’’ ‘‘the reliability of
financial reporting, including financial statements and other reports for internal and external use,’’ and ‘‘compliance with applicable laws and regulations.’’ 150 Internal controls include the policies,
procedures, and guidance that help management ensure effective
and efficient use of resources; compliance with laws and regulations; and prevention and detection of fraud, waste, and abuse. Effective internal controls are a fundamental part of managing any
organization to achieve desired outcomes and manage risk.
As the GAO has noted, a key challenge that OFS faced following
the enactment of EESA was the need to develop simultaneously a
comprehensive system of internal controls while it was trying to
react quickly to financial market dislocations.151 Due to the rapid
evolution of the TARP, OFS developed controls as various aspects
of the program became operational, instead of implementing a controls system prior to the establishment of different programs. For
example, as discussed above, 152 Treasury developed ‘‘Policies and
Procedures’’ to govern its financial agency agreements. These controls, however, were written in late 2009 and early 2010, and received final approval only at various points in 2010—serving as a
further indication that Treasury’s system of internal controls has
been a process of gradual development, implementation, and evolution. Furthermore, OFS has yet to develop internal written procedures for overseeing and monitoring Fannie Mae’s and Freddie
Mac’s administrative and compliance activities, including verifying
the completeness and accuracy of their data.153 While the Panel
recognizes the rapid pace of Treasury’s program implementation
and the evolving nature of the TARP, the lack of a comprehensive
system of internal controls at the beginning increased the risk that
the interests of the government and taxpayers may not have been
adequately protected and that the program objectives may not have
been achieved in the most efficient and effective manner.
Moreover, for financial agency agreements, the now-finalized
guidance is either procedural or general, not substantive. For example, the oversight policy document mandates only that Treasury
must ‘‘ensure that service levels are being met.’’ 154 Such requirements are so amorphous that it is impossible to meaningfully
evaluate whether or not Treasury complied. Alternatively, the guidance is logistical, as when the compensation procedures direct that
obligating funds requires the ‘‘completion of a Funding Authorization for Financial Agent Activity Sheet, submission of a purchase
request, commitment of funds, and the creation of an obliga150 12

U.S.C § 5226(c)(1)(A)–(C).
2008 GAO Report, supra note 149, at 43.
Section B.4, supra.
153 For further discussion of Fannie Mae and Freddie Mac, see Annex I, infra.
154 Treasury Financial Agent Oversight Policy, supra note 53, at 4.

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151 December
152 See

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tion.’’ 155 The Policies and Procedures do not constrain Treasury’s
discretion or provide practical guidance to Treasury employees
charged with selecting and administering financial agency agreements. As a result, compliance with these internal Policies and
Procedures will have little practical effect on Treasury’s use of its
financial agency agreement authority.156
The internal controls for contracts are more extensive. The internal controls cover six areas: web publication of contracts, purchase
request guidelines, contact and inquiries procedures, COTR nomination and file organizations, contract distribution procedure, and
acquisition planning guidelines. Though some of these policies are
procedural, others contain substantive requirements for each step
of the contracting process. Such clear directions ensure consistency
in administration and that adequate procedures are used for all
contracts.

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3. Evaluation of How Treasury Selects Contractors and
Agents
Once the decision to outsource a particular function has been
made, 157 and companies have submitted bids, Treasury still must
determine which specific company will be awarded the contract or
agreement. For contracts, the FAR provides straightforward requirements: agencies select the company whose bid represents the
best value.158 The FAR also lists a number of factors and subfactors to use in evaluating bids.159 Financial agency agreements, by
contrast, have far fewer formal requirements, and therefore OFA
has considerably more discretion in selecting agents.
OFA does limit its options by imposing certain threshold requirements, discussed more fully above, in Section C. Nevertheless,
OFA’s broad discretion resulted in decisions like hiring Fannie Mae
and Freddie Mac without apparently taking into account either
public or private sector alternatives, which raised a number of
issues that are addressed in detail later in this report.160 Treasury
selected Fannie Mae and Freddie Mac based on three criteria: (1)
Their nationwide housing knowledge, as well as the resources and
capabilities they had acquired in the course of performing their
unique role in housing finance markets; (2) the limited time frame
for implementing HAMP; and (3) prior market research by Treasury for a separate program that indicated Fannie Mae and Freddie
Mac were well qualified for the program.161 According to Deputy
Assistant Secretary Gary Grippo, ‘‘we made a determination that
there were no other parties with the capabilities and infrastructure
155 U.S. Department of the Treasury, Financial Agent Compensation Procedure, at 5 (June 30,
2010).
156 It is unfortunately impossible to determine whether such guidance is typical of Treasury’s
usual practices with regard to financial agents. Treasury currently has 26 financial agency
agreements that are unrelated to the TARP and are administered separately. There is, however,
little public information regarding the internal controls Treasury has adopted to help administer
these agreements, making a comparison to TARP-related financial agency agreements impossible.
157 For a discussion of how Treasury decides what to outsource, see Section C, supra.
158 Federal Acquisition Regulation, supra note 11, at Subpart 15.3.
159 Federal Acquisition Regulation, supra note 11, at Subpart 15.3.
160 For a more complete discussion of the Fannie Mae and Freddie Mac financial agency agreements, see Annex I, infra.
161 Treasury conversations with Panel staff (Sept. 27, 2010).

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to operate a national mortgage modification program.’’ 162 Testimony from the Panel’s recent hearing, however, suggests that the
roles of Fannie Mae and Freddie Mac as financial agents were not
simply an extension of what they were already doing. In addition,
both Fannie Mae and Freddie Mac have relied heavily on subcontractors to implement HAMP, calling into question whether
they had the operating capabilities and infrastructure to operate a
national foreclosure mitigation program.163
4. Evaluation of Treasury’s Post-Award Management of Contracts and Agreements
a. Who Manages Post-Award Contracts and Agreements?
Treasury has improved its post-award contract and agreement
management staff over time. Given the rapid deployment of the
TARP in response to the financial crisis and the need to begin operations immediately, management staffing was initially inadequate.
In late 2008 and early 2009, GAO developed a number of recommendations designed to ensure the integrity, transparency, and
accountability of Treasury’s TARP contracting process.164 In general, GAO recommended that Treasury expedite its efforts to ensure that a sufficient number of appropriately trained personnel
were in place to oversee the performance of all contractors. Since
then, Treasury has dedicated more personnel to help facilitate effective management and oversight of TARP contracts and financial
agency agreements.165

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i. Procurement Contracts
Procurement contracts are overseen by contracting officers, who
have overall responsibility for managing a contract. The day-to-day
monitoring of a contract is delegated to Contracting Officer’s Technical Representatives (COTRs), who act as the contracting officer’s
technical experts and representatives in the administration and
monitoring of all TARP contracts. With limited exceptions, COTRs
are required by Treasury’s internal guidance to be trained and certified in their acquisition-related responsibilities prior to their appointments.166
Initially, Treasury did not have enough trained COTRs to manage the contracts, so it assigned a number of its senior officials as
COTRs. Given the limited timeframe for executing the program,
some of these officials were assigned COTR responsibilities without
receiving formal training in their acquisition-related responsibilities.167 While Treasury replaced the senior-level COTRs with certified COTRs over time, the fact that officials without proper procurement training were charged with the administration and moni162 Testimony of Gary Grippo, supra note 49.
163 For a more complete discussion of the Fannie Mae and Freddie Mac financial agency agreements, see Annex I.
164 U.S. Government Accountability Office, Troubled Asset Relief Program: Status of Efforts to
Address Transparency and Accountability Issues, at 76–77 (Jan. 30, 2009) (GAO–09–296) (online
at www.gao.gov/new.items/d09296.pdf) (hereinafter ‘‘January 2009 GAO Report on Transparency
and Accountability’’); December 2008 GAO Report, supra note 149, at 59–60.
165 Treasury conversations with Panel staff (Sept. 2, 2010).
166 January 2009 GAO Report on Transparency and Accountability, supra note 164, at 51–52.
167 January 2009 GAO Report on Transparency and Accountability, supra note 164, at 51–52.

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toring of contracts for a time potentially impeded efforts to implement effectively and oversee the TARP.
Since then, trained and certified COTRs have been put in place
for all OFS contracts, 168 and Treasury has held a number of internal workshops and best practice exchanges for COTRs. Personnel
from other agencies have been brought in to share different agencies’ practices.169 Treasury also plans to hold annual refresher
training programs intended to supplement the formal training and
certification required prior to COTR appointment and further enhance skills development for COTRs assigned to TARP contracts
and financial agency agreements.170 In addition, OFS has developed an online COTR document management structure for contract
and agreement administration to ensure consistent and complete
documentation of COTR files, standardize processes, and facilitate
personnel transition through access to information and shared
practices.171 In areas where COTR oversight may potentially be
weak, Treasury has gone further. For example, Treasury noted that
COTRs might be unable to assess compliance effectively in the context of legal services. To mitigate this potential problem, Treasury
had all of the attorneys who worked with retained law firms receive training and become COTR-certified.172
Additionally, Treasury has hired two senior-level contract specialists to both supervise and support all pre-award and post-award
procurement actions in support of OFS.
ii. Financial Agency Agreements
OFA is responsible for the administration, day-to-day management, and oversight of the financial agency agreements supporting
the implementation of EESA. OFA assists the Treasury Fiscal Assistant Secretary and Deputy Fiscal Assistant Secretary in the selection, designation, and management of financial agents in support of the TARP. OFA is responsible for providing financial agents
with proper instructions and with formal direction and guidance in
executing their responsibilities under their financial agency agreements. Within OFA, financial agent managers are the primary
points of contact for specific financial agency agreements; their responsibilities include ensuring that funds are obligated to financial
agency agreements and that invoices and accruals are processed in
a timely fashion. In addition, with respect to Freddie Mac’s financial agent functions, senior-level officials within OFS direct and
closely monitor Freddie Mac’s activities, and OFS has four employees assigned to work full-time to oversee Freddie Mac (three of
whom work full time on-site in Freddie Mac’s office).173 Addition168 There

are currently 21 COTRs overseeing Treasury’s contracts.
conversations with Panel staff (Sept. 16, 2010).
conversations with Panel staff (Sept. 2, 2010); U.S. Department of the Treasury,
OFS Actions During Fiscal Year 2010 to Enhance Oversight of TARP Contractor and Financial
Agent Performance (Aug. 19, 2010) (hereinafter ‘‘OFS Actions to Enhance Oversight’’). Treasury
has also indicated that it has trained additional personnel for COTR certification to ensure
workloads are balanced so sufficient attention is given to managing contracts and financial
agency agreements.
171 Id.
172 Treasury conversations with Panel staff (Sept. 16, 2010).
173 Treasury conversations with Panel staff (Sept. 23, 2010); Congressional Oversight Panel,
Written Testimony of Paul Heran, program executive, Making Home Affordable—Compliance,
Freddie Mac, COP Hearing on Treasury’s Use of Private Contractors, at 2 (Sept. 22, 2010) (online
169 Treasury

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170 Treasury

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ally, Treasury’s MHA Compliance Committee (composed of senior
Treasury officials leading the MHA program and chaired by the director of compliance at OFS) meets weekly with Freddie Mac’s
MHA compliance senior management team to discuss the program’s status, issues, and challenges.174
Since September 2009, Treasury has also made organizational
and staffing improvements to strengthen its oversight of financial
agents, including the hiring of seven full-time staff members. Originally anticipated to have only around five staff members, OFA currently has 11 staff, with four more expected to be hired by the end
of 2010. The improvements at OFA also include the hiring of a permanent full-time director who has 10 years of experience in managing billion-dollar federal contracts and Treasury operations supported by financial agents as well as the reorganization of OFA
into dedicated teams charged with the monitoring and oversight of
each major financial agent.175

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iii. Additional Post-Award Management
OFS has created the Contracting Agreement and Review Board
(CARB), which meets at least monthly and is charged with administering contracts and financial agency agreements, ensuring sufficient and effective planning, administration, and management, and
examining issues with planned TARP acquisitions.176
In addition, Treasury hired an executive contract administration
manager to oversee the planning of long-range requirements, implement contract management best practices, and provide leadership and guidance to COTRs and OFA management personnel. The
contract administration manager reports to the OFS chief operating officer and holds weekly roundtable meetings with COTRs to
identify significant issues and actions on particular contracts and
financial agency agreements, facilitate cross-training and professional development of COTRs, and continuously improve the administration and oversight of OFS contracts and agreements.177
OFS has also established OFS–Compliance (OFS–C) to perform
some compliance monitoring. OFS–C currently has 27 employees
and plans to add 20 more positions. Of these 27, five are tasked
with reviewing all of Treasury’s arrangements for conflicts of interest.178 Four employees help monitor the financial agency agreements with Fannie Mae and Freddie Mac, which is discussed in
more detail below, in Annex I. Other staff are not specifically assigned to monitor performance but do so part-time in the course of
reviewing TARP programs such as the CPP.

at cop.senate.gov/documents/testimony-092210-heran.pdf) (hereinafter ‘‘Testimony of Paul
Heran’’).
174 Id. at 2; Treasury conversations with Panel staff (Sept. 23, 2010).
175 U.S. Department of the Treasury, Update on Changes in Key Positions for TARP Oversight
of Contractors and Financial Agents (Sept. 14, 2010).
176 Treasury conversations with Panel staff (Sept. 2, 2010).
177 Treasury conversations with Panel staff (Sept. 2, 2010).
178 For more discussion of this conflicts of interest group, see Section H, infra.

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b. Treasury Procedures for Post-Award Contract and
Agreement Management
i. Procurement Contracts
The specific procedures and metrics Treasury uses to administer
a contract are laid out in each contract on a contract-by-contract
basis. In general, though, Treasury has several layers of controls
to manage contractor performance. The first layer is the COTR,
who monitors contract performance on a daily or weekly basis. The
COTR also prepares a monthly report, which evaluates the contractor for cost control, performance, and business relations.179 For
contracts for legal services, the attorneys who work with the contractor law firm help the COTR prepare these monthly reports. At
present, Treasury’s contracts are overseen by 21 COTRs, with a
COTR overseeing, at most, $38 million worth of contracts and usually much less.
The next layer of controls is the CARB, which reviews the
COTRs’ monthly reports. The CARB monitors performance data
from all contracts to ensure consistent and effective performance
management. Treasury also relies on self-certifications from contractors. For example, contractors must certify that they have accurately reported all conflicts of interest.
Ongoing efforts on the part of Treasury to enhance its oversight
of contractor performance include an OFS Contract Administration
Management Plan, which is a comprehensive strategy to improve
acquisition planning, implement consistent and reliable processes
for contract execution and implementation, manage contractor performance based on level of risk, and reduce reliance on contracted
support as OFS retains in-house expertise.180
In the event that a contract violation is found, the COTR has
several options, including rejecting or withholding payment, stopping or reducing the amount of work the contractor receives, considering the performance as an element of future award decisions,
and issuing a formal notice to the contractor to cure.
These procedures follow well-established norms for monitoring
contract performance.181 Though additional procedures such as requiring independent audits of contractors would provide added assurances of contract performance, it is not clear they would be
worth the added administrative time and expense.182
ii. Financial Agency Agreements
Since September 2009, Treasury has strengthened its infrastructure for monitoring, managing, and overseeing its financial agents,
including the installation of performance measurement and monitoring initiatives.
OFA’s primary mechanism for monitoring compliance with the
terms of a financial agency agreement is agent self-certification.183
179 Treasury

conversations with Panel staff (Sept. 16, 2010).
Actions to Enhance Oversight, supra note 170.
181 Project on Government Oversight conversations with Panel staff (Sept. 27, 2010); Christopher Yukins, Professor of Law, George Washington University Law School, conversations with
Panel staff (Sept. 29, 2010).
182 Christopher Yukins, Professor of Law, George Washington University Law School, conversations with Panel staff (Sept. 29, 2010).
183 Treasury conversations with Panel staff (Sept. 16, 2010).

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180 OFS

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The agent must certify that they are complying with 10 to 15 selected terms of the agreement, such as that all conflicts of interest
have been addressed, and that they safeguarded protected information.184 In addition, agents are required to review the effectiveness
of their internal control processes annually, which most agents do
either by hiring an independent reviewer to perform an SAS 70
audit, 185 or by conducting a comparable internal audit.186 Treasury
also requires agents to submit information regarding conflicts of interest, which it reviews on an ongoing basis.187
OFA has instituted an annual on-site spot check program for financial agents. These spot checks are not formal audits, but instead select a few provisions in the agency agreements and test the
agent’s processes with regard to those provisions. For example, a
spot check may verify that the agent has sufficient measures in
place for protecting confidential information, including that all employees have signed non-disclosure forms.188
In addition to compliance with the terms of the financial agency
agreement, OFA also evaluates agents on their performance under
the financial agency agreement on a monthly or quarterly basis.
The process involves all OFS stakeholders and balances both quantitative and qualitative factors. Quantitative measures include
counts of work product, for example. Qualitative assessments principally consist of interviews with the relevant program officers.189
Survey responses are also used.190 Together, these quantitative
and qualitative assessments are used to create a scorecard, which
is linked to incentive fees in some cases.191
Furthermore, Treasury has instituted a bi-annual customer satisfaction survey of OFA’s internal stakeholders (for example, OFS),
which provides a subjective evaluation of whether the financial
agents are responsive to Treasury requirements.192
If an agent does not perform, OFA relies on general Treasury
procedures to respond. Treasury has a three-strike policy. On the
first instance of non-performance, Treasury will meet the agent,
present proof of non-performance, and establish a remediation
plan, which will be monitored weekly. If the agent fails to perform
again, Treasury will issue a formal letter and possibly issue sanctions. A third incident usually results in termination of the agree184 See, e.g., U.S. Department of the Treasury, Financial Agency Agreement Between U.S. Department of the Treasury and Avondale Investments (Dec. 22, 2009) (Contract No. TOFS–10–
FAA–001)
(online
at
www.financialstability.gov/docs/ContractsAgreements/
Avondale%20Signed%20FAA.pdf); Financial Agency Agreement Between Treasury and BNY
Mellon, supra note 27.
185 An SAS 70 audit is an in-depth review of a company’s control objectives and control activities performed by an independent accounting and auditing firm. It was developed by the American Institute of Certified Public Accountants and is a widely recognized auditing standard. For
more information on the auditing standard, see SAS 70 Audit, SAS 70—Overview (online at
sas70.com/sas70_overview.html).
186 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 6.
187 Treasury conversations with Panel staff (Sept. 16, 2010). For a more complete discussion
of Treasury’s monitoring of contractor and agent conflicts of interest, see Section H, infra.
188 Treasury conversations with Panel staff (Sept. 16, 2010); Prepared Statement of Gary
Grippo and Ronald Backes, supra note 26, at 6.
189 Treasury conversations with Panel staff (Sept. 16, 2010).
190 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 6.
191 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 6.
192 U.S. Department of the Treasury, Update on Changes in OFS Actions for Enhancing Contractor and Financial Agent Oversight (Sept. 14, 2010).

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ment. To date, OFA has not proceeded to this third step against
any agent.193
Despite these several layers of controls, OFA’s procedure has
failed to detect at least one serious failing by an agent. Discussed
in more detail below, in Annex I, Fannie Mae published incorrect
information regarding mortgage borrower re-default rates under
HAMP. The error was detected not by Treasury but by a group of
outside analysts.194 OFS and OFA officials readily admit that
Treasury lacked adequate controls with respect to the communication of program requirements and the validation of data.195 This
admission calls into question the level of independent scrutiny,
verification, and oversight that Treasury has implemented with respect to the monitoring of its financial agents.196 While the Panel
recognizes and appreciates that Treasury’s monitoring and oversight have strengthened over time, proper implementation of the
TARP and oversight of financial agents require rigorous monitoring
and controls from program inception.
Some have argued that the best method for ensuring agent performance is to create monetary incentives in the agreement to reward excellent performance. Such incentives also provide clear
metrics for judging success and would force Treasury to define its
goals for each contract before it is awarded. This technique has
been used in some agreements such as those with Fannie Mae and
Freddie Mac.197 On the other hand, others argue that such incentives are not always necessary. Agents may be motivated to perform well by, for example, a desire to build capacity in a particular
area or the prestige associated with successfully accomplishing the
task.
iii. Subcontracts
Although Treasury’s consent is required before any contractor or
financial agent can engage a subcontractor, Treasury has limited
oversight ability after the subcontract is awarded. Before giving
consent, OFA examines potential financial agent subcontractors to
ensure that there is an adequate budget and that the tasks envisioned for the subcontractor are within the original scope of work.
In addition, the relevant program office can become involved to ensure that program objectives will be met. Contracts are most carefully examined when they involve payment arrangements where
Treasury may bear the risk of cost overruns.198
Prior to giving approval, Treasury also examines all subcontracts
for conflict of interest information. The prime contractor or financial agent is responsible for collecting conflicts information from the
potential subcontractors and submitting it to Treasury. Potential
193 Treasury

conversations with Panel staff (Sept. 16, 2010).
Assessment of the Home Affordable Modification Program (HAMP) Re-Default
Table, Conducted for the U.S. Department of the Treasury—Office of Financial Stability, at 2–
1
(Aug.
9,
2010)
(online
at
www.financialstability.gov/docs/
MITRE%20Final%20Public%20Version%208-6-10.pdf) (hereinafter ‘‘MITRE HAMP Re-Default
Report’’).
195 Treasury conversations with Panel staff (Sept. 23, 2010).
196 This concern is exacerbated by Treasury’s exclusive reliance on Fannie Mae to act as
record keeper and program administrator, which creates significant risks to both effective program implementation and financial agent oversight. For further discussion, see Annex I, infra.
197 For a more complete discussion of incentives in these agreements, see footnote 122, supra.
198 Treasury conversations with Panel staff (Sept. 16, 2010).

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194 MITRE,

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subcontractors have been rejected because of conflicts of interest
issues.199
After approving a subcontract, Treasury primarily relies on the
prime contractor or the financial agent to ensure their subcontractors’ compliance. Prime contractors and financial agents, in their
required self-certifications, also certify to the compliance of their
subcontractors. Prime contractors and financial agents collect ongoing conflicts of interest information from their subcontractors, and
then send this information to Treasury. Treasury, however, does directly collect some information on subcontractors through day-today inquiries, annual reports from prime contractors and financial
agents, and from monthly reports that identify subcontractors, subcontract values, and other information.
Even without direct oversight, Treasury retains tools to control
subcontractor behavior by working through prime contractors and
financial agents. All the terms of the original contract or financial
agency agreement flow down to, and bind, the subcontractors.
Prime contractors and financial agents also remain directly liable
to Treasury in the event that a subcontractor fails to perform adequately.200 In addition, continually adding further layers of direct
oversight risks adding to administrative costs without correspondingly great increases in accountability.201
Despite these controls, however, Treasury lacks critical basic information about subcontractors, such as the text of the subcontracts themselves 202 and the dates on which they were awarded.203 Treasury should collect this information. In addition, though
prime contractor and financial agent direct liability will provide incentive to ensure subcontractors are adequate, it does not necessarily ensure that Treasury receives the best value. More
troublingly, without direct oversight, Treasury will have difficulty
detecting violations of contract terms that are not related to work
product, such as whether or not a subcontractor has ensured the
confidentiality of information or that there are no conflicts of interest. At present, Treasury must simply trust that prime contractors
or financial agents will enforce these provisions.204
F. Evaluation of Small Business Arrangements
Under the FAR, any acquisition between $3,000 and $100,000
must be set aside exclusively for small business concerns, unless
199 Treasury

conversations with Panel staff (Sept. 16, 2010).
conversations with Panel staff (Sept. 16, 2010).
Lawrence Lessig, a Professor of Law at Harvard Law School and Director of the
Edmond J. Safra Foundation Center for Ethics, described this problem as the ‘‘Bee WatcherWatcher’’ problem, referencing the Dr. Seuss story that features a bee being watched by a
watcher, who is in turn watched by another watcher (a watch-watcher), who is in turn watched
by another watcher (a watch-watcher-watcher) in an ever-expanding chain of oversight. Dr.
Seuss, Did I Ever Tell You How Lucky You Are?, at 29 (1973); Lawrence Lessig, Professor of
Law, Harvard Law School, conversations with Panel staff (Sep. 20, 2010).
202 Treasury conversations with Panel staff (Sept. 13, 2010).
203 Treasury conversations with Panel staff (Sept. 16, 2010).
204 This lack of direct oversight and its associated dangers are not unique to Treasury. Treasury’s procedure for managing subcontractors is typical of most government agencies. Steven
Schooner, Professor of Law, George Washington University Law School, conversations with
Panel staff (Oct. 5, 2010); Project on Government Oversight conversations with Panel staff (Oct.
6, 2010). Over the past twenty years, the government’s contract management staff has been cut
while the total value of its acquisitions has increased. This has left the government with insufficient resources for contract management and has eviscerated the resources available for overseeing subcontractors. Steven Schooner, Professor of Law, George Washington University Law
School, conversations with Panel staff (Oct. 5, 2010).
200 Treasury

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201 Professor

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the contracting officer determines that competitive offers from
small businesses cannot be obtained.205 For all other contracts, the
FAR expresses a preference for contracting with small businesses,
but does not require it. No requirements at all exist for small business financial agency agreements.206
From the beginning of the TARP, however, OFS has encouraged
small businesses, including minority-, veteran-, and women-owned
small businesses, to pursue procurement opportunities under both
its contracting authority and for financial agency agreements.207
Where subcontracting opportunities exist for a given work requirement, OFS requires contractors to submit small business subcontracting plans.208 OFS considers a potential contractor’s efforts to
use small businesses as part of its selection criteria for all contracts.209 Each contract is reviewed internally by a small business
specialist to examine opportunities for small business participation.210 In addition, the financial agency agreements for both
Fannie Mae and Freddie Mac provide a floor for the governmentsponsored enterprises’ (GSEs’) use of small business contractors, including minority- or women-owned contractors. In entering into
their financial agency agreements with Treasury, Fannie Mae and
Freddie Mac agreed to ‘‘engage one or more small businesses as
contractors, including minority- or women-owned businesses,’’ in
fulfilling their responsibilities.211 OFS has also reached out to
small businesses, including minority-, veteran-, and women-owned
small businesses. For example, on May 27, 2009, Treasury held an
Industry Day and Small Business Networking event where 11
small businesses presented their capabilities to an audience of approximately 40 interested firms.212 In some cases, OFS has called
small business trade associations to notify them of a new solicitation available to small businesses.213 These efforts notwithstanding, Treasury has received considerable criticism of its efforts
to promote small business contracting. A recurring critique is that
Treasury’s solicitations are too large, covering too much work or too
large a geographic area. Instead of awarding one large contract
that small businesses cannot feasibly perform, these organizations
argue, Treasury should break down the work into multiple smaller
contracts.214 Other criticisms include that Treasury’s outreach efforts have not included small professional services firms such as
205 Federal

Acquisition Regulation, supra note 11, at Subpart 9.5.
2008 GAO Report, supra note 149, at 39.
Government Accountability Office, Troubled Asset Relief Program: One Year Later, Actions Are Needed to Address Remaining Transparency and Accountability Challenges, at 28 (Oct.
2009) (GAO–10–16) (online at www.gao.gov/new.items/d1016.pdf) (hereinafter ‘‘October 2009
GAO Report on Transparency and Accountability’’). One of Treasury’s objectives is to provide
contracting opportunities for small businesses. See Treasury Procurement Contracts and Agreements, supra note 10 (‘‘Treasury actively encourages the participation of small, minority, veteran, and women-owned businesses in fulfilling its needs. . . . Where subcontracting opportunities exist for a given work requirement Treasury requires contractors to submit small business
subcontracting plans with specific goals for small, minority, veteran, and women-owned business
subcontracts.’’).
208 Treasury Procurement Contracts and Agreements, supra note 10.
209 Treasury conversations with Panel staff (Sept. 16, 2010).
210 Treasury conversations with Panel staff (Sept. 16, 2010).
211 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122. For a
more complete discussion of Fannie Mae and Freddie Mac, see Annex I, infra.
212 Treasury conversations with Panel staff (Sept. 16, 2010).
213 Treasury conversations with Panel staff (Sept. 16, 2010).
214 National Association of Minority and Women Owned Law Firms conversations with Panel
staff (Sept. 30, 2010); National Association of Real Estate Brokers conversations with Panel staff
(Oct. 5, 2010).
206 December

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207 U.S.

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41
law firms, 215 and that Treasury has not provided sufficient, conveniently located training sessions on how to win contracts.216
OFS has not established any specific targets for how many contracts, agreements, and subcontracts to award to small businesses.
Treasury in general, however, establishes, in negotiation with the
Small Business Administration, internal goals for small business
contracts. Their goals for disadvantaged, women-owned, and veteran-owned small businesses are subsets of their broader small
business goals. Figure 7 below displays the goals for fiscal years
2010 and 2011.
FIGURE 7: TREASURY’S SMALL BUSINESS CONTRACTING GOALS, FISCAL YEARS 2010 and 2011 217
Goal 218
(Percent)

Category

Prime Contracts
Small Business .........................................................................................................................................................
Small Disadvantaged Business ......................................................................................................................
Women-Owned Small Business .......................................................................................................................
Service-Disabled Veteran-Owned Small Business ..........................................................................................
Subcontracts
Small Business .........................................................................................................................................................
Small Disadvantaged Business ......................................................................................................................
Women-Owned Small Business .......................................................................................................................
Service-Disabled Veteran-Owned Small Business ..........................................................................................

28.5
5.0
5.0
3.0
44.7
5.0
5.0
3.0

217 Office of Small and Disadvantaged Business Utilization, Fiscal Year 2010 & 2011 Small Business Program Goals (online at
www.treas.gov/offices/management/dcfo/osdbu/accomplishments.shtml) (accessed Oct. 12, 2010).
218 The goal is a percentage of contract dollars obligated, not the number of contracts.

OFS initially did not contract with many small businesses, but
has substantially increased its share of small business contracts
over time.219 As of September 30, 2010, a majority of financial
agency agreements (eight of 15) and 13 contracts have been awarded to small businesses. Small businesses have won 55 subcontracts,
although it is possible that Treasury’s lack of transparency regarding subcontractors has concealed even greater opportunities for
small businesses.220 These contracts, subcontracts, and agreements
have already expended $42.3 million to small businesses and have
an obligated value of $54.3 million.
FIGURE 8: TOTAL NUMBER OF CONTRACTS, SUBCONTRACTS, AND FINANCIAL AGENCY
AGREEMENTS, AS OF AUGUST 13, 2010 221
Financial
Agency
Agreements

Prime
Contracts

Large Business ...............................................................................
Service Disabled Veteran Owned Small Business ..........................
Small Business ...............................................................................
Small Disadvantaged Business 222 ................................................
Women and Minority Owned Small Business .................................
Woman Owned Small Disadvantaged Business .............................
Women Owned Small Business ......................................................
Minority Owned Small Business .....................................................
Other ...............................................................................................

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221 Data

60
2
6
1
1
1
2
0
0

Subcontracts

7
0
2
0
0
0
1
5
0

43
2
20
2
5
1
15
10
1

from Treasury (Sept. 30, 2010). Data for contractors to financial agents is as of August 31, 2010.

215 National Association of Minority and Women Owned Law Firms conversations with Panel
staff (Sept. 30, 2010).
216 National Association of Real Estate Brokers conversations with Panel staff (Oct. 5, 2010).
219 October 2009 GAO Report on Transparency and Accountability, supra note 207, at 28–29.
220 The Panel compiled this number from data provided from Treasury (Sept. 30, 2010).

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222 Despite the potential overlap, Treasury used both the Minority Owned Small Business and Small Disadvantaged Business categories in
the data provided to the Panel.

FIGURE 9: VALUE OF CONTRACTS, FINANCIAL AGENCY AGREEMENTS, AND SUBCONTRACTS, AS OF
AUGUST 13, 2010 223
Prime
Contracts

Large Business ...............................................................................
Service Disabled Veteran Owned Small Business ..........................
Small Business ...............................................................................
Small Disadvantaged Business ......................................................
Women and Minority Owned Small Business .................................
Woman Owned Small Disadvantaged Business .............................
Women Owned Small Business ......................................................
Minority Owned Small Business .....................................................
Other ...............................................................................................

$74,551,966
89,032
2241,931,694
0
0
0
1,307,071
0
0

Financial
Agency
Agreements

$180,380,453
0
4,229,167
0
0
0
575,000
9,180,000
0

Subcontracts

$62,095,468
$187,843
14,621,028
191,368
3,466,979
422,499
7,892,877
3,999,121
87,360

223 Data from Treasury (Sept. 30, 2010). All values are expended values. For prime contracts and financial agency agreements, the subcontract values were deducted from the prime contract or financial agency agreement expended value to avoid double counting. Data for contractors to financial agents is as of August 31, 2010.
224 One small business contract had a listed expended value that was less than the value of its subcontract. This resulted in an expended
value that was negative. As a result, this prime contract has been given an expended value of zero for purposes of this Figure.

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Despite OFS’s efforts to promote small business contracting opportunities, large businesses still receive the overwhelming majority of prime contracts, 225 both in terms of value and number. OFS
has not met Treasury’s goals for small business prime contracts.
Indeed, less than 5 percent of prime contract dollars go to small
businesses, far short of the 28.5 percent goal. Though not so far
below the goal as for prime contracts, OFS has also failed to meet
Treasury’s goals for subcontracting dollars. Although Treasury has
made efforts to include small businesses, there remains room to improve.
Also of note is the limited involvement of women- and minorityowned small businesses.226 Despite increases over time in small
business contracting, the situation has not substantially improved
with regard to minority- and women-owned businesses. Only one
prime contract has been awarded to a minority-owned business.
Trade associations representing minority- and women-owned businesses, moreover, state that Treasury has not reached out to them
as it has done for small businesses more generally.227 The Panel
notes with concern the lack of outreach to minority- and womenowned small businesses.
225 A prime contract is the original contract.
226 Treasury has received considerable criticism on this point. See, e.g., Senate Small Business
Committee, Investing in Small Business: Jumpstarting the Engines of our Economy (Jan. 29,
2009) (online at sbc.senate.gov/public/index.cfm?p=Hearings&ContentRecord_id=3fa523ec-87714093-ac96-94f08aecba46&ContentType_id=14f995b9-dfa5-407a-9d3556cc7152a7ed&Group_id=43eb5e02-e987-4077-b9a71e5a9cf28964&MonthDisplay=1&YearDisplay=2009); House Financial Services, Subcommittee
on Housing and Community Opportunity, Minorities and Women in Financial Regulatory Reform: The Need for Increasing Participation and Opportunities for Qualified Persons and Businesses
(May
12,
2010)
(online
at
financialservices.house.gov/Hearings/
hearingDetails.aspx?NewsID=1066); James Byrne, Eye on Washington, Minority Business Entrepreneur (May/June 2009); Marcia Wade Talbert, Opportunities for Minority Contracts in TARP
Limited, Business News (Oct. 25, 2008) (online at www.blackenterprise.com/business/businessnews/2008/10/25/opportunities-for-minority-contracts-in-tarp-limited/).
227 National Association of Minority and Women Owned Law Firms conversations with Panel
staff (Sept. 30, 2010); National Association of Real Estate Brokers conversations with Panel staff
(Oct. 5, 2010); National Association of Securities Professionals conversations with Panel staff
(Oct. 8, 2010).

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G. Evaluation of Transparency and Accountability
Transparency and accountability are of heightened importance in
the context of contracting.228 A contractor is not a government entity. Its employees do not take an oath of office, and it is not obligated to stand for election, so U.S. citizens have no opportunity to
cast a vote on its performance. In this context, it is critical that
Treasury use rigorous transparency and accountability standards
to ensure that the public has access to the identities and performance records of the private entities working with Treasury to implement the TARP.
1. Transparency
A core element of the Panel’s mandate is to examine the ‘‘extent
to which the information made available on transactions under the
[TARP] has contributed to market transparency.’’ 229 In previous
reports, the Panel has examined this issue in detail, stressing the
importance of transparency with respect to a wide array of TARP
programs and institutions.230
Treasury has disclosed a significant amount of information, and
in testimony before the Panel, one expert stated that ‘‘Treasury
earns strong marks for its transparency efforts.’’ 231 Yet despite
Treasury’s provision of basic information on contractors and financial agents, and despite making the contracts and agreements
themselves publicly available, it may be beneficial for Treasury to
disclose key information in three critical areas:
• material information in arrangements, including use of subcontractors;
• performance under arrangements; and
• monitoring procedures.
The absence of sufficient information in these three areas reflects
the critical difference between ‘‘formalistic transparency’’ and
‘‘meaningful transparency’’ that was highlighted in testimony before the Panel.232

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a. Disclosure of Material Information
Treasury has disclosed some information with respect to its relationships with private entities, including the names of both contractors and financial agents, the date the contract was awarded,
the value, and the anticipated end date. Treasury posts a list of the
228 See Congressional Oversight Panel, Testimony of Allison Stanger, Russell J. Leng ’60 Professor of International Politics and Economics, Middlebury College, Transcript: COP Hearing on
Treasury’s Use of Private Contractors (Sept. 22, 2010) (publication forthcoming) (online at
cop.senate.gov/hearings/library/hearing-092210-contracting.cfm) (hereinafter ‘‘Testimony of Allison Stanger’’) (‘‘I am increasingly convinced that getting as much information out in the public
domain and encouraging self-policing behavior, and encouraging the American people to hold
their government accountable is really the key.’’).
229 12 U.S.C. § 5233(b)(1)(A)(iii).
230 See, e.g., August 2010 Oversight Report, supra note 80, at 4 (‘‘In the interests of transparency and completeness, and to help inform regulators actions in a world that is likely to become ever more financially integrated, the Panel strongly urges Treasury to start now to report
more data about how TARP and other rescue funds flowed internationally and to document the
impact that the U.S. rescue had overseas.’’).
231 Congressional Oversight Panel, Written Testimony of Steven Schooner, professor of law
and co-director of the government procurement law program, The George Washington University
School of Law, COP Hearing on Treasury’s Use of Private Contractors, at 5 (Sept. 22, 2010) (online at cop.senate.gov/documents/testimony-092210-schooner.pdf).
232 See Id. at 5.

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contractors and financial agents, as well as the documents themselves, on financialstability.gov.233
Not all material information is publicly available, however. While
Treasury provides basic information on the total value of the contract and the general services to be provided by the contractor, it
does not provide ‘‘detailed information’’ on the contractor’s obligations under the contract or on specific expenses incurred.234 Many
of the contracts are task or delivery order contracts, where critical
specifics typically appear in task orders, rather than in the contracts themselves.235 Treasury does not release these task orders to
the public; it maintains that it does not disclose them due to the
volume of the orders.236 Treasury also does not disclose hourly
rates for law firms. On one hand, Treasury should make as much
information available as possible, but on the other, billing rates
may be regarded as the type of trade secret that traditionally has
been exempted from disclosure requirements. An expert testified
before the Panel that while not ‘‘all cost or pricing data should be
protected by the government, protecting proprietary information is
the general rule.’’ 237
In addition, Treasury does not publicly disclose detailed information with respect to the names and duties of subcontractors, nor
does it publish the subcontracts themselves. The result is that in
cases in which contractors delegate substantial portions of their duties to subcontractors, the public possesses limited access to information.238 Subcontractor status operates like an umbrella, shielding contractors, financial agents, and Treasury from the need to
disclose valuable information about the disposition of taxpayer
funds.239
In one case, Treasury awarded a contract to a ‘‘small disadvantaged business’’—Anderson, McCoy & Orta, an Oklahoma City
small business—which (with Treasury approval, as required) in
turn delegated roughly 80 percent of the contract to Cadwalader,
a ‘‘large business.’’ 240 Thus, although on the surface it appears that
the contract is being performed by a small business, in actuality a
233 Treasury updates the site approximately every 30 days. List of Procurement Contracts and
Agreements Under EESA, supra note 8 (accessed Oct. 12, 2010); Treasury conversations with
Panel staff (Aug. 30, 2010).
234 June 2009 GAO Report on Transparency and Accountability, supra note 57, at 84.
235 See Section D.1.a, supra.
236 Treasury conversations with Panel staff (Sept. 16, 2010).
237 Congressional Oversight Panel, Written Testimony of Scott Amey, general counsel, Project
on Government Oversight, COP Hearing on Treasury’s Use of Private Contractors, at 4 (Sept.
22, 2010) (online at cop.senate.gov/documents/testimony-092210-amey.pdf).
238 GAO has noted Treasury’s subcontracting process and its efforts to ensure that small businesses, minority-owned businesses, and women-owned businesses are well-represented. See June
2009 GAO Report on Transparency and Accountability, supra note 57, at 63–64. Of course, while
it may be true that a substantial percentage of subcontracts have been awarded to these types
of businesses, this evidence is obscured from public view because it is not made publicly available. The fact that it is not publicized makes it difficult to identify both cases of concern, such
as the Anderson contract example discussed in the paragraph below, and success stories.
239 Based on past practice, it seems reasonable to think Treasury would be capable of disclosing information on subcontractors. See Congressional Oversight Panel, Written Testimony of
Allison Stanger, Russell Leng ’60 Professor of International Politics and Economics, Middlebury
College, COP Hearing on Treasury’s Use of Private Contractors, at 6, 8 (Sept. 22, 2010) (online
at cop.senate.gov/documents/testimony-092210-stanger.pdf) (hereinafter ‘‘Testimony of Allison
Stanger’’) (‘‘The old version of USAspending.gov used to have a page entirely dedicated to subcontracts and linked to the home page. . . . I stand ready to be persuaded otherwise, but to
date, I have found most concerns about the costs of transparency to be misplaced, excessively
focused on the short term at the expense of the sustainable.’’).
240 Data provided to Panel staff by Treasury (Aug. 27, 2010).

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large business is essentially responsible for performance.241 Because information on subcontracts is not made public, this fact is
likely to remain obscured from public view.242
According to two experts who testified before the Panel, one option for addressing concerns about disclosure is to include more robust disclosure terms in future contracts and agreements. In certain situations—such as the TARP, which was designed and implemented during a period of extreme economic upheaval—these provisions could require disclosure of certain information that could be
withheld during ‘‘normal’’ times under other disclosure regimes.
Such contracts could require the disclosure of certain types of proprietary information. Including such provisions would allow potential contractors and agents to decide in advance whether they want
to enter an arrangement that imposes heightened disclosure responsibilities. Yet in considering this option, it is important to recognize that emergency situations may call for Treasury to hire competent contractors within a very short period of time. Program implementation should not be placed at risk by incorporating disclosure provisions that discourage potential bidders. On the other
hand, in certain types of economic emergencies, business considerations may put Treasury in a strong negotiating position. In the
fall of 2008, for example, Wall Street firms—both law firms and financial firms—were losing business rapidly. Simultaneously,
Treasury was soliciting contracts for work that was both lucrative
and prestigious. In such a situation, Treasury may be able to secure qualified contractors despite the inclusion of expanded disclosure provisions in the contracts.

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b. Disclosure of Performance
Treasury publishes almost no information on the performance of
contractors and financial agents during the life of the arrangement.
For example, the monthly MHA reports mention the activities of
the HAMP compliance agent, but offer few specifics on whether the
agent is actually meeting performance targets. There is even less
information available on the performance of other retained entities.
This lack of disclosure makes it hard to determine whether the
process has been aggressive, robust and transparent enough. As a
result of this lack of disclosure, it is impossible for the public to
verify that a retained entity is acting in accordance within the
terms of its arrangement or to advocate for arrangements to be
canceled when a contractor is performing poorly. Thus, in the absence of more detailed information on performance while the arrangement is active, any public concerns about a retained entity’s
performance are likely to surface after it has already been paid in
full.
241 While it is not illegal for a small business contractor to subcontract to a large business,
this practice raises red flags. After all, although a contractor is not obligated to subcontract with
a small business when it pursues a subcontract, the example in the text above highlights one
way in which limited disclosure makes it difficult for the public to assess the degree to which
small businesses are involved in the implementation of the TARP.
242 Cf. October 2009 GAO Report on Transparency and Accountability, supra note 207, at 28
(‘‘The share of work by small businesses—including minority-and women-owned businesses—
under TARP contracts and financial agency agreements has grown substantially since November
2008, when only one of Treasury’s prime contracts was with a small business and only one minority small business firm was a subcontractor with a large business contractor.’’).

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Other relevant aspects of performance are also not disclosed to
the public. While Treasury has provided detailed guidance on how
retained entities should address conflict of interest issues, it does
not disclose information concerning ongoing conflict monitoring and
mitigation efforts.243 Additionally, neither contractors nor financial
agents have published any qualitative information on ‘‘best practices’’ or implementation challenges. The absence of this type of
qualitative information deprives future generations of policymakers
of a useful tool for learning how to deploy contractors and agents
effectively.244
c. Disclosure of Monitoring Procedures
Prior to the Panel’s hearing on TARP contracting on September
21, 2010, Treasury had not publicly disclosed significant details
about its procedures for monitoring TARP contracts and agreements. Treasury testimony during the hearing illuminated several
of these monitoring procedures, including daily oversight by COTRs
for contracts and quantitative monthly or quarterly measures for financial agents.245 While these disclosures are useful in helping the
public understand Treasury’s monitoring procedures, there are additional disclosures that would enhance the transparency of the
monitoring process.
First, Treasury does not make the results of its monitoring efforts publicly available, so it is difficult to determine whether these
monitoring efforts are successful. Second, Treasury created detailed
‘‘Policies and Procedures’’ to govern its relationship with contractors and financial agents, 246 but it has not made these documents
public. Treasury maintains that it generally does not disclose ‘‘policies and procedures’’ and that they are intended to be used solely
for internal processes.247 Regardless of past practice, disclosure of
the documents is particularly important with regard to financial
agents because of their unique status: unlike traditional contractors who are awarded procurement contracts with the federal government, financial agents are not subject to the FAR.

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2. Accountability
When it passed EESA, Congress emphasized the importance of
accountability. One of the statute’s purposes was to ensure that the
use of TARP authority was subject to ‘‘public accountability.’’ 248
243 After submitting their original conflict-of-interest mitigation plans, some entities submitted
amended plans to Treasury. Data provided by Treasury staff to Panel staff (Sept. 14, 2010).
Nonetheless, Treasury does not publish these amended plans, nor does it publish information
on ongoing conflict assessments or ongoing mitigation efforts. See also Testimony of Allison
Stanger, supra note 228 (‘‘[Y]ou really can’t talk about mitigating conflicts of interest until you
see what the interests are. That’s why I come down on the side of radical transparency.’’).
244 As noted in at the Panel’s hearing on contracting, better availability of ‘‘best practices’’ information would have assisted government officials and retained entities in employing the best
possible processes for establishing and carrying out their TARP contracts and agreements. See
Congressional Oversight Panel, Testimony of Steven Schooner, professor of law and co-director
of the government procurement law program, The George Washington University School of Law,
Transcript: COP Hearing on Treasury’s Use of Private Contractors (Sept. 22, 2010) (publication
forthcoming) (online at cop.senate.gov/hearings/library/hearing-092210-contracting.cfm) (‘‘[F]rom
an aspirational standpoint, there’s always room for improvement on a contract-by-contract basis.
We can all sit down and do better. Give them a little more time and a lot more staff, a little
bit of training and some more best practices, there’s plenty of room for improvement.’’).
245 See Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 6.
246 See Section B.4, supra.
247 Treasury conversations with Panel staff (Oct. 4, 2010).
248 12 U.S.C. § 5201(2)(D).

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Notwithstanding this concern, EESA enabled the Secretary to use
private entities to implement the TARP, even though private parties—unlike public officials—would not be subject to traditional accountability mechanisms, such as public elections, direct Congressional oversight, or statutory disclosure regimes like the Freedom
of Information Act (FOIA). For these reasons, establishing rigorous
oversight mechanisms is essential to fulfilling Congress’s mandate
that contractors and financial agents are held accountable.249
Treasury has taken several steps to attempt to enhance accountability of contractors and financial agents, such as making contracts and agreements available online, describing financial agents’
fiduciary duties in the text of the agreements, assigning oversight
responsibility to specific Treasury employees, and training those
employees to oversee contractors’ performance.250 Treasury also
hired additional full-time staff to assist with monitoring efforts.251
Yet while Treasury has taken significant steps to improve its accountability regime, the regime remains imperfect. Treasury has
failed to provide detailed, public descriptions of its plans for holding contractors and agents accountable.252 Some of the earliest
TARP contracts included weak language on the contractors’ transparency and accountability duties.253 For example, the contract
with the law firm Simpson Thacher & Bartlett LLP included no
provisions on transparency and accountability.254 Similarly, subcontractors of financial agents are bound neither by agency law nor
by the FAR.255 The result is that some of the entities responsible
for implementing the TARP are subject to an amorphous accountability regime.
Fannie Mae and Freddie Mac provide relevant examples.256 Although they may be somewhat unique, they demonstrate some of
the shortcomings of the existing accountability regime. For instance, although Treasury outlined broad, general goals for HAMP
249 See Senate Budget Committee, Written Testimony of James Carafano, director, Douglas
and Sarah Allison Center for Foreign Policy Studies, The Heritage Foundation, Responsible Contracting: Modernizing the Business of Government, at 1 (July 15, 2010) (online at budget.senate.gov/democratic/testimony/2010/Carafano_Testimony_715.pdf)
(‘‘Getting
contracting
right is a fundamental responsibility of good governance—essential to the practice of limited
government and fiscal responsibility.’’).
250 U.S. Government Accountability Office, Troubled Asset Relief Program: March 2009 Status
of Efforts to Address Transparency and Accountability, at 39 (Mar. 2009) (GAO–09–504) (online
at www.gao.gov/new.items/d09504.pdf).
251 Data provided by Treasury staff to Panel staff (Sept. 15, 2010). While Treasury’s decision
to hire additional staff to monitor contractors’ performance constitutes a meaningful step toward
enhancing accountability, the scale of Treasury’s contracting efforts—as well as the myriad subcontract agreements that exist—suggests that Treasury may still not have adequate capacity to
conduct truly comprehensive monitoring. In addition, the staffing challenge lies not only at the
first level of monitoring, but also at the second level: effective monitoring necessitates that monitors are supervised such that they are held accountable for their performance as well. Developing a system to ‘‘monitor the monitors’’ risks the creation of layer upon layer of oversight.
252 Treasury created ‘‘Policies and Procedures’’ that provide some guidance on its relationships
with financial agents, but they apply only to financial agents, provide few details on specific
accountability mechanisms (such as the methods Treasury will use to monitor performance), and
cover only five subject areas, omitting key issues like public disclosure obligations. See Section
B.4, supra.
253 See SIGTARP Initial Report to the Congress, supra note 54, at 5 (‘‘SIGTARP also recommended that transparency and oversight-related language be inserted in recent TARP contracts; Treasury included such language in the recent auto industry, Citigroup, and Bank of
America contracts, making them far superior than earlier contracts from an oversight perspective.’’).
254 See U.S. Department of the Treasury, Contract Between U.S. Department of the Treasury
and Simpson Thacher & Bartlett (Oct. 10, 2008) (Contract No. TOFS–09–D–0009) (online at
www.financialstability.gov/docs/ContractsAgreements/Simpson%20Contract%2010′10′08.pdf).
255 See Section B.1.b, supra.
256 See Annex I, infra.

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in March 2009, Treasury has not announced specific performance
metrics for the program, nor has it revised its initial objectives as
circumstances have changed. In the absence of benchmarks for the
program that are both more specific and more realistic, it is difficult to determine whether Fannie Mae and Freddie Mac are performing adequately under their financial agency agreements. Moreover, OFS has not yet developed written procedures for oversight
and monitoring of the two entities, which makes it difficult for OFS
to monitor performance systematically and ‘‘identify key risks’’ in
the program.257
Moreover, contractors are not bound by the FOIA, a core accountability tool that applies to federal agencies.258 Therefore, substantial portions of the work performed to effectuate the TARP may be
forever shielded from public scrutiny. Without access to this information, it will be challenging for the public to hold Treasury, as
well as its contractors, subcontractors, and financial agents, fully
accountable.259
H. Discussion of Conflicts of Interest

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As discussed in more detail in Section B, Treasury issued the Interim Final Rule on January 21, 2009 to guide contractors, financial agents, and subcontractors (collectively referred to as ‘‘retained
entities’’) in the performance of their agreements with Treasury.260
The rule is relatively extensive and comprehensive in some areas,
but weak in others. In terms of many traditional ethical issues—
such as acceptance of gifts and other sorts of ‘‘bribes’’ during the
contract solicitation process—the regulations are robust. Of the
public comments filed in response to the publication of the interim
rule, several opposed the rule on the grounds that it would impose
undue regulatory burdens on retained entities, and for potential
contractors, the costs of compliance would outweigh the benefits of
receiving the contract. According to these comments, the effect
would be to discourage the strongest firms from bidding on TARP
contracts and subcontracts. In contrast, none of the public comments stated that the regulations were too lax or insufficiently extensive.261
While it is challenging to address the merits of these comments
without more disclosure from Treasury and retained entities—
257 U.S. Government Accountability Office, TARP Management Report: Improvements are
Needed in Internal Control Over Financial Reporting for the Troubled Asset Relief Program, at
13 (June 30, 2010) (GAO–10–743R) (online at www.gao.gov/new.items/d10743r.pdf) (hereinafter
‘‘June 2010 GAO Report on Internal Control Over Financial Reporting’’).
258 FOIA obligates federal agencies to disclose requested information unless they are able to
show that it is covered by one of nine exemptions. In contrast, contractors are permitted to disclose requested information, but they are not obligated to do so. 5 U.S.C. § 552(b). See also Federal Acquisition Regulation, supra note 11, at 24.20. Likewise, financial agents are not compelled to comply with the FOIA.
259 See Senate Budget Committee, Written Testimony of Allison Stanger, Russell Leng ’60 Professor of International Politics and Economics, Middlebury College, Responsible Contracting:
Modernizing the Business of Government, at 7 (July 15, 2010) (online at budget.senate.gov/
democratic/testimony/2010/Stanger_Testimony_715.pdf) (‘‘The American people need to be able
to see where and how their tax dollars are spent—right through to the sub-award level. Companies as well as governments can operate with the purest of intentions, but if their most important transactions are opaque to the public, they will lose trust and effectiveness.’’).
260 See Section B.3, supra (discussing the ‘‘TARP Conflicts of Interest’’ regulations, which are
codified in the Code of Federal Regulations at 31 CFR § 31).
261 See generally TARP Conflicts of Interest, supra note 37 (listing all public comments to the
Interim Final Rule on TARP Conflicts of Interest, none of which fault the rule for being insufficiently extensive).

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Treasury has not made information on compliance costs or ongoing
mitigation efforts publicly available—the public comments on the
IFR do reflect Treasury’s broad conception of its ‘‘conflict of interest’’ mandate. Section 107 of EESA requires only that the Secretary
‘‘issue regulations or guidelines necessary to address and manage
or to prohibit conflicts of interest,’’ including ‘‘any other potential
conflict of interest, as the Secretary deems necessary or appropriate in the public interest.’’ 262
Yet despite being faced with these sparse requirements, Treasury
drafted the IFR to include a broad array of provisions covering a
diverse set of subjects, regulating everything from the disclosure of
nonpublic information—including requiring ‘‘periodic training’’ for
employees on the proper handling of nonpublic information—to ‘‘favors’’ and gifts.263 Just as the IFR takes steps beyond the minimal
obligations imposed by EESA in terms of the breadth of its coverage, it also takes a robust approach in terms of the strictness of
its methodology for dealing with two core types of conflicts of interest: OCI and PCI. EESA does not require Treasury to bar all conflicts of interest: the statute permitted Treasury simply to develop
regulations to ‘‘address and manage or to prohibit’’ them.264 Instead, the IFR prohibits all OCIs and PCIs unless they have been
mitigated or Treasury waives them.265 The presumptive prohibition
seems to reflect an aggressive approach to certain types of conflicts
of interest.
However, the regulations do not address all situations in which
conflicts of interest could arise. The Panel is concerned about the
potential for a conflict of interest to develop in the following situations:
• Treasury treats a retained entity differently in Treasury’s
exercise of its public responsibilities;
• A retained entity carries out its assignments in a manner
that serves its interest and not the public interest;
• A retained entity carries out its assignments in a manner
that serves the interest of the entity’s other clients;
• A retained entity uses information it obtains from its work
for the TARP in a manner that benefits itself or its other clients.
The discussion below lays out the basis for the Panel’s concerns
in greater detail.
1. Treasury Gives Preferential Treatment to a Retained Entity
There are four situations in which Treasury’s relationship with
a retained entity could compromise its ability to act impartially in
the exercise of its public responsibilities.
• Treasury contracts with a firm and then seeks to regulate the
firm or its industry.
• Treasury enters into an arrangement with a contractor or financial agent—or that contractor or financial agent enters into
an arrangement with a subcontractor—and subsequently insmartinez on DSKB9S0YB1PROD with HEARING

262 12

U.S.C. § 5218(a).
CFR §§ 31.213(a)(1), 31.217(c)(3).
264 12 U.S.C. § 5218(a) (emphasis added).
265 31 CFR § 31.211(a); 31 CFR § 31.212(a).
263 31

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tends to hire an employee from one of those retained entities,
or one of the retained entities intends to hire a Treasury employee.
• Treasury develops an overreliance on one specific firm because
it has entered multiple arrangements with that firm.
• Treasury hires a contractor or financial agent—or that contractor or financial agent hires a subcontractor—that needs
government support in the future.
The remainder of this subsection addresses each of these situations in turn.
a. Future Industry Regulation
Acting in its regulatory capacity, Treasury may need to regulate
a business that it is also employing to do work. It is hard to see
how Treasury could avoid the perception of a conflict of interest if
it implements industry-specific regulations or regulates an individual business, and such oversight could have direct implications
for the ability of a contractor or financial agent to perform.266 The
perception of a conflict may be particularly likely to arise if, as discussed above, a company enters an arrangement with Treasury at
below-market rates and expects that it will receive advantages in
subsequent legislative, regulatory or enforcement initiatives.
It is also possible that a firm could attempt to leverage its relationship with Treasury to enhance its capacity to lobby effectively
with other regulators, such as the Federal Reserve or the FDIC.
This concern is particularly relevant in the wake of the DoddFrank Wall Street Reform and Consumer Protection Act,267 when
firms are engaged in intense lobbying of the government as it begins the rulemaking process required by the statute.

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b. Hiring
Although EESA explicitly requires the Secretary to issue regulations that address ‘‘post-employment restrictions on employees,’’ 268
the IFR includes no provisions related to this issue. According to
the ‘‘Supplemental Information’’ provided in the Federal Register,
the IFR omits this issue because Treasury believes it is ‘‘already
adequately covered by existing law.’’ 269
Existing regulations do provide guidance on this issue.270 On his
first day in office, President Barack Obama issued an executive
order that required government appointees and lobbyists entering
government to pledge not to work on ‘‘any particular matter involving specific parties that is directly and substantially related to my
former employer or former clients, including regulations and contracts’’ for two years. Employees leaving the government are also
required to take a pledge that they will abide by post-employment
266 Treasury asserts that it maintains a wall between its regulatory functions and its policy
and political functions. Testimony of Gary Grippo, supra note 49. Whether it maintains such
a separation or not, the perception of a conflict may nonetheless arise if it issues regulations
that appear to favor certain contractors, agents, or their respective industries over others.
267 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111–203 (2010).
268 12 U.S.C. § 5218(a).
269 TARP Conflicts of Interest, supra note 37.
270 Executive Order 13490 of January 21, 2009: Ethics Commitments by Executive Branch Personnel, 74 Fed. Reg. 4673 (Jan. 26, 2009) (hereinafter ‘‘Executive Order 13490’’). Additional restrictions on executive branch officials ‘‘seeking other employment’’ are published in the Code
of Federal Regulations at 5 CFR § 2635.601 et seq.

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communication restrictions and that they will refrain from lobbying
executive branch officials until the conclusion of the Administration.271
Despite the merit of these provisions, without more disclosure
from Treasury, it is difficult to determine whether Treasury has
confronted any potential conflicts issues for either its employees
seeking employment in the private sector or for private sector employees seeking opportunities at Treasury. Treasury does not publicly disclose information that identifies the employment paths of
its employees. As a result, it is challenging to assess whether the
issue of the ‘‘revolving door’’ has been addressed appropriately.272
c. Overreliance on Individual Firms
Ensuring that contracts and agreements are awarded to a broad
group of firms may be critical to minimizing conflicts of interest.273
Awarding a large number or value of contracts or agreements to
one specific firm may leave Treasury overly reliant on that particular institution. Such overreliance may cause Treasury to be disproportionately dependent on certain firms or industries. For example, Treasury may be less likely to expedite meaningful reforms of
Fannie Mae and Freddie Mac when it has employed them for combined arrangements of $240.5 million and when these firms agreed
to provide their services at cost, receiving no profit from the
deals.274 Forcing senior Treasury officials into the simultaneous
role of regulator and client may place them in an awkward position. Likewise, Treasury may be hesitant to implement certain
types of accounting reforms when it has an outstanding contract of
$24.6 million with PricewaterhouseCoopers, particularly when such
reforms would subject the investment of taxpayer funds to more
risk.275 In addition, Treasury awarded contracts of roughly $27
million to Cadwalader, rather than distributing the legal work
among a wider array of law firms. As a whole, disproportionate reliance on particular firms leaves Treasury less nimble to consider
the widest possible array of regulatory options and also makes
Treasury more vulnerable to lobbying efforts by specific institutions
and industries.
d. Future Government Support
The IFR does not prevent Treasury from providing significant future financial support to entities that it has hired as contractors in
the past or that are performing work for Treasury under a contract

271 Id.
272 Lawrence

Lessig conversations with Panel staff (Sept. 23, 2010).
testified that its preference is to engage multiple firms, rather than relying on
a single entity. Congressional Oversight Panel, Testimony of Ronald W. Backes, director of procurement services, U.S. Department of the Treasury, Transcript: COP Hearing on Treasury’s
Use of Private Contractors (Sept. 22, 2010) (publication forthcoming) (online at cop.senate.gov/
hearings/library/hearing-092210-contracting.cfm).
274 Congressional Oversight Panel, Testimony of Joy Cianci, senior vice president, Making
Home Affordable Program, Fannie Mae, Transcript: COP Hearing on Treasury’s Use of Private
Contractors (Sept. 22, 2010) (publication forthcoming) (online at cop.senate.gov/hearings/library/
hearing-092210-contracting.cfm) (hereinafter ‘‘Testimony of Joy Cianci’’). See also Annex I, infra.
275 List of Procurement Contracts and Agreements Under EESA, supra note 8.

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273 Treasury

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in the present.276 On one hand, such a prohibition may appear to
be unnecessary: Treasury’s criteria for providing any assistance
should focus on the institution’s importance to the broader economy
and the extent of its need for assistance, not on whether Treasury
has existing arrangements with the institution.
But on the other hand, Treasury’s previous or ongoing relations
with a company may skew its view of both of these criteria. Perhaps Treasury would be inclined to perceive an institution as more
important if it was performing substantial, valuable work as a contractor. Or perhaps it would be less reluctant to allow an institution to fail if failure meant that a company would not be able to
perform a contract for which it had already been paid. Companies
may also exert pressure on Treasury, particularly if they contract
with the government at standard government rates, which are
often below-market rates.277 For example, Fannie Mae and Freddie
Mac agreed to provide services at cost, receiving no profits from the
agreements.278 Firms that agree to such arrangements may believe
that their willingness to provide services at cheap rates entitles
them to a better deal when they run into financial difficulties. On
the other hand, it may be improbable that Treasury would give
such firms preferential treatment in light of the likelihood that the
size of the contracts would be small relative to the scope of the
firms’ financial difficulties.279 However, given the absence of specific provisions in the IFR related to this issue, as well as an absence of any additional guidance from Treasury, it is not clear how
Treasury would address this situation.280 Without more concrete
guidance on this issue, it is possible that future awards of financial
assistance to contractors and financial agents could raise the appearance of a conflict of interest.

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2. Retained Entity Serves its own Interest and Not the Public Interest
A significant concern is that a contractor will carry out its contractual responsibilities so as to serve its own interest, rather than
the public interest.281 When there is a melding of government and
private entities—in terms of both interests and personnel—it may
be difficult to pinpoint how and where public interests align with
private interests and how and where they diverge. For example,
the GSEs may have an interest in maximizing the performance of
276 The Secretary’s authority to make all funding commitments under the TARP ended on October 3, 2010. See 12 U.S.C. § 5230(b). However, in the future, it is conceivable that the government could provide financial support to institutions under a different program.
277 See Section H.1.a, supra.
278 Testimony of Joy Cianci, supra note 274. See also Annex I, infra.
279 For example, as discussed in more detail in Annex I, infra, the combined obligated value
of the Fannie Mae and Freddie Mac agreements is approximately $219 million, but both firms
reported combined losses in excess of $108 billion in 2008.
280 See Letter from Danielle Brian, executive director, Project on Government Oversight, to the
Chairs and Ranking Members of the Senate Committee on Banking, Housing, and Urban Affairs, the Senate Committee on Finance, the House Committee on Financial Services, and the
Joint Economic Committee (May 19, 2009) (online at www.pogo.org/pogo-files/letters/financialoversight/er-b-20090519.html) (hereinafter ‘‘Letter from Danielle Brian to Congressional Leadership’’) (‘‘It is imperative that Treasury establish strong conflict of interest policies for the TARP,
because while the firms that were awarded TARP procurement contracts also have to follow the
conflict of interest rules in the Federal Acquisition Regulation, it appears that other firms are
being retained as ‘financial agents’ and would only have to follow the TARP rules.’’).
281 See, e.g., Testimony of Allison Stanger, supra note 239, at 6, 8 (‘‘Government by contract
means that government is entirely dependent on the private sector to conduct its daily business,
so effective oversight is too often hostage to a corporate bottom line.’’).

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their mortgage loan portfolios, which could potentially conflict with
their responsibilities to administer HAMP and enforce servicer
compliance uniformly.282 In addition, the GSEs may have sought
these agreements in order to curry favor with Treasury despite the
fact that the agreements do not contribute to their long-term profitability.
It is very challenging to develop regulations that are sufficient to
address this concern fully, as it is almost inevitable that any rule
or contract will allow some flexibility for entities to make independent decisions that could prioritize their own interests over others. While the IFR includes provisions that address many aspects
of this concern, such as its prohibitions on organizational conflicts
of interest, there are still opportunities for retained entities to act
to maximize their own self-interest.283 Perhaps the most effective
tool to minimize this possibility is to include strong provisions in
the contract to bind retained entities to perform at a high level
that serves the public interest.284 As described in more detail in
Sections C and D, Treasury has adopted robust provisions in many
of its contracts and agreements, and many of its monitoring and
compliance procedures appear to be stringent. Nonetheless, the
Panel believes that it is important to continue to monitor this issue
to ensure that contractors serve the public interest. The Panel also
recognizes that if errors are made during the selection process,
there may be some conflicts that cannot be mitigated even if they
are subjected to an intensive monitoring process.
3. Retained Entity Serves its Clients’ Interest and Not the
Public Interest
It is also conceivable that a retained entity would act to promote
the interest of its clients, rather than the public interest. As discussed above, the IFR and the arrangements themselves include
provisions that attempt to ensure that the entity provides the services requested by the government. The introduction to the rule acknowledges that ‘‘retained entities may find that their duty to private clients impairs their objectivity when advising Treasury.’’ 285
Even so, it is inevitable that some flexibility will remain that would
allow an entity to promote private, rather than public, interests.
For example, the GSEs’ business relationships with servicers could
potentially conflict with their duties to administer HAMP uniformly and to ensure that servicers comply with the program’s
guidelines.286 Likewise, the choice of Cadwalader raises questions
about conflicts since the firm has represented a number of TARP
recipients, including General Motors and Ally.287 It is important to

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282 See

Annex I, infra.
283 Transcript Testimony of Scott Amey, supra note 37 (‘‘I think that there are possible ways
to get around these conflicts, because just mitigating them and coming up with firewalls that
somebody in a different building [sic] doesn’t seem to be adequate to me.’’).
284 See Section G.1.a, supra.
285 TARP Conflicts of Interest, supra note 37.
286 See Annex I, infra.
287 In total, Cadwalader represented three clients with respect to which it also represented
Treasury: GM, Ally Financial, and First Bancorp. It maintains that the aggregate revenues from
these three clients accounted for less than 1 percent of the firm’s revenues in each of the last
five years. Data provided by Treasury and Cadwalader to Panel staff (Oct. 5, 2010). Treasury
maintains that Cadwalader did not perform TARP-related work for any of its clients. Treasury
conversations with Panel staff (Sept. 28, 2010).

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continue to monitor Treasury’s arrangements with private entities
to ensure that they act in the public interest as much as possible.
In order to ensure that these monitoring efforts are robust, it is important to know both the clients of retained entities and their relative importance to the firm.288
It merits mention that the Panel invited Cadwalader to testify at
its September 22, 2010 hearing, entitled ‘‘Treasury’s Use of Private
Contractors.’’ In a letter to the Panel on September 21, 2010, John
J. Rapisardi, co-chairman of Cadwalader’s Financial Restructuring
Department, declined the invitation, citing ‘‘the difficulty [testifying] would cause in protecting the privilege of both the United
States Treasury and our other clients in this forum.’’ The letter
also stated that the firm was ‘‘willing to provide the Panel with
pertinent information provided that the interests of the Firm’s clients are not prejudiced.’’ 289 This deference to the interests of the
firm’s clients perfectly illustrates the potential conflicts that could
result from Treasury’s contracting procedures.

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4. Retained Entity Uses Nonpublic Information to Benefit
Itself or its Clients
The IFR contains provisions that govern the use of nonpublic information. The introduction to the rule states that ‘‘retained entities may find that their duty to private clients impairs . . . their
judgment about the proper use of nonpublic information.’’ 290 An
entire subsection of the rule deals with confidentiality issues.291 It
specifies that nonpublic information should not be disclosed unless
necessary and should not be used ‘‘to further any private interest
other than as contemplated by the arrangement.’’ 292 It also requires each retained entity to take ‘‘appropriate measures to ensure
the confidentiality of nonpublic information and to prevent its inappropriate use’’ and to ‘‘document these measures in sufficient detail
to demonstrate compliance.’’ 293
In testimony before the Panel, BNY Mellon outlined a series of
steps it has taken in an attempt to mitigate potential problems
that could arise from its possession of sensitive information.294 It
used information barrier policies that limit information sharing on
a ‘‘need to know’’ basis, a restricted securities list, ‘‘enhanced access
controls’’ for TARP-related documents (including electronic files),
nondisclosure agreements, and physical separation of employees
servicing the TARP from employees engaged in asset management
activities. At an individual level, employees are required to provide
disclosures on a quarterly basis, and they are restricted from certain personal trading activities.295 It is not clear, however, that all
288 With respect to Cadwalader, the Panel requested information regarding clients’ relative importance to the firm. However, Treasury declined to request this information from its client.
289 Letter from John J. Rapisardi, co-chairman of Cadwalader’s Financial Restructuring Department, to Naomi Baum, executive director of the Congressional Oversight Panel (Sept. 21,
2010) (emphasis added).
290 TARP Conflicts of Interest, supra note 37.
291 31 CFR § 31.217.
292 31 CFR § 31.217(b).
293 31 CFR § 31.217(c).
294 AllianceBernstein
has instituted similarly robust conflict mitigation procedures.
AllianceBernstein conversations with Panel staff (Sept. 30, 2010).
295 Congressional Oversight Panel, Written Testimony of Mark Musi, chief compliance and
ethics officer, Bank of New York Mellon, COP Hearing on Treasury’s Use of Private Contractors,
at 3 (Sept. 22, 2010) (online at cop.senate.gov/documents/testimony-092210-musi.pdf).

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firms have conflict mitigation processes that are as robust as BNY
Mellon’s.
Yet despite Treasury’s commendable efforts to restrict the inappropriate use of nonpublic information, it is extremely difficult to
eliminate the concern entirely. Employees of retained entities may
be exposed to nonpublic information that would benefit them in future private pursuits, long after the termination of the TARP relationship. Similarly, the information could assist their lobbying
strategies or other types of future engagement with the government. For these reasons, this concern should be monitored even
after the TARP expires.

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5. Does the IFR Alleviate Conflicts of Interest?
As discussed above, the IFR does not address several key situations that could result in conflicts of interest. Without more guidance, it is possible that if any of these situations were to arise, the
public could perceive that a conflict of interest exists. In addition,
because much of the monitoring of conflicts of interest is based on
self-disclosure by retained entities, Treasury may not have sufficient information to ensure that all relevant conflicts are addressed.296 The weaknesses of the IFR create a ripe opportunity for
Treasury to fill these gaps in the final version of the rule. Alternatively, ‘‘radical transparency’’ of information on contracts, financial agreements, and subcontracts, including disclosure of ongoing
conflict-of-interest monitoring efforts, could help to alleviate the
perception of conflicts.297
More broadly, however, the conflict-of-interest regulations highlight the fundamental conundrum that plagues the TARP’s implementation: when the government is tasked with intervening in the
private sector to stabilize a faltering economy, how can it partner
with private industry while simultaneously preserving public values? This tension is evidenced with respect to specific institutions.
When Morgan Stanley, for example, is acting as a financial agent
for the U.S. government, will Treasury’s ability to develop fair economic policies for the financial industry be compromised? Similarly,
the cases of Fannie Mae and Freddie Mac are evidence of some of
the possible conflicts that may persist despite the presence of the
IFR and Treasury’s monitoring regime.298 In addition, to what extent would truly robust conflict-of-interest regulations impede
Treasury’s ability to hire the highest-performing contractors and financial agents? While it is in Treasury’s interest to remain attractive to the private entities capable of the best performance and to
generate the highest possible rates of return on its investments,
296 Letter from Danielle Brian to Congressional Leadership, supra note 280 (‘‘[I]t appears that
both the Fed and Treasury are mostly relying on the asset managers for self-disclosure.’’). Treasury has stated that it ‘‘independently review[s] the conflicts posture’’ for all retained entities and
that the IFR was intended solely to outline the responsibilities of retained entities, not to reflect
or narrow the range of monitoring activities that Treasury is entitled to undertake on its own.
Testimony of Gary Grippo, supra note 49; Treasury conversations with Panel staff (Sept. 23,
2010). Nonetheless, Treasury largely relies upon self-disclosure by these entities of the underlying data regarding potential conflicts issues, and then it uses this data as the basis of its own
review. Most importantly, it is possible for entities to withhold information from Treasury, and
it is difficult for Treasury to then uncover this information with the level of granularity necessary to identify a potential conflict of interest.
297 For an extended discussion of the benefits of transparency and areas in which enhanced
transparency may be possible, see Section G, supra.
298 See Annex I, infra.

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Treasury must also develop policies that are consistent with public
values, such as fairness and transparency. In some instances, these
values necessarily impose costs, making the contracts less appealing to private firms. At the same time, these costs are critical to
ensuring that the public understands how the government uses its
money, who receives this money, and the quality of the work that
the government receives for the money it spends.
I. Activities of Other Oversight Bodies

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As part of their broader duty to oversee the TARP, GAO and
SIGTARP have explored the issue of TARP contracting and intend
to publish further on this subject near the time of this report’s release.
SIGTARP has released seven quarterly reports to Congress since
the enactment of EESA. Each of these reports has briefly discussed
or offered recommendations regarding an element of TARP contracting.299 SIGTARP’s initial report to Congress, released on February 6, 2009, recommended that all TARP agreements be posted
online. This recommendation was fully implemented on January
28, 2009.300 Furthermore, the majority of SIGTARP reports have
cautioned that conflicts of interest may exist at any level of the
TARP’s administration.
On May 14, 2010, SIGTARP sent an engagement memo to Herbert M. Allison, Jr., the then-Assistant Treasury Secretary for Financial Stability, detailing its intention to audit Treasury’s process
in procuring professional services for TARP.301 This audit aims to
accomplish two goals: (1) to assess whether the contract prices for
these services were fair and reasonable; and (2) to examine the invoices delivered by the contractors to establish whether they reflect
actual work completed.
In addition to its work on TARP contracting, SIGTARP has also
addressed issues relating to PPIP. The Audit Division of SIGTARP
currently has two audits focused on PPIP, one on internal controls
and one on the selection of asset managers. The scope of these audits includes the criteria used in the selection of managers, issues
of conflicts of interests, as well as internal controls and compliance.302 The results of SIGTARP’s internal compliance audit, in299 See Office of the Special Inspector General for the Troubled Asset Relief Program, Quarterly Report to Congress, at 147–151 (Apr. 21, 2009) (online at www.sigtarp.gov/reports/congress/
2009/April2009_Quarterly_Report_to_Congress.pdf); Office of the Special Inspector General for
the Troubled Asset Relief Program, Quarterly Report to Congress, at 91–92, 171–183 (July 21,
2009)
(online
at
www.sigtarp.gov/reports/congress/2009/
July2009_Quarterly_Report_to_Congress.pdf); Office of the Special Inspector General for the
Troubled Asset Relief Program, Quarterly Report to Congress, at 87, 159–161 (Oct. 21, 2009) (online at www.sigtarp.gov/reports/congress/2009/October2009_Quarterly_Report_to_Congress.pdf)
(hereinafter ‘‘Quarterly Report to Congress’’); Office of the Special Inspector General for the
Troubled Asset Relief Program, Quarterly Report to Congress, at 140–141 (Jan. 30, 2010) (online
at www.sigtarp.gov/reports/congress/2010/January2010_Quarterly_Report_to_Congress.pdf); Office of the Special Inspector General for the Troubled Asset Relief Program, Quarterly Report
to Congress, at 25–28 (July 21, 2010) (online at www.sigtarp.gov/reports/congress/2010/
July2010_Quarterly_Report_to_Congress.pdf) (hereinafter ‘‘July 2010 SIGTARP Report’’).
300 SIGTARP Initial Report to the Congress, supra note 54.
301 Office of the Special Inspector General for the Troubled Asset Relief Program, Engagement
Memo—Review of Treasury’s Process for Contracting for Professional Services Under the Troubled Asset Relief Program (May 14, 2010) (online at www.sigtarp.gov/reports/audit/2010/
SIGTARP%20Memo%20Contracting%20for%20Professional%20services%205.14.10.pdf).
302 July 2010 SIGTARP Report, supra note 299, at 25–28. Treasury selected the following fund
managers for PPIP: AllianceBernstein L.P. and its sub-advisors Greenfield Partners, LLC and
Rialto Capital Management, LLC; Angelo, Gordon & Co., L.P. and GE Capital Real Estate;

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cluding recommendations for Treasury, have so far been evidenced
by a series of letters.303 SIGTARP released the audit report on the
selection of asset managers on October 7, 2010.304 Due to
SIGTARP’s engagement in this area, contracts with the PPIP asset
managers are not examined in this report.
In early November, GAO plans to release a report focusing specifically on TARP contracting. The report will provide an assessment of the effectiveness of Treasury’s contracting under the TARP
as well as its implementation of recommendations.
J. Conclusion and Recommendations

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The TARP was unique in its size and scope and the speed with
which it was implemented. In light of these factors, it is not surprising that the government sought outside assistance. Indeed, although the overall amount expended on outsourced work is significant, it is relatively modest in light of the size of the TARP itself.
As more work is pushed to private contractors and agents, however, inevitable and perhaps troubling consequences become apparent. Accountability and transparency decrease, and the potential
for conflicts of interest increases. The particular requirements of
the TARP exacerbated these problems, as some of the services required by Treasury were obtained from law firms and financial institutions that are not by their nature transparent and have many
other clients operating in the financial industry, which may have
interests that conflict with those of the government.
As discussed above, Treasury has been responsive in adopting
the recommendations of oversight bodies, and has earned some
praise from the GAO and expert witnesses both for its contracting
process and the transparency of its process. Despite the pressing
needs of the financial crisis, Treasury complied with the FAR, although it could have waived its provisions, and in some circumstances went above and beyond what it was required to do.
This praise must be viewed in context, however. Government contracting is notoriously nontransparent, and it is possible to perform
well on a comparative basis, and yet be capable of significant improvement.
The Panel recommends that Treasury address the following
issues:
• Treasury should include performance incentives in contracts
and agreements, where appropriate.
• Transparency and accountability
—Material facts: Critical information, such as task orders,
should be made public. In the future, Treasury should consider
including more stringent disclosure provisions in contracts and
agreements so as to obligate retained entities to disclose all
relevant material information.
—Rationale and decision-making process: Treasury should
better explain its rationale and decision-making process behind
BlackRock, Inc.; Invesco Ltd.; Marathon Asset Management, L.P.; Oaktree Capital Management,
L.P.; RLJ Western Asset Management, LP.; The TCW Group, Inc.; and Wellington Management
Company, LLP. U.S. Department of the Treasury, Legacy Securities Public-Private Investment
Program
(Sept.
17,
2010)
(online
at
www.financialstability.gov/roadtostability/
legacysecurities.html#press).
303 July 2010 SIGTARP Report, supra note 299, at 281–282.
304 SIGTARP Report on PPIP, supra note 5.

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58
choosing to use contractors and financial agents rather than
performing a specific function within Treasury. This is especially important in cases where Treasury enters into contracts
or financial agency agreements with institutions like Fannie
Mae and Freddie Mac that have received or are likely to receive substantial government assistance.
—Performance: Treasury should regularly publish progress
updates on the performance of contractors and financial
agents. Treasury should publish qualitative information on
progress made by contractors and financial agents that include
information on ‘‘best practices’’ and implementation challenges.
—Monitoring procedures: Treasury should disclose the results of its efforts to monitor contracts and agreements. Treasury should also publicly release its ‘‘Policies and Procedures’’
documents and information concerning the control Treasury retains over the direction of the TARP, the types of oversight
Treasury exercises over its TARP contractors and financial
agents, and the level of input that TARP contractors and financial agents have with respect to program development, execution, and policy decisions.
—Accountability: Treasury should provide detailed, public
descriptions of its plans for holding contractors and agents accountable, including the processes it plans to employ to promote a culture of accountability for subcontractors. Any such
plans should detail the level of disclosure that is necessary to
hold contractors, agents, and subcontractors accountable.
• Subcontracting
—Material facts: Treasury should require all contractors to
disclose the names and duties of all subcontractors, the values
of the subcontracts, and the subcontracts themselves.
—Small business plans: Treasury should require its financial
agents to submit small business subcontracting plans, and
Treasury should make this information publicly available.
Treasury should also seek to make more subcontracts available
to small businesses.
• Conflicts of Interest
—Final rule on conflicts: Treasury should adopt a final rule
on conflicts of interest for contractors, agents, and subcontractors. Nearly 22 months have passed since the IFR was issued,
far longer than the 60-day notice and comment period. A final
rule will provide retained entities with more regulatory certainty.
—Immediate disclosure of all conflicts and mitigation efforts:
Treasury should disclose detailed, ongoing conflict-of-interest
findings for all entities, including ongoing conflict mitigation
efforts and the information upon which these findings are
based. Where possible, Treasury should remove the redactions
of material conflict-of-interest information.
—Ongoing disclosure: Treasury should also make regular
disclosures of conflicts of interest that arise in the course of the
performance of the arrangement, which should include updated
information on entities’ mitigation efforts.

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—Compliance costs: Treasury contractors, agents, and subcontractors should publish costs they have incurred in complying with the IFR.
—Plans for addressing conflicts of interest: Treasury should
develop and publicize plans for addressing the four potential
conflicts of interest discussed in this report: (1) preferential
treatment of retained entities by Treasury, (2) retained entities
that serve their own interests, rather than the public interest,
(3) retained entities that serve their clients’ interests, rather
than the public interest, and (4) retained entities that use nonpublic information to benefit themselves or their clients.
—Self-disclosure: While Treasury clearly takes its responsibility for monitoring conflicts seriously, it relies on contractors
and agents to provide most of the underlying data upon which
their reviews are based. While this may largely be due to the
scope and scale of the arrangements, Treasury should consider
alternatives that make it less reliant on the retained entities
for factual information, such as conducting intensive spot
checks on individual entities.

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ANNEX I: FANNIE MAE AND FREDDIE MAC: A CASE
STUDY

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Here, the Panel examines in-depth issues related to two of the
financial agency agreements that Treasury has entered into under
EESA: those with Fannie Mae and Freddie Mac. The Panel is examining these two contracts in more detail for two reasons. First,
these financial agency agreements together represent the largest
part of the TARP procurement contract and financial agency agreement universe. Of the $436.7 million in total obligated value for all
TARP procurement contracts and financial agency agreements,
Treasury has obligated $126.7 million under Fannie Mae’s financial
agency agreement and $88.9 million under Freddie Mac’s financial
agency agreement. To date, Treasury has expended $111.3 million
and $79.3 million on its financial agency agreements with Fannie
Mae and Freddie Mac, respectively.305 Second, Fannie Mae and
Freddie Mac have such a key responsibility in a program designed
to prevent qualified borrowers from losing their homes through
foreclosure and, as such, play an instrumental role in implementing one of the core purposes of EESA—homeownership preservation.306 The Panel intends to pursue this topic further in its November 2010 report on the status of Treasury’s foreclosure mitigation efforts.
In February 2009, Treasury entered into financial agency agreements with Fannie Mae and Freddie Mac to provide services under
the Administration’s MHA program, which provides mortgage relief
to qualifying homeowners. Treasury executed financial agency
agreements with Fannie Mae and Freddie Mac to administer and
enforce compliance with HAMP, respectively.307 These roles are
distinct from these entities’ participation in HAMP as holders or
guarantors of mortgages.
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) chartered by Congress with a mission of providing liquidity, stability, and affordability to the U.S. housing and mortgage markets. Fannie Mae and Freddie Mac operate in the U.S.
secondary mortgage market by purchasing and securitizing mortgages, rather than making direct mortgage loans.308
305 For comparative purposes, while Treasury had expended less than $500 million on HAMP
mortgage modifications as of September 30, 2010, its expenditures under its Fannie Mae and
Freddie Mac agreements currently equal $190.6 million.
306 12 U.S.C. § 5201.
307 HAMP is designed to help struggling homeowners avoid foreclosure by reducing their
monthly mortgage payments to 31 percent of their pretax monthly income. In order to be eligible, a borrower must meet three criteria: (1) the borrower must be delinquent on their mortgage
or facing imminent risk of default; (2) the property must be the borrower’s primary residence;
and (3) the mortgage was originated before January 1, 2009 and the unpaid principal balance
must be no greater than $729,750. If a borrower is eligible, participating servicers will then reduce the borrower’s mortgage payment for a trial period. If the borrower successfully makes payments and provides certain documentation for three months, then the modification is made ‘‘permanent,’’ for five years. For further information about, and discussion concerning, HAMP, see
March 2009 Oversight Report, supra note 3; October 2009 Oversight Report, supra note 3; April
2010 Oversight Report, supra note 3.
308 Congress established Fannie Mae in 1938 to create a secondary market for loans insured
by the Federal Housing Administration (FHA), but its charter was amended in 1954 so that it
could focus on the secondary market more generally. In 1970, Congress established Freddie Mac
as a new government-chartered entity to provide an additional source of liquidity for mortgage
loans. Office of Management and Budget, Analytical Perspectives: Budget of the U.S. Government, Fiscal Year 2011, at 349 (Feb. 1, 2010) (online at www.whitehouse.gov/sites/default/files/
omb/budget/fy2011/assets/spec.pdf) (hereinafter ‘‘Analytical Perspectives: Budget of the U.S. Government, FY 2011’’).

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The features of Fannie Mae’s and Freddie Mac’s government
charters (for example, a line of credit with Treasury, public mission
requirements, limited competition, and lower capital requirements)
created the perception of a government guarantee, which played a
part in the GSEs becoming significantly overleveraged and undercapitalized. In 2008, Fannie Mae and Freddie Mac reported combined losses in excess of $108 billion.309 The Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie
Mac, placed Fannie Mae and Freddie Mac into conservatorship on
September 6, 2008, and they continue to function as governmentbacked enterprises.310
Edward J. DeMarco, the acting director of FHFA, recently described their legal status in testimony before the House Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises. According to Mr. DeMarco, ‘‘[t]he statutory purpose of conservatorship is to preserve and conserve each company’s
assets and put them in a sound and solvent condition. The goals
of conservatorship are to help restore confidence in the companies,
enhance their capacity to fulfill their mission, and mitigate the systemic risk that contributed directly to instability in financial markets. The Enterprises are responsible for normal business activities
and day-to-day operations, subject to FHFA supervision. FHFA exercises oversight as safety and soundness regulator, and, as conservator, holds the powers of the management, board, and shareholders of each Enterprise.’’ 311 Mr. DeMarco commented further
that ‘‘[a] principal focus of the conservatorships is to maintain the
Enterprises’ secondary mortgage market role until legislation produces a resolution of their future. FHFA’s oversight is also directed
toward minimizing losses, limiting risk exposure, and ensuring the
Enterprises price their services to address their costs and risk adequately. He also stated that ‘‘neither company would be capable of
serving the mortgage market today without the ongoing financial
support provided by the Treasury.’’ 312 Although Fannie Mae and
Freddie Mac have been delisted, their stocks continue to trade over
the counter.
Even though Fannie Mae and Freddie Mac have a complicated
legal relationship with the government as a result of their being
placed into conservatorship over two years ago, they became the
government’s financial agents when they agreed to perform HAMP
administration and compliance for the Treasury Department. As
309 Federally regulated banks must hold 4 percent capital against their mortgages, but Fannie
Mae and Freddie Mac were required to hold only 2.5 percent capital against their on-balance
sheet mortgage portfolio, and only 0.45 percent against mortgages they guaranteed. See House
Committee on Financial Services, Written Testimony of Timothy F. Geithner, Secretary, U.S.
Department of the Treasury, Housing Finance—What Should the New System Be Able to Do?:
Part I—Government and Stakeholder Perspectives, at 8–11 (Mar. 23, 2010) (online at
www.house.gov/apps/list/hearing/financialsvcs_dem/testimony_-_geithner.pdf).
310 In connection with the GSEs being placed into conservatorship, Treasury agreed to provide
financial support to the GSEs through the establishment of Preferred Stock Purchase Agreements. In December 2009, Treasury decided to replace the $200 billion cap on Treasury’s funding commitment to each GSE with a formulaic cap that increases above $200 billion by the
amount of any losses and decreases by any gains (but not below $200 billion), which will become
permanent at the end of three years. See Analytical Perspectives: Budget of the U.S. Government, FY 2011, supra note 308, at 350.
311 House Financial Services, Subcommittee on Capital Markets, Insurance, and GovernmentSponsored Enterprises, Written Testimony of Edward J. DeMarco, acting director, Federal Housing Finance Agency, The Future of Housing Finance: A Progress Update on the GSEs, at 2 (Sept.
15, 2010) (online at financialservices.house.gov/Media/file/hearings/111/DeMarco091510.pdf).
312 Id. at 2.

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discussed above, this results in their having a fiduciary obligation
of loyalty and fair dealing to Treasury, including the requirement
to act in the best interests of Treasury, and not their own interests,
in performance of their duties under the agreements.313
A. Role of Fannie Mae in HAMP
In serving as the administrator for HAMP, Fannie Mae’s principal responsibilities include: implementing the guidelines and policies for the program and preparing the requisite forms; instructing
participating mortgage servicers how to modify loans; serving as
paying agent to calculate subsidies and compensation consistent
with program guidelines; serving as recordkeeper for executed loan
modifications and program administration; and coordinating with
Treasury and other parties toward achievement of the program’s
goals.314 By also functioning as the program interface for servicers,
Fannie Mae provides information and resources to servicers to implement the program.
B. Role of Freddie Mac in HAMP
As the compliance agent responsible for the HAMP Compliance
Program, Freddie Mac is responsible for ensuring that servicers are
satisfying their obligations under the HAMP Servicer Participation
Agreements.315 Because of the confidential and proprietary information to which it has access, Freddie Mac has established a separate and independent division to conduct its compliance activities,
named Making Home Affordable-Compliance (MHA–C), which is
responsible for evaluating and reporting to Treasury on mortgage
servicers participating in HAMP and their compliance with HAMP
requirements. In addition, Treasury asked Freddie Mac, in its role
as compliance agent, to develop a ‘‘second look’’ process pursuant
to which MHA–C audits a sample of HAMP modification requests
to double-check the servicer’s determination on the request.
C. Analysis of Treasury’s Selection of Fannie Mae and
Freddie Mac

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In April 2010, the Panel stated: ‘‘Treasury still needs to provide
detailed public information related to its selection and use of
Fannie Mae as financial agent and HAMP program administrator
and Freddie Mac as compliance agent. The effectiveness of the financial agent/program administrator and financial agent/compliance agent is instrumental to the success and accountability of
HAMP, making the selection process for these agents especially important.’’ 316
At the Panel’s September 22, 2010 hearing on Treasury’s use of
its exceptional crisis contracting authority under EESA, Deputy Assistant Secretary Gary Grippo provided further background regarding Treasury’s decision-making with respect to selecting Fannie
313 For further discussion concerning the nature of financial agents and the confines of the
principal-agent legal relationship, see Sections A and B.1.b, supra.
314 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit A.
315 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit A.
316 April 2010 Oversight Report, supra note 3, at 88.

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Mae and Freddie Mac as its financial agents. Mr. Grippo stated
that Treasury selected Fannie Mae and Freddie Mac to perform
HAMP-related duties and responsibilities after making the determination that no other public or private entities (including FHFA
and not-for-profits) had the operating capabilities, infrastructure,
and resources to operate a foreclosure mitigation program on a national scale.317
In further conversations between Treasury and the Panel staff,
however, it has become apparent that Treasury selected Fannie
Mae and Freddie Mac based on three criteria.
• First, given their housing knowledge of a nationwide scope and
resources and capabilities they acquired in the course of performing their unique role in housing finance markets (including loss mitigation expertise), Treasury determined that the
GSEs possessed the unique ability to set up a nationwide program such as HAMP. Since the Administration initially projected that HAMP would assist up to 3 to 4 million at-risk
homeowners,318 selecting institutions with the pre-existing capacity and infrastructure became particularly important.319
• Second, Treasury’s determination was also based in part upon
the time frame for implementing HAMP. It was critical for
Treasury to select agents that were capable of getting a large
program off the ground quickly since HAMP was launched just
several weeks after it was announced.320
• Finally, as part of the market research that it conducted in October 2008 with respect to the purchases of troubled assets
from troubled financial institutions, Treasury identified the
GSEs as being very well qualified to help administer and operate a large program on a nationwide scope.321
In early 2009 (during the midst of a financial crisis), it is likely
that other public or private sector alternatives might have been
available to assist Treasury with TARP-related services and responsibilities.322 However, on the one hand as discussed above, it
is not clear that Treasury had other time-effective options given
the relative infrastructure, capabilities, and resources issues that
were at the crux of the GSEs’ selection. On the other hand, the extent to which the GSEs had the infrastructure, capabilities, and resources is not absolutely clear given the amount of subcontracting
they engaged in to help fulfill their responsibilities. Treasury never
considered the Federal Housing Administration (FHA), which provides mortgage insurance on loans made by FHA-approved lenders
throughout the United States and its territories, to be a viable option because it ‘‘lacked the infrastructure given its market footprint
317 Testimony

of Gary Grippo, supra note 49.
Department of the Treasury, Making Home Affordable: Updated Detailed Program Description (Mar. 4, 2009) (online at www.treas.gov/press/releases/reports/housing_fact_sheet.pdf).
319 Treasury conversations with Panel staff (Sept. 27, 2010).
320 Treasury conversations with Panel staff (Sept. 27, 2010).
321 Treasury conversations with Panel staff (Sept. 27, 2010).
322 The Panel notes that Fannie Mae and Freddie Mac entered into subcontracts with for-profit companies to assist with their HAMP-related responsibilities during this time. However, it
is important to note that other potential alternatives, including Wells Fargo and Bank of America, who were facing their own balance sheet issues at the time, received substantial TARP assistance, and may not have been capable of carrying out such duties and responsibilities over
the long-term.

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318 U.S.

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and the nature of its business as an insurer.’’ 323 According to Mr.
Grippo, ‘‘[s]imply put, we made a determination that there were no
other parties with the capabilities and infrastructure to operate a
national mortgage modification program. And I can point to experiences that we had in October and November of 2008 in making
that determination.’’ 324 The decision to select the GSEs for these
responsibilities, however, was made with the approval and encouragement of FHFA.325
Testimony from the Panel’s recent hearing, however, suggests
that the roles of Fannie Mae and Freddie Mac as financial agents
were not simply an extension of what they were already doing and
also that they may not have had the operating capabilities and infrastructure to operate a national foreclosure mitigation program.
For example, given that the responsibilities that Freddie Mac is
tasked with under its financial agency agreement are somewhat
different from the other types of compliance activities it conducts,
it needed to hire staff and recruit personnel with a slightly different skill set (for example, strong auditors that understood controls and control-based auditing). Paul Heran, program executive
for MHA–C at Freddie Mac, stated that after being asked by Treas323 Treasury

conversations with Panel staff (Oct. 7, 2010).
of Gary Grippo, supra note 49; Treasury conversations with Panel staff (Oct.

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324 Testimony

7, 2010).
In his testimony, Mr. Grippo noted that the GSEs are unique since they ‘‘have connections
to all the servicers across the country’’ and ‘‘have the information technology capability to manage information related to millions of loans at the loan level, as well as the human capital to
implement a national program.’’
In conversations with Panel staff, Mr. Grippo also noted that in October 2008, Treasury
launched (but ultimately did not commence) two programs to purchase troubled assets—a program to purchase residential mortgage-backed securities and a program to purchase whole
loans—directly from the institutions that held them. As part of this process, Treasury issued
a public notice soliciting interest from financial institutions to serve as financial agents to administer the whole loan purchase program. More than 70 institutions (including both Fannie
Mae and Freddie Mac) submitted bids indicating that they were best qualified to be tasked with
this responsibility. After conducting due diligence and a thorough evaluation, Treasury concluded that the only entities that could operationally manage this task were the GSEs since
they had, among other resources and capabilities, the loan-level information technology requirements and pre-existing servicer relationships. If Treasury had commenced this program, it
would have selected the GSEs to assist with the program. Once the Administration decided in
early 2009 to launch a foreclosure mitigation program centered on mortgage modifications, however, Treasury again concluded that the GSEs were best able to set up such a program in a
‘‘reasonable amount of time.’’ The GSEs’ selection was a consensus decision made by the Treasury Department, the National Economic Council, and the Department of Housing and Urban
Development after extensive consultation, meetings, policy discussions, and consideration of
other options. Whereas other private sector options (including private commercial banks) might
have been viable options for performing credit risk and asset management services, Treasury
concluded that the GSEs were exclusively capable of helping administer a mortgage modification
program. Treasury conversations with Panel staff (Oct. 7, 2010).
325 Treasury conversations with Panel staff (Oct. 7, 2010) (during which Mr. Grippo indicated
that FHFA ‘‘was involved from the very beginning,’’ provided its explicit authorization for Treasury’s selection, and ‘‘always had firsthand knowledge of everything.’’); FHFA conversations with
Panel staff (Oct. 8, 2010); Caroline Herron, former vice president and HAMP consultant, Fannie
Mae, conversations with Panel staff (Oct. 6, 2010).
In conversations with Panel staff, FHFA representatives stated that their approval of Treasury’s decision to enter into financial agency agreements with Fannie Mae and Freddie Mac was
based on two criteria. First, the GSEs have the statutory authority to perform various types
of services for the Federal Reserve, home loan banks, and other governmental entities. They are
also authorized to be employed as fiscal or other agents of the federal government, and the Secretary of the Treasury is authorized to make those designations. FHFA determined that the
roles that Treasury would task Fannie Mae and Freddie Mac with were consistent with the
goals of the conservatorship process (for example, a loss mitigation program would help minimize losses by stabilizing the markets and benefitting the GSEs’ portfolios). Second, the GSEs
had the operational capabilities (including servicer relationships, leadership, and familiarity
with housing finance issues) to successfully manage such tasks.
FHFA also noted that while Treasury had initially proposed that the GSEs would be performing the same tasks under HAMP, it advised Treasury to reallocate those roles and give
them different responsibilities.

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ury in February 2009 to serve as HAMP compliance agent, Freddie
Mac’s task ‘‘essentially was to create a wholly new business function and organization, hire staff (which . . . included transferring
qualified personnel from the existing Freddie Mac organization),
and begin operations immediately.’’ 326 The type of work Treasury
asked Fannie Mae to perform as HAMP administrator is also not
within its core competence, nor does Fannie Mae have experience
as a client consulting company. These issues raise important questions as to whether Treasury’s decision-making undermined the
conservatorship process (and exposed the GSEs to additional risk)
by transferring qualified personnel that could otherwise have focused their efforts on returning the GSEs to a sound and solvent
condition.
On one hand, Treasury’s decision to contract with Fannie Mae
and Freddie Mac after they were placed into conservatorship has
caused some to raise concerns about whether the government was
intending to affect their solvency by awarding them large financial
agency agreements. New York Times columnist David Brooks recently commented that ‘‘agencies fail and get rewarded with more
responsibilities.’’ 327 Vesting Fannie Mae and Freddie Mac with key
roles in a program designed to help stabilize the entire housing
market may have provided further benefit and stability to the
GSEs on a macroeconomic level. It may be that the resources
Fannie Mae and Freddie Mac are devoting to their HAMP responsibilities are simply surplus resources within these two firms during a housing market downturn (which, in the absence of the
HAMP work, would be left idle). Viewed in this light, Treasury’s
decision is only appropriate if using the GSEs is more cost-effective
and efficient than turning to other federal resources or contracting
with other private firms.
On the other hand, the TARP financial agency agreements with
Fannie Mae and Freddie Mac are not material in relation to the
economics of the conservancy of those firms.328 As discussed above,
it is difficult to envision a scenario where these financial agency
agreements had any material bearing on either firm’s financial
health, given the relative small size of the contracted amount, in
the context of the more than $90 billion in losses reported between
the two GSEs in 2009.329 Any concern as to whether Treasury’s decision-making was intended to affect the GSEs’ solvency is further
lessened by the nature of Fannie Mae’s and Freddie Mac’s financial
agency agreements with the Treasury Department, which are ‘‘set
at cost, with no mark-up for profit.’’ 330 Furthermore, Mr. Grippo
326 Testimony

of Paul Heran, supra note 173, at 1.
Brooks, The Responsibility Deficit, New York Times (Sept. 23, 2010) (online at
www.nytimes.com/2010/09/24/opinion/24brooks.html).
328 If Fannie Mae and Freddie Mac were to collect the full obligated value under their financial agency agreements, it would amount to $219 million. Since their conservatorship is going
to cost the federal government several hundred billion dollars, the entire TARP financial agency
agreements, at the maximum possible amount, represent only a fraction of the conservatorship
amount.
329 For further discussion concerning how Treasury decided what functions to contract out in
making its contracting and financial agent designations, see Section C.1, supra. See also footnote
78, supra, for further discussion concerning how the TARP financial agency agreements represent a small percentage of Fannie Mae and Freddie Mac’s annual net revenue.
330 Congressional Oversight Panel, Written Testimony of Joy Cianci, senior vice president,
Making Home Affordable Program, Fannie Mae, COP Hearing on Treasury’s Use of Private Contractors, at 4 (Sept. 22, 2010) (online at cop.senate.gov/documents/testimony-092210-cianci.pdf)
Continued

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327 David

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testified at the Panel’s recent hearing that Treasury’s decisionmaking in engaging Fannie Mae and Freddie Mac as financial
agents was not driven by a desire to prop them up.331 ‘‘We had engaged the operating capability of the GSEs. Their information technology, their ability to deal with dozens if not hundreds of servicers
in implementing HAMP.’’ 332 Treasury has not used ‘‘those parts of
their business related to their credit risk management standards,
how they ran their own portfolio, or any other credit risk decisions
that they made in the subprime space.’’ 333 The Panel notes, however, that the HAMP engagement, although not dispositive to the
economic survival of Fannie Mae and Freddie Mac, did give the
GSEs the opportunity to present themselves in the best possible
light to the Treasury officials who may well be involved in determining the GSEs’ ultimate fate.
D. Discussion of Conflicts of Interest

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In addition to the IFR, which binds all of Treasury’s arrangements with contractors and financial agents, Fannie Mae and
Freddie Mac are subject to the conflicts of interest mitigation and
information barriers contained within their respective financial
agency agreements. These internal controls center on the responsibilities of Fannie Mae and Freddie Mac to ensure the non-disclosure of non-public information and certain program information to
personnel involved with other Fannie Mae or Freddie Mac (or subcontractor) activities that may conflict with duties owed by the
GSEs to Treasury. According to the GSEs’ financial agency agreements, there are four actual or potential conflicts of interest associated with their status as financial agents.334 These four actual or
potential conflicts appear to be comprehensive and carefully
thought-out:
• The GSEs’ interests in maximizing the performance and
minimizing the costs of their retained and guaranteed mortgage loan portfolios, which could potentially conflict with
their responsibilities to administer HAMP uniformly and for
all borrowers and investors and enforce servicer compliance
with program guidelines, respectively;
(hereinafter ‘‘Written Testimony of Joy Cianci’’); Treasury and Freddie Mac conversations with
Panel staff (Sept. 27, 2010). The Panel notes that although the GSEs’ financial agency agreements are at-cost, with no mark-up for profit, the subcontracts they have entered into to help
carry out their HAMP-related responsibilities are not at-cost, but allow the subcontractors to
generate profit. Given that the taxpayers will ultimately cover all of the costs of HAMP, either
because of their ownership stakes in Fannie Mae and Freddie Mac or because they ultimately
pay all of Treasury’s bills, taxpayers may not be indifferent as to how much Fannie Mae and
Freddie Mac are being compensated.
While the financial agency agreements for both Fannie Mae and Freddie Mac provide each
with the opportunity to receive performance incentive payments, Treasury has indicated that
no such incentive payments have been made, and has taken the incentive payment clause off
the table indefinitely. Treasury conversations with Panel staff (Sept. 22, 2010). See also Testimony of Joy Cianci, supra note 274 (stating that ‘‘[t]here was a provision in the original contract
that provided for the potential for incentives. We have not received incentives to date. And we’re
in the process of working through a revision to that contract. My understanding is that there
will not be an incentive framework forward.’’).
331 Testimony of Gary Grippo, supra note 49.
332 Id.
333 Id.
334 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F; Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at
Exhibit F.

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• The GSEs’ business relationships with servicers, which could
potentially conflict with their duties to administer HAMP
uniformly and enforce servicer compliance with program
guidelines, respectively;
• The GSEs’ interests in benefitting from HAMP interest rate
or principal reduction payments and loan modifications of
mortgages in their own portfolios (whether owned or guaranteed), which could potentially conflict with their duties to administer HAMP uniformly for all investors and enforce
servicer compliance with program guidelines, respectively;
and
• The financial interest of GSE employees in banks or investment funds that could receive or benefit from HAMP interest
rate or principal reduction payments, which could potentially
conflict with the interests of Treasury.
As the list above demonstrates, Fannie Mae and Freddie Mac appear to have more obvious conflicts of interest than any other contractor or financial agent. Although HAMP operates to modify nonGSE mortgages, there is a companion program under HAMP to
modify GSE mortgages. As discussed in several of the Panel’s previous reports, the federal government committed $75 billion to
HAMP, with $50 billion of TARP funds allocated to modify privatelabel mortgages and $25 billion from the Housing and Economic
Recovery Act (HERA) to modify GSE mortgages.335 According to
the August 2010 Making Home Affordable Program report, 55.2
percent of active permanent and trial loan modifications that have
taken place since the program’s inception are actually GSE modifications.336 That the majority of the modifications under HAMP
involve mortgages that the GSEs hold or guarantee means that the
potential exists for a substantial financial conflict of interest. In a
prior report, the Panel noted that ‘‘these dual roles—as ‘doers’ of
mortgage modifications for loans that they own or guarantee and
‘overseers’ of Treasury’s mortgage modification program—may
present competing interests or diminish the overall effectiveness of
Fannie Mae’s and Freddie Mac’s ability to modify mortgages, engage in HAMP administration or oversight, or both.’’ 337 At the
Panel’s recent hearing, Mr. Heran stated that while MHA–C ‘‘is responsible for evaluating compliance for non-GSE loans only,’’ the
GSEs themselves (under the supervision of FHFA) are responsible
for evaluating compliance for GSE loans.338 This means that while
MHA–C does not conduct compliance for mortgages owned or guaranteed by Freddie Mac, another department within Freddie Mac is
charged with those responsibilities.339 The Panel is not convinced
as to the appropriateness of and logic underlying this particular allocation of responsibilities.
335 October 2009 Oversight Report, supra note 3; April 2010 Oversight Report, supra note 3.
336 U.S. Department of the Treasury, Making Home Affordable Program: Servicer Performance
Report Through August 2010 (Sept. 22, 2010) (online at www.financialstability.gov/docs/
AugustMHAPublic2010.pdf) (hereinafter ‘‘Servicer Performance Report through August 2010’’).
337 April 2010 Oversight Report, supra note 3, at 88.
338 Congressional Oversight Panel, Testimony of Paul Heran, program executive, Making
Home Affordable—Compliance, Freddie Mac, Transcript: COP Hearing on Treasury’s Use of Private Contractors (Sept. 22, 2010) (publication forthcoming) (online at cop.senate.gov/hearings/library/hearing-092210-contracting.cfm).
339 Id.

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With respect to the issues arising out of Fannie Mae’s and
Freddie Mac’s ownership or guarantees of mortgage portfolios that
could conflict with financial agency agreements, there are several
mitigating factors worth noting. First, as discussed above, Fannie
Mae and Freddie Mac, as financial agents and fiduciaries of Treasury, owe a duty to look solely to the best interests of Treasury
without considering the interests of other clients or its own proprietary interests. This helps ensure that the GSEs will carry out
their assignments in a manner that serves the public interest instead of their own interests. In order to carry out these functions,
Fannie Mae and Freddie Mac created distinct business units that
are segregated from and operate separate and apart from their
books of business. Second, Treasury receives advice from two GSEs
as well as from other third-party advisers. Third, Treasury retains
sole responsibility for developing the HAMP program guidelines,
and both GSEs are obligated to comply with those guidelines.
Fourth, both Fannie Mae and Freddie Mac must develop and implement an information barrier policy to prevent ‘‘misuse of material non-public information to benefit’’ their portfolios (i.e., insider
trading) and a firewall with respect to employees and systems and
databases with information regarding modifications of mortgages
backing mortgage-backed securities in their portfolios.340 Fifth,
Fannie Mae does not receive any incentive payments to fund loan
modifications or fees to servicers and investors for modifications of
loans that it owns (other than in its capacity as an investor in
mortgage-backed securities).341
Finally, FHFA provides an additional layer of oversight in its
role as conservator. It closely monitors Fannie Mae’s and Freddie
Mac’s compliance with the financial agency agreements and the nature of the tasks Treasury asks them to perform on an ongoing
basis, in addition to helping ensure that the GSEs’ HAMP responsibilities are segregated completely from their business lines.342
There are several mitigating factors to address the conflict arising out of the GSEs’ business relationships with servicers. Treasury’s relationships with Fannie Mae and Freddie Mac are structured so that one GSE—Fannie Mae—is charged with program administration and a different GSE—Freddie Mac—is responsible for
auditing servicer performance under HAMP. For its part, Freddie
Mac was required to adopt an internal policy establishing the principle that in its performance under the financial agency agreement,
all decisions are to be made solely based upon the HAMP program
objectives and requirements (without consideration of potential
benefit to mortgage sellers or servicers with whom it does business
or to itself via modifications of mortgages that it owns or guarantees).343 Freddie Mac is also required to submit copies of its
340 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F; Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at
Exhibit F.
341 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F; Written Testimony of Joy Cianci, supra note 330, at 3 (stating that ‘‘[i]t should be noted
that Treasury does not pay, and Fannie Mae does not receive, incentives under the Program
for modifications of Fannie Mae-owned loans.’’).
342 FHFA conversations with Panel staff (Oct. 4, 2010).
343 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F.

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servicer audits to Treasury upon request.344 In addition, Treasury
retains the right under the financial agency agreements to oversee
and audit their performance.345
With respect to issues concerning personal and organizational
conflicts of interest, Fannie Mae and Freddie Mac, in entering into
their financial agency agreements, agreed that all management officials and key individuals would be subject to a code of ethics and
associated insider trading policy.346 Furthermore, each must certify
on a quarterly basis that it has no organizational or personal conflicts of interest.347
It could be argued that it is implausible and impractical for
Fannie Mae and Freddie Mac to conduct modifications of mortgages
they own or guarantee and maintain business relationships with
servicers while simultaneously conducting independent contracting
roles under HAMP. If Treasury selects contractors or financial
agents with clear structural conflicts, or portfolios with interests
adverse to Treasury’s, that may raise an immitigable conflict because the interests are not aligned (regardless of whether mitigation procedures are implemented). Since a key objective of the conservatorship process is to minimize losses, it might appear that
Treasury and FHFA have incentives to allow Fannie Mae and
Freddie Mac to use material non-public information gained from
their HAMP contracting roles that might ultimately be beneficial
to the GSEs’ bottom lines as they conduct their own mortgage
modifications.348 On the other hand, the financial agency agreements were set up in different ways and established to achieve different goals, suggesting the importance Treasury has given to mitigating conflicts of interest and implementing a rigorous set of mitigation procedures. Additionally, the GSEs appear to have taken
their obligations to comply with Treasury’s conflict of interest regulations in all required areas seriously, creating separate business
units dedicated to carrying out their HAMP responsibilities (and
accountable under their financial agency agreements to Treasury)
and, as discussed above, deploying a variety of conflict mitigation
techniques.349
As illustrated by the complexities described above, the fundamental issue with Fannie Mae and Freddie Mac in their roles as
financial agents is whether they are simply extensions of the fed344 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F. While this requirement likely limits the exercise of discretion in the audit process (and
hence the latitude of Freddie Mac to treat certain servicers more favorably than others), it does
not totally eliminate that discretion.
345 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at § 17.
346 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F.
347 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit F.
348 From the perspective of the taxpayers (who became majority shareholders of Fannie Mae
and Freddie Mac as a result of their placement into conservatorship), this conflict may not be
as troubling as it may seem since the public may want the GSEs to use information gained as
a result of their roles as financial agents to aid them in modifying their own mortgages, given
that the taxpayers directly bear the costs of distressed mortgage loans owned or guaranteed by
the GSEs (while not directly bearing the costs resulting from distressed non-GSE mortgages).
349 For example, in conversations with Panel staff, Fannie Mae indicated that it has reported
18 incidents (or potential breaches of its obligations) to Treasury over the course of its financial
agency agreement. Such reporting includes minor matters such as a carrier’s temporary
misplacement of a box containing the names and addresses of potential borrowers.

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eral government itself.350 This question is somewhat challenging to
answer because, as discussed above, the GSEs are not legally government agencies and their employees are not civil servants, but
they have been operating under conservatorship by the FHFA and
would likely not have survived without the financial assistance provided by Treasury. If they are really private entities with their own
financial interests independent of the federal government’s, then
the real and perceived conflicts of interest seem vast and unmanageable. If they are just arms of the federal government at this
point, however, then any real or perceived conflicts likely evaporate. The manner in which Treasury is treating the GSEs (for example, they are being compensated at cost for the work they are
doing—they are earning zero profit) in some ways gives the appearance that they are government entities, underlining the tension
created by the anomalous position of Fannie Mae and Freddie Mac.
E. Evaluation of Small Business Contracting

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The financial agency agreements for both Fannie Mae and
Freddie Mac provide a floor for the GSEs’ use of small business
contractors, including minority- or women-owned contractors. In
entering into their financial agency agreements with the Treasury
Department, Fannie Mae and Freddie Mac agreed to ‘‘engage one
or more small businesses as contractors, including minority- or
women-owned businesses,’’ in fulfilling their responsibilities.351
Fannie Mae and Freddie Mac have selected subcontractors and
vendors to support their duties as HAMP program administrator
and compliance agent, respectively, using the standard competitive
bidding process (unless time-to-market pressures necessitate otherwise), and have complied with its obligation to engage womenowned and minority-owned small businesses.352 In total, Fannie
Mae has awarded contracts to ‘‘19 small and diverse companies’’ in
furtherance of its duties as HAMP compliance agent for Treasury.353 Freddie Mac has indicated that 25 percent of the subcontractors it has hired are minority- or women-owned.354

350 In August 2009, the Congressional Budget Office (CBO) addressed these issues by noting
that because of the ‘‘extraordinary degree of management and financial control now exercise[d]
over them,’’ along with their ‘‘unique legal status and a long history linking them closely to the
federal government,’’ they should be considered federal operations, even though they ‘‘had been
considered private firms owned by their shareholders.’’ Therefore, CBO concluded that it would
be ‘‘appropriate and useful to policymakers to account for and display the GSEs’ financial transactions alongside other federal activities in the budget.’’ Congressional Budget Office, The Budget and Economic Outlook: An Update, at 8 (Aug. 2009) (online at www.cbo.gov/ftpdocs/105xx/
doc10521/08-25-BudgetUpdate.pdf). For its part, however, the Office of Management and Budget
(OMB) continues to treat the GSEs as ‘‘non-budgetary private entities in conservatorship rather
than as Government agencies’’ because they ‘‘remain private companies with Boards of Directors
and management responsible for their day-to-day operations.’’ Analytical Perspectives: Budget
of the U.S. Government, FY 2011, supra note 308, at 140.
351 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at § 15
and § 16.
352 Written Testimony of Joy Cianci, supra note 330, at 4; Treasury and Freddie Mac conversations with Panel staff (Sept. 27, 2010).
353 Written Testimony of Joy Cianci, supra note 330, at 4.
354 Treasury and Freddie Mac conversations with Panel staff (Sept. 27, 2010).

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F. Evaluation of Treasury’s Monitoring
1. Treasury’s Monitoring of Performance and Compliance
OFS has developed a comprehensive regime of documents, standards, and continual reviews to assess performance and financial
agency agreement compliance.
Treasury has a comprehensive oversight structure in place to
oversee and monitor Fannie Mae’s activities as Treasury’s financial
agent.355 The Homeownership Preservation Office (HPO) has a collaborative relationship with the OFA, CFO, and OFS–Compliance
teams. Five members of the OFS–Compliance staff work exclusively on conflicts of interest matters for all contractors and financial agents, and almost all staffers within HPO have regular and
substantial interactions with Fannie Mae.356 In addition to the
Making Home Affordable program committee that meets weekly,
Treasury has also established several working committees (centered on compliance, budgeting, and governance issues) to oversee
Fannie Mae. These committees meet on a regular basis and include
interlocking membership from each of the different Treasury offices
(referenced above) that is tasked with monitoring and oversight responsibilities for Fannie Mae.357
Treasury’s monitoring and supervision of the GSEs are closely
coordinated with general oversight and risk assessment by FHFA
as part of the conservatorship process. Members of the FHFA conservatorship team continuously oversee Fannie Mae’s and Freddie
Mac’s financial agency agreements, monitor the tasks that Treasury asks the GSEs to perform as a risk assessment measure, and
help ensure that they are compensated appropriately for their
work.358
Senior-level officials within OFS direct and closely monitor
Freddie Mac’s activities as Treasury’s financial agent, and OFS has
four employees assigned to work full-time to oversee Freddie Mac,
three of whom work full time on-site in Freddie Mac’s office.359 Additionally, Treasury’s MHA Compliance Committee (composed of
senior Treasury officials leading the MHA program and chaired by
the director of compliance at OFS) meets weekly with Freddie
Mac’s MHA–C senior management team to discuss the program’s
status, issues and challenges.360
As with its other contractors and financial agents, there are several metrics that Treasury uses to evaluate and manage Fannie
Mae’s and Freddie Mac’s performance and compliance with their financial agency agreements. Since financial agents have a fiduciary
obligation to Treasury (and therefore serve as an extension of
Treasury), OFS has developed specific processes to measure performance and ensure compliance. The process for monitoring the
performance and compliance of these financial agents is contained
in their respective financial agency agreements.
355 Treasury

and Fannie Mae conversations with Panel staff (Oct. 4, 2010).
and Fannie Mae conversations with Panel staff (Oct. 4, 2010).
357 Treasury and Fannie Mae conversations with Panel staff (Oct. 4, 2010).
358 FHFA conversations with Panel staff (Oct. 4, 2010).
359 Treasury conversations with Panel staff (Sept. 23, 2010); Testimony of Paul Heran, supra
note 173, at 2.
360 Treasury conversations with Panel staff (Sept. 23, 2010); Testimony of Paul Heran, supra
note 173, at 2.

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356 Treasury

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On the performance side, these include qualitative measures
(such as assessments of cost containment, responsiveness, and nature of their business relationship with Treasury), and quantitative
measures (such as how they process transactions, the timeliness
and accuracy of their reports, and the number of servicer reviews
conducted).361 OFA collects quantitative measures on a quarterly
or monthly basis to monitor the agents’ performance, balancing ‘‘objective measurements (for example, quantitative counts of work
products) and subjective measurements (for example, survey responses).’’ 362 Additionally, informal communications between
Treasury and the GSEs are regular and continuous, which suggests
that the level of interaction is best characterized as constant involvement.363
On the compliance side, the GSEs are required to report to
Treasury on internal controls, risk assessments, information technology security, employee training, and how they have revisited
their conflicts of interest mitigation plans.364 The financial agency
agreements also require that Fannie Mae and Freddie Mac self-certify annually that they are complying with 11 selected terms of the
agreements and review the effectiveness of their internal controls
on an annual basis.365 On an annual basis, Treasury staff conduct
on-site visits to review the processes and controls of each agent at
their offices.366 Treasury also requires agents to submit information regarding conflicts of interest, which it reviews on an on-going
basis.367
2. Data Production and Verification
Some concerns have developed recently regarding the process underlying Fannie Mae’s data generation and how rigorously Treasury is scrutinizing the HAMP data and metrics it receives from its
financial agent. Under the terms of its financial agency agreement,
Fannie Mae is required, among other tasks, to ‘‘[p]rovide detailed
loan level reporting, as required, to the Treasury and the compliance agent.’’ 368 Starting in the June 2010 Making Home Affordable
public report, Treasury has included a table entitled ‘‘Performance
of Permanent Modifications,’’ which is produced by Fannie Mae and
provides information on the number of borrowers in delinquency or
re-default after their loans convert from trial modifications to permanent modifications. This information is designed to inform the
public as to whether homeowners with HAMP modifications are
being placed into sustainable mortgages. Initially, Treasury reported that just under 6 percent of HAMP homeowners were at
361 Testimony

of Gary Grippo, supra note 49.
Statement of Gary Grippo and Ronald Backes, supra note 26, at 6.
and Freddie Mac conversations with Panel staff (Sept. 27, 2010); Treasury and
Fannie Mae conversations with Panel staff (Oct. 4, 2010).
364 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122; Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122.
365 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at § 16,
Exhibit D; Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122,
at § 16, Exhibit D.
366 Prepared Statement of Gary Grippo and Ronald Backes, supra note 26, at 6.
367 Treasury conversations with Panel staff (Sept. 16, 2010). For a more complete discussion
of Treasury’s monitoring of contractor and agent conflicts of interest, see Sections B.3 and H,
supra.
368 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit A.
362 Prepared

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363 Treasury

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least 60 days late six months after their mortgages were modified.
After the June 2010 table was published, however, analysts at
Barclays Capital challenged the information reported in the
table.369 After Treasury and Fannie Mae reviewed the data, they
found that the default rate that Fannie Mae provided in the original table appeared to be significantly lower than the actual default
rate as indicated by the source data. The significant errors in the
table were subsequently attributed to logic errors in the Fannie
Mae code used to create the table.370 As a result, Treasury had to
correct the data and republish its June 2010 MHA report in early
August 2010 after data validation efforts were undertaken by the
MITRE Corporation and an independent third party consultant
contracted by Fannie Mae’s Internal Audit group.
The data error, which was highly visible and instrumental from
a public policy perspective, suggests that there was a lack of adequate processes or systems in place (as well as personnel) at
Fannie Mae to detect any mistakes, omissions, or discrepancies in
data production, as well as insufficient scrutiny, verification and
validation by the Home Ownership Preservation Office within
Treasury of the HAMP data compilations it was receiving from its
financial agent.371 Treasury, with the support of FHFA, will require Fannie Mae to pay for the data validation services provided
by the MITRE Corporation as a result of the data error.372 Fannie
Mae and Treasury express confidence that processes have been put
in place to make sure that such errors in the data collection and
generation cycle will not be repeated, and noted how the MITRE
Corporation’s mandate has been broadened to analyze and validate
the data generation and production components of all public HAMP
reports.373
The systems and resources that Treasury has committed to monitoring the performance and compliance of the GSEs have grown
over time. In recent conversations with Treasury officials, however,
OFS and OFA officials readily admit that Treasury lacked adequate controls with respect to the communication of program re369 MITRE

HAMP Re-Default Report, supra note 194, at 2–1.
HAMP Re-Default Report, supra note 194, at 2–1.
MITRE, Home Affordable Modification Program: Assessment of the HAMP July 2010
Public Report (Final) (Sept. 3, 2010) (recommending that Treasury should engage in ‘‘manual
cross-checking efforts’’ to ‘‘decrease the likelihood of errors.’’). According to Treasury officials,
this occurrence demonstrated that Treasury lacked adequate controls with respect to how program and financial agency agreement requirements were being communicated from Treasury.
In addition, the data error also highlighted inadequate testing being done by Fannie Mae and
inadequate validation of that testing on the part of Treasury. Treasury conversations with Panel
staff (Sept. 23, 2010).
372 Treasury conversations with Panel staff (Sept. 23, 2010). Since Fannie Mae is under conservatorship, however, ultimately the fees will be paid for by taxpayers, regardless of whether
Fannie Mae or Treasury pays the fees to MITRE.
373 Treasury conversations with Panel staff (Sept. 23, 2010); Testimony of Joy Cianci, supra
note 274.
According to Ms. Cianci, immediately upon discovering the data error, Fannie Mae notified
Treasury and ‘‘took upon a three-phased remediation approach.’’ The first phase focused on ‘‘recoding and validating a revised grid.’’ Treasury engaged the MITRE Corporation to ‘‘independently code and validate the grid,’’ and ‘‘Fannie Mae assigned four independent teams to recode
and revalidate the grid.’’ The MITRE Corporation ‘‘expressed strong confidence to Treasury regarding the revised table,’’ resulting in the publication of the revised table on August 6, 2010.
Phase two focused on the internal audit and MITRE Corporation performing a ‘‘root cause analysis’’ to help ‘‘identify some recommendations that would bolster controls regarding [Fannie
Mae’s] production of data in support of the public report.’’ Currently, Fannie Mae is in the third
phase which is focused on bolstering internal controls.
370 MITRE

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371 See

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quirements and the validation of data.374 This admission, based
upon the data error described above, calls into question the level
of independent scrutiny, verification, and oversight that Treasury
has done with respect to the monitoring of its financial agents.
While the Panel recognizes and appreciates that Treasury has dedicated more resources to the monitoring and oversight of the GSEs,
proper implementation of the TARP and oversight of financial
agents require rigorous monitoring and controls from the program’s
inception.
G. Performance Assessment Made Challenging by
Insufficient Reporting
Under the terms of its financial agency agreement and responsibilities as HAMP compliance agent, Freddie Mac is required,
among other tasks, to ‘‘conduct examinations and review servicer
compliance with the published rules for the program and report results to the Treasury.’’ 375 Based upon such examinations, Freddie
is required to provide Treasury ‘‘with advice, guidance, and lessons
learned to improve operation of the program.’’ 376
In mid-2009, the OFS compliance department observed that
Freddie Mac (since the inception of HAMP) was having difficulty
meeting the deadlines of its planned audits and delivering key compliance reports.377 After evaluating the first Servicer Performance
Reviews completed by Freddie Mac, OFS had several other areas
of concern, including the use of unqualified staff to perform audits;
inconsistent and incomplete audit documentation; and overreliance
on contractors to perform the audits.378 These difficulties led
Treasury to meet with senior officials at Freddie Mac, develop a detailed remediation plan addressing many aspects of Freddie Mac’s
contractual obligations and place an OFS compliance official with
Freddie Mac full-time.379 According to Treasury, Freddie Mac was
very proactive in addressing these concerns and made some key
personnel changes to improve its compliance function, including the
hiring of Mr. Heran, program executive for Making Home Affordable—Compliance, who came to Freddie Mac after a long auditing
career in the financial services industry.380 While OFS compliance
acted prudently in recognizing the deficiencies at Freddie Mac
early on and taking steps to remedy the situation, and although it
is possible that Freddie Mac has completed all of the steps under
its detailed remediation plan, it is difficult to monitor progress on
these issues without additional information and more regular reporting.
H. Evaluation of Transparency
Beginning with the release of its Making Home Affordable Program Servicer Performance Report through May 2010, released in

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374 Treasury

conversations with Panel staff (Sept. 23, 2010).
375 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit A.
376 Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122, at Exhibit A.
377 July 2010 SIGTARP Report, supra note 299, at 102.
378 July 2010 SIGTARP Report, supra note 299, at 102.
379 July 2010 SIGTARP Report, supra note 299, at 102.
380 Treasury conversations with Panel staff (Sept. 23, 2010).

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June 2010, Treasury has included an appendix describing Freddie
Mac’s compliance activities.381 The material in this appendix has
become boilerplate language that Treasury now includes in each
month’s Servicer Performance Report. The appendix describes the
four major activities that comprise the compliance program, including on-site reviews (to assess readiness and governance as well as
implementation), loan file reviews, net present value (NPV) testing
and assessments, and incentive payment reviews.382 The appendix
also discusses the frequency with which Freddie Mac conducts its
reviews for each of the different types of compliance activities to assess servicer compliance with HAMP guidelines. In addition, the
appendix discusses several areas of Freddie Mac’s continued compliance focus, including borrower solicitation, underwriting documentation, NPV model usage, document processing and control,
data maintenance, and governance. While this additional information is a step in the right direction with respect to transparency,
the Panel is disappointed that the monthly MHA reports have offered little detail on Freddie Mac’s activities as HAMP compliance
agent. While it takes time to develop a large enough pool of
servicer actions and trial conversions for Freddie Mac to review,
whether the process has been aggressive, robust, and transparent
enough remains unclear. Preliminary compliance results would
have been most useful early in the life of HAMP in order to enable
course corrections and help homeowners before it is too late.
Additionally, the May 2010 Making Home Affordable Program
Servicer Performance Report marked the first occasion in which
Treasury released the results of MHA–C’s compliance ‘‘Second
Look’’ reviews (detailing the December 2009 rotation for ‘‘Second
Look’’ reviews).383 Treasury again released this information in its
August 2010 Making Home Affordable Program Servicer Performance Report (detailing the first quarter 2010 rotation for ‘‘Second
Look’’ reviews).384 Going forward, Treasury plans to make this information available on a monthly basis. According to Treasury, the
reason why information on other compliance activities has not been
made publicly available is because the ‘‘Second Look’’ compliance
activities lend themselves to be given out in a benchmark manner,
and other compliance activities do not.385 Going forward, however,
Treasury plans to continue to consult with MHA–C in efforts to determine what other types of compliance-related information can be
made public and improve transparency.
The Panel has long been concerned about Treasury’s data collection efforts under HAMP. In all of the Panel’s prior reports on
Treasury’s foreclosure mitigation efforts, the Panel has expressly
called for the collection of more data and greater public disclo381 U.S. Department of the Treasury, Making Home Affordable Program Servicer Performance
Report Through May 2010, at 11 (June 21, 2010) (online at www.financialstability.gov/docs/
May%20MHA%20Public%20062110.pdf) (hereinafter ‘‘Making Home Affordable Program
Servicer Performance Report Through May 2010’’).
382 See generally, Id. at 11.
383 Id. at 6. This information demonstrated that MHA–C disagreed with the servicers’ actions
in 3.9 percent of the cases it evaluated.
384 Servicer Performance Report through August 2010, supra note 336, at 11. This information
demonstrated that MHA–C disagreed with the servicers’ actions in an average of 4.8 percent
of the cases it evaluated.
385 Treasury conversations with Panel staff (Sept. 27, 2010).

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sure.386 Treasury relies on Fannie Mae to act as record keeper for
executed loan modifications and program administration. In this
capacity, Fannie Mae is the primary collector of and gatekeeper for
all information related to HAMP, including basic information such
as the number of modifications, the rate of conversions from trial
to permanent modifications, and the reasons for borrower failure.
Such exclusive reliance creates significant risks to both effective
program implementation and financial agent oversight.
In prior reports the Panel has noted the importance of a strong
accountability regime and public disclosure to the credibility and
effectiveness of HAMP.387 Treasury should publicly release more
data collected by Fannie Mae and Freddie Mac so that Congress,
the TARP oversight bodies, and the public can better evaluate the
effectiveness of HAMP. Review and analysis of the substantial
amount of data being collected by Fannie Mae as program administrator and Freddie Mac as compliance agent are important in understanding the strengths and weaknesses of HAMP as well as particular areas in need of improvement. Because of Fannie Mae and
Freddie Mac’s crucial roles in administering and enforcing HAMP
requirements, it is especially important that Treasury release data
on the compliance audits done by Freddie Mac to show whether
servicers are properly following HAMP guidelines or whether
Treasury and Freddie Mac are ensuring that HAMP requirements
are being enforced. Taxpayers should be able to see the consequences that result both from HAMP compliance and non-compliance.388
I. Conclusion

smartinez on DSKB9S0YB1PROD with HEARING

The Panel is very concerned that, over 19 months into its financial agency agreements with Fannie Mae and Freddie Mac, Treasury’s expectations for them in their respective roles of financial
agent/HAMP administrator and financial agent/compliance agent
remain unclear. The Panel has previously called on Treasury to
‘‘clearly define and communicate its goals and requirements as well
as its measurements for success. Without clear goals and measurements, Treasury and its agents and third parties (for example,
oversight bodies, Congress, and the public) will not be able to
evaluate the adequacy or success of its programs overall or of individual participants.’’ 389 Not only has Treasury failed to articulate
specific goals for the program, but the concerns raised in the discussion above suggest that Fannie Mae and Freddie Mac are not
performing satisfactorily under their financial agency agreements.
In addition, OFS has yet to develop written procedures for the
oversight and monitoring of Fannie Mae and Freddie Mac’s administrative and compliance activities, including internal controls over
the existence, completeness and accuracy of data formulation and
386 April 2010 Oversight Report, supra note 3; October 2009 Oversight Report, supra note 3;
March 2009 Oversight Report, supra note 3.
387 April 2010 Oversight Report, supra note 3, at 5; October 2009 Oversight Report, supra note
3, at 5.
388 April 2010 Oversight Report, supra note 3, at 9.
389 April 2010 Oversight Report, supra note 3, at 86.

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77

smartinez on DSKB9S0YB1PROD with HEARING

input.390 As GAO noted recently, ‘‘[w]ithout clearly documented
guidance regarding the specific procedures OFS should follow to effectively oversee and monitor Fannie Mae and Freddie Mac, OFS
faces an increased risk that the financial information related to
HAMP may not be complete or correct, and OFS management’s
ability to identify key risks in this area may also be impaired.’’ 391
It is exactly requirements such as these that Treasury should explicitly include in all procurements and financial agency agreements. Accordingly, GAO has recommended that OFS develop and
implement written procedures detailing steps to be performed in
overseeing and monitoring Fannie Mae and Freddie Mac.392
There are several important lessons that can be learned from
analyzing Fannie Mae and Freddie Mac’s roles as financial agents
of Treasury.
• First, the lack of clarity surrounding Treasury’s decision to select Fannie Mae and Freddie Mac suggests that Treasury
should better explain its rationale and decision-making process
behind choosing to enter into contracts or financial agency
agreements with institutions that have been bailed out or are
likely to be bailed out. Since Fannie Mae and Freddie Mac do
not have a proven track record of success with respect to running their own businesses (as demonstrated by their being
placed into conservatorship in September 2008), Treasury had,
and has, an obligation to explain why it believes they would,
and will, be successful with the administration and compliance
enforcement of the $30 billion TARP-funded HAMP. Their selection without extensive consideration of alternative options
has led inevitably to concerns as to whether their selection was
part of an overall government rescue of the GSEs, and was not
driven by concerns for the effectiveness of HAMP.
• Second, the recent data error by Fannie Mae indicates that
Treasury was not sufficiently cognizant of the importance of
clear communication and robust monitoring and supervision of
performance and compliance as it developed and implemented
large scale programs under the TARP like HAMP, particularly
early on in the process.
• Third, the credibility and effectiveness of HAMP is undermined
in the absence of sufficient and regular public disclosure of
compliance and enforcement activities conducted by Treasury’s
contractors and financial agents. In order for compliance and
enforcement to function as a deterrence mechanism and be exercised effectively, they must be sufficiently robust and transparent.

390 According to documentation from Treasury, drafted ‘‘Program Implementation Guidelines’’
guidance for the Financial Agency Agreements for Fannie Mae and Freddie Mac are currently
in final review with Fannie Mae, Freddie Mac, and their regulator, FHFA.
391 June 2010 GAO Report on Internal Control Over Financial Reporting, supra note 257, at
13.
392 June 2010 GAO Report on Internal Control Over Financial Reporting, supra note 257, at
14.

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VerDate Mar 15 2010

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TOFS–10–G–0008 .........

TOFS–10–D–0006 .........

TOS09–020 ...................

TOFS–09–D–0011 .........

TOFS–09–D–0006 .........

TOFS–10–O–0021 .........

TOFS–09–D–0005 .........

TOFS–10–O–0007 .........

TOFS–09–D–0010 .........

TOFS–10–D–0005 .........

Contract
Number

smartinez on DSKB9S0YB1PROD with HEARING

CCH Incorporated ..........

Bingham McCutchen
LLP.
Cadwalader Wickersham
& Taft LLP.
Cadwalader Wickersham
& Taft LLP.
Cadwalader Wickersham
& Taft LLP.
Cadwalader Wickersham
& Taft LLP.

Association of Government Accountants.
Bingham McCutchen
LLP.

Anderson McCoy & Orta

Alston & Bird LLP .........

Contractor

GSA Task Order for procurement books—
FAR, T&M, Government Contracts Reference, World Class
Contracting.

Legal services for work
under Treasury’s
Public Private Investment Funds (PPIF)
program.
CEAR Program Application.
SBA Initiative Legal
Services—Contract
Novated from TOFS–
09–D–0005 with
McKee Nelson.
SBA 7(a) Security Purchase Program.
Auto Investment Legal
Services.
Restructuring Legal
Services.
Bankruptcy Legal Services.
Omnibus procurement
for legal services.

Omnibus procurement
for legal services.

Description

9/30/2010

8/6/2010

1/27/2009

7/30/2009

3/30/2009

9/17/2010

3/30/2009

1/15/2010

5/26/2009

8/6/2010

Date of
Award

10/30/2010

8/5/2015

7/20/2009

1/6/2011

8/31/2010

12/31/2010

9/29/2010

1/14/2011

11/24/2010

8/5/2015

Performance
End Date

$0

2,430

1,997,820

409,955

2,049,979

17,482,165

19,975

422,355

5,000

4,068,834

Obligated
Value

$0

0

0

409,955

1,266,342

17,392,786

0

270,776

5,000

1,577,271

Expended
Value

2,430

99,791,842

409,955

20,687,500

26,756,322

19,975

1,850,651

5,000

15,000,000

$99,791,842

Adjusted
Potential
Contract
Value 394

ANNEX II: TABLES
FIGURE 10: LIST OF PROCUREMENT CONTRACTS DETAILING VALUES UNDER THE CONTRACT 393

DC

TODC

DC

TODC

TODC

DC

TODC

DC

TODC

TODC

Type of
Vehicle 395

Fixed Price, Labor Hour
or Time and Materials
Fixed Price

Fixed Price or Time and
Materials
Fixed Price or Time and
Materials
Labor Hour

Time and Materials

Fixed Price or Time and
Materials

Fixed Price

Fixed Price, Labor Hour,
or Time and Materials
Fixed Price Time and
Materials or Labor
Hour

Contract
Type

78

C540A

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Debevoise & Plimpton,
LLP.
Digital Management
Inc..

Cushman & Wakefield
of VA Inc..
Davis Audrey Robinette

Colonial Parking Inc. ....
CQ–Roll Call Inc. ..........

Fmt 6602

Ennis Knupp & Associates Inc..
Equilar Inc. ...................

Ernst & Young LLP .......

Ernst & Young LLP .......

FI Consulting Inc. .........

Fox Hefter Swibel Levin
& Carol, LLP.

TOFS–10–D–0004 .........

TOS–09–008 .................

Sfmt 6602

T2009–TARP–0002 .......

TOFS–10–B–0007 .........

TOFS–09–B–0001 .........

TOFS–09–D–0013 .........

TOFS–09–O–0013 .........

TOFS–10–B–0003 .........

Ennis Knupp & Associates Inc..

TOFS–09–D–0012 .........

TOFS–10–D–0019 .........

TOS09–016 ...................

TOS09–017 ...................
TOFS–10–O–0020 .........

smartinez on DSKB9S0YB1PROD with HEARING

E:\HR\OC\C540A.XXX

Program Compliance
Support Services.
Credit Reform Modeling
and Analysis.
Restructuring Legal
Services.

Investment and Advisory
Services.
Executive Compensation
Data Subscription.
Accounting Services ......

Lease of parking spaces
One year subscription
(3 users) to the CQ
Today Breaking News
& Schedules, CQ
Congressional & Financial Transcripts,
CQ Custom Email
Alerts.
Painting Services for
TARP Offices.
Program Operations
Support Services to
include project management, scanning
and document management and correspondence.
Restructuring Legal
Services.
Data and Document
Management Consulting Services.
Investment Consulting
Services.

C540A

7/30/2009

3/31/2009

7/22/2010

10/18/2008

9/10/2009

10/11/2008

4/12/2010

4/22/2010

7/30/2009

9/27/2010

12/24/2008

1/7/2009
9/1/2010

1/28/2011

3/30/2014

7/19/2015

9/30/2011

9/10/2010

4/10/2010

4/11/2015

4/20/2015

1/28/2011

9/23/2015

1/3/2009

9/30/2013
7/7/2011

84,125

1,935,866

0

11,397,968

59,990

2,715,965

83,050

0

159,175

50,000

8,750

191,650
7,500

0

1,461,560

0

10,710,092

59,990

2,392,742

82,050

0

0

0

8,750

111,320
7,500

20,687,500

1,935,866

21,993,424

11,397,968

59,990

2,495,190

6,000,000

100,000,000

20,687,500

6,000,000

8,750

566,050
7,500

TODC

TODC

TODC

TODC

DC

TODC

TODC

TODC

TODC

TODC

DC

DC
DC

Fixed Price or Time and
Materials

Fixed Price or Time and
Materials
Fixed Price or Labor
Hour
Labor Hour

Fixed Price or Time and
Materials
Fixed Price, Labor Hour,
or Time and Materials
Fixed Price, Time and
Materials, or Labor
Hour
Fixed Price Level of Effort
Fixed Price

Fixed Price or Labor
Hour

Fixed Price

Fixed Price
Fixed Price

79

VerDate Mar 15 2010

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Haynes and Boone LLP

Fox Hefter Swibel Levin
& Carol, LLP.

Contractor

Frm 00086

Fmt 6602

Hughes Hubbard &
Reed LLP.

Herman Miller Inc. ........
Hughes Hubbard &
Reed LLP.

Sfmt 6602

E:\HR\OC\C540A.XXX

Knowledge Mosaic Inc.

Korn/Ferry International

TOFS–09–O–0012 .........

TDO10–F–249 ...............

TOFS–09–G–0002 .........

C540A

TDOX09–0040 ...............

Lindholm & Associates
Inc.
Locke Lord Bissell &
Liddell LLP.

Knowledge Mosaic Inc.

TOFS–10–D–0009 .........

TDO–TARP–2009–0003

Hughes Hubbard &
Reed LLP.

TOFS–10–B–0001 .........

TOFS–09–O–0003 .........
T09BPA–002 .................

Haynes and Boone LLP

TOFS–10–D–0008 .........

SEC filings subscription
service.
SEC filings subscription
service.
Executive search services for the OFS
Chief Investment Officer position.
Human resources services.
Initiate Interim Legal
Services in support
of Treasury Investments under EESA.

Aeron Chairs .................
Legal services for the
Capital Purchase
Program.
Document Production
services and Litigation Support.
Omnibus procurement
for legal services.

Auto Investment Legal
Services.
Omnibus procurement
for legal services.

Omnibus procurement
for legal services.

Description

2/12/2009

10/31/2008

7/17/2009

8/12/2010

9/2/2009

8/6/2010

12/22/2009

4/17/2009
10/29/2008

8/6/2010

3/30/2009

8/6/2010

Date of
Award

8/11/2009

9/30/2010

10/15/2009

8/31/2011

8/31/2010

8/5/2015

12/22/2014

5/31/2009
10/31/2010

8/5/2015

3/10/2010

8/5/2015

Performance
End Date

0

272,243

751,302

75,017

5,000

5,000

0

601,890

53,799
3,060,921

0

345,746

Obligated
Value

0

272,243

614,963

75,017

5,000

5,000

0

601,890

53,799
2,828,688

0

345,746

Expended
Value

2,000,000

710,528

75,017

5,000

5,000

99,791,842

13,464,607

53,799
5,645,162

99,791,842

26,756,322

99,791,842

Adjusted
Potential
Contract
Value 394

ANNEX II: TABLES—Continued
FIGURE 10: LIST OF PROCUREMENT CONTRACTS DETAILING VALUES UNDER THE CONTRACT 393

TOFS–09–D–0007 .........

TOFS–10–D–0007 .........

Contract
Number

smartinez on DSKB9S0YB1PROD with HEARING

DC

DC

DC

DC

DC

TODC

TODC

DC
TODC

TODC

TODC

TODC

Type of
Vehicle 395

Labor Hour

Labor Hour

Fixed Price

Fixed Price

Fixed Price, Labor Hour
or Time and Materials
Fixed Price

Fixed Price or Labor
Hour

Fixed Price, Labor Hour
or Time and Materials
Fixed Price or Time and
Materials
Fixed Price, Labor Hour,
or Time and Materials
Fixed Price
Fixed Price or Time and
Materials

Contract
Type

80

VerDate Mar 15 2010

04:38 Oct 23, 2010

Mercer (US) Inc. ............

Love & Long LLP ...........

TOFS–10–B–0004 .........

Navigant Consulting Inc

Jkt 061540

Paul Weiss Rifkind
Wharton & Garrison
LLP.
Perkins Coie LLP ...........

Phacil, Inc. ....................

PricewaterhouseCoopers
LLP.
PricewaterhouseCoopers
LLP.
PricewaterhouseCoopers
LLP.
Qualx Corporation .........
RDA Corporation ...........

TDOX09–0039 ...............

TOFS–10–D–0012 .........

TOFS–10–D–0013 .........

TOS–07–109 .................

T2009–TARP–0001 .......

Frm 00087

Fmt 6602

Sfmt 6602

E:\HR\OC\C540A.XXX

C540A

TOFS–10–D–0003 .........
TOFS–10–B–0005 .........

TOFS–10–B–0009 .........

TOFS–09–B–0002 .........

Pat Taylor and Associates, Inc.

TOFS–10–O–0001 .........
TOFS–10–D–0011 .........

PO 00000

NNA Inc. ........................
Orrick Herrington Sutcliffe LLP.

TOFS–10–B–0008 .........

Microlink LLC ................

TOFS–09–O–0011 .........

TOFS–10–D–0010 .........

smartinez on DSKB9S0YB1PROD with HEARING

Program Compliance
Support Services.
FOIA Support Services ..
Data and Document
Management Consulting Services.

PPIP compliance ...........

Freedom of Information
Act (FOIA) Analysts
to support the Disclosure Services, Privacy and Treasury
Records.
Internal control services

Omnibus procurement
for legal services.

Temporary Services for
Document Production,
FOIA Assistance, and
Program Support.
Omnibus procurement
for legal services.

Executive Compensation
Data Subscription.
Data and Document
Management Consulting Services.
Program Compliance
Support Services.
Newspaper delivery .......
Omnibus procurement
for legal services.

Omnibus procurement
for legal services.

3/8/2010
4/23/2010

7/22/2010

9/11/2009

10/16/2008

5/15/2009

8/6/2010

8/6/2010

2/9/2009

9/30/2009
8/6/2010

7/21/2010

4/22/2010

8/18/2009

8/6/2010

3/8/2015
7/8/2015

7/19/2015

9/10/2014

9/30/2011

9/12/2009

8/5/2015

8/5/2015

1/5/2010

9/30/2010
8/5/2015

7/19/2015

4/20/2015

8/18/2010

8/5/2015

230,438
1,277,134

0

1,240,037

24,541,437

103,425

0

0

692,108

8,479
0

0

1,665,160

3,000

0

192,032
393,861

0

1,114,937

22,410,694

90,301

0

0

692,108

8,220
0

0

615,150

3,000

0

14,000,000
100,000,000

21,993,424

2,897,400

25,361,407

103,425

99,791,842

99,791,842

692,108

7,765
99,791,842

21,993,424

100,000,000

3,000

99,791,842

TODC
TODC

TODC

TODC

TODC

Task Order

TODC

TODC

DC

DC
TODC

TODC

TODC

DC

TODC

Fixed Price and Labor
Hour
Fixed Price
Fixed Price, Labor Hour,
or Time and Materials

Labor Hour

Time and Materials

Fixed Price, Labor Hour,
or Time and Materials
Fixed Price, Labor Hour,
or Time and Materials
Fixed Price

Fixed Price, Labor Hour,
or Time and Materials
Fixed Price and Labor
Hour
Fixed Price
Fixed Price, Labor Hour,
or Time and Materials
Labor Hour

Fixed Price, Labor Hour,
or Time and Materials
Fixed Price

81

VerDate Mar 15 2010

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Regis & Associates, PC

Reed Elselvier Inc. (dba
LexisNexis).

Contractor

Frm 00088

Fmt 6602

Sfmt 6602

Simpson Thacher &
Bartlett LLP.

Simpson Thacher &
Bartlett LLP.
Simpson Thacher &
Bartlett LLP.

Shulman Rogers Gandal
Pordy & Ecker PA.

E:\HR\OC\C540A.XXX

C540A

TOS09–010A .................

Sonnenschein Nath &
Rosenthal LLP.
Sonnenschein Nath &
Rosenthal LLP.

TOFS–09–O–0016 .........

TOFS–09–D–0004 .........

SNL Financial LC ..........

TOS09–007 ...................

TOFS–09–D–0009 .........

TOFS–09–D–0001 .........

TOFS–10–D–0015 .........

Schiff Hardin LLP .........
Seyfarth Shaw LLP ........

TOFS–10–G–0007 .........
TOFS–10–D–0014 .........

Capital Assistance Program (I).
Legal services for work
under Treasury’s
Public Private Investment Funds (PPIF)
program.
Legal services for the
implementation of
TARP.
SNL Unlimited, a webbased financial analytics service.
Auto Investment Legal
services.
Legal services related
to auto industry
loans.

Omnibus procurement
for legal services.

Accurint subscription
services for one
year—4 users.
Program Compliance
Support Services.
Housing Legal Services
Omnibus procurement
for legal services.

Description

11/7/2008

3/30/2009

9/30/2009

10/10/2008

5/26/2009

2/20/2009

8/6/2010

7/22/2010
8/6/2010

7/21/2010

6/24/2010

Date of
Award

5/31/2009

3/30/2010

9/29/2012

4/9/2009

5/24/2011

10/31/2009

8/5/2015

7/21/2011
8/5/2015

7/19/2015

6/30/2011

Performance
End Date

2,722,326

1,834,193

260,000

931,090

7,849,026

2,047,872

0

537,375
0

0

8,208

Obligated
Value

2,722,326

1,834,193

110,000

931,090

3,185,439

1,363,085

0

87,464
0

0

1,539

Expended
Value

233,663

26,756,322

460,000

1,025,000

15,000,000

5,000,000

99,791,842

537,375
99,791,842

21,993,424

8,208

Adjusted
Potential
Contract
Value 394

ANNEX II: TABLES—Continued
FIGURE 10: LIST OF PROCUREMENT CONTRACTS DETAILING VALUES UNDER THE CONTRACT 393

TOFS–10–B–0010 .........

TOFS–10–G–0005 .........

Contract
Number

smartinez on DSKB9S0YB1PROD with HEARING

DC

TODC

DC

TODC

TODC

TODC

TODC

DC
TODC

TODC

DC

Type of
Vehicle 395

Fixed Price or Time and
Materials
Labor Hour

Fixed Price

Fixed Price or Time and
Materials

Fixed Price and Labor
Hour
Labor Hour
Fixed Price, Labor Hour,
or Time and Materials
Fixed Price, Labor Hour,
or Time and Materials
Fixed Price or Labor
Hour
Fixed Price or Labor
Hour

Fixed Price

Contract
Type

82

Sonnenschein Nath &
Rosenthal LLP.

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The Boston Consulting
Group Inc.

Frm 00089

Fmt 6602

TOFS–10–O–0017 .........

Sfmt 6602

Venable LLP ..................

E:\HR\OC\C540A.XXX

West Publishing Corporation.
Whitaker Brothers Bus
Machines Inc.

TOFS–10–D–0017 .........

TOFS–10–G–0006 .........

C540A

395 Adjusted

394 Adjusted

393 Treasury

Subscription Service for
4 users.
Paper Shredder .............

Management Consulting
relating to the Auto
industry.
Management Consulting
relating to the Auto
industry.
Financial Institution
Mgmt & Modeling—
Training course
(J.Talley).
FNMA IR2 Assessment—OFS task
order on Treasury
Mitre Contract.
Capital Assistance Program (II) Legal Services.
Omnibus procurement
for legal services.

Omnibus procurement
for legal services.

Legal Services for the
purchase of asset
backed securities.
Legal services for the
Capital Purchase
Program.
Housing Legal Services

1/27/2009

7/27/2010

8/6/2010

2/20/2009

2/16/2010

6/30/2010

4/3/2009

3/6/2009

8/6/2010

4/8/2010

10/29/2008

12/10/2008

2/26/2009

7/31/2011

8/5/2015

2/19/2010

10/31/2010

8/14/2010

9/30/2010

9/5/2009

8/5/2015

4/7/2011

7/31/2010

6/9/2009

3,213

5,972

0

1,394,724

740,526

5,000

4,100,195

991,169

0

1,229,350

5,787,939

249,999

3,213

747

0

1,394,724

656,276

5,000

4,099,923

991,169

0

572,956

2,687,999

82,884

3,213

5,972

99,791,842

5,000,000

740,526

5,000

7,000,000

1,000,000

99,791,842

1,229,350

5,520,000

249,999

DC

DC

TODC

TODC

DC

DC

TODC

TODC

TODC

TODC

TODC

TODC

documents provided to Panel staff (Oct. 8, 2010).
Potential Contract Value includes amounts from the base contract, task orders, and modifications.
Potential Contract Value includes amounts from the base contract, task orders, and modifications. A ‘‘TDOC’’ is a Task or Delivery Order Contract, while a ‘‘DC’’ is a Definitive Contract.

TDOX09–0038 ...............

Venable LLP ..................

TOFS–09–D–0002 .........

The Mitre Corporation ...

The George Washington
University.

TOFS–09–D–0008 .........

TOFS–10–I–0001 ..........

The Boston Consulting
Group Inc.

TOFS–09–D–0003 .........

TOFS–10–D–0016 .........

Squire Sanders &
Dempsey LLP.
Sullivan Cove Reign Enterprises JV.

T09BPA–001 .................

TOFS–10–B–0002 .........

Squire Sanders &
Dempsey LLP.

TOS09–014C .................

smartinez on DSKB9S0YB1PROD with HEARING

Fixed Price

Fixed Price, Labor Hour,
or Time and Materials
Fixed Price

Fixed Price or Labor
Hour

Cost Plus Fixed Fee

Fixed Price

Fixed Price or Labor
Hour

Fixed Price or Labor
Hour
Fixed Price, Labor Hour,
or Time and Materials
Labor Hour

Fixed Price or Time and
Materials

Fixed Price or Time and
Materials

83

VerDate Mar 15 2010

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Alston & Bird
LLP.

Contractor

PO 00000

Frm 00090

Fmt 6602

Sfmt 6602

Cadwalader
Wickersham &
Taft LLP.

Cadwalader
Wickersham &
Taft LLP.

Cadwalader
Wickersham &
Taft LLP.

TOFS–09–D–
0011

TOS09–020

TOFS–10–D–
0006

TOFS–09–D–
0006

TOFS–10–O–
0021

Bingham
McCutchen
LLP.
Cadwalader
Wickersham &
Taft LLP.

Association of
Government
Accountants.
Bingham
McCutchen
LLP.

TOFS–10–O–
0007

TOFS–09–D—
0005

Anderson McCoy
& Orta.

TOFS–09–D–
0010

E:\HR\OC\C540A.XXX

Omnibus procurement for legal
services.

Bankruptcy Legal Services .............

Restructuring Legal Services .........

Auto Investment Legal Services .....

SBA 7(a) Security Purchase Program.

SBA Initiative Legal Services—
Contract Novated from TOFS–
09–D–0005 with McKee Nelson.

CEAR Program Application .............

Legal services for work under
Treasury’s Public Private Investment Funds (PPIF) program.

Omnibus procurement for legal
services.

Description

99,791,842

417,563

20,687,500

8,590,000

19,975

1,850,651

5,000

15,000,000

$99,791,842

Original
Potential
Contract
Value 397

99,791,842

409,955

20,687,500

26,756,322

19,975

1,850,651

5,000

15,000,000

$99,791,842

Adjusted
Potential
Contract
Value 398

Limited Competition—Unusual
and Compelling Urgency.
Limited Competition—Unusual
and Compelling Urgency.
Limited Competition—Unusual
and Compelling Urgency.
Full and Open w/
Small Business Set-aside.

Full and Open w/
Small Business Set-aside.
Limited Competition—Unusual
and Compelling Urgency.
Sole Source—
Only Responsible Source.
Limited Competition—Unusual
and Compelling Urgency.
SAP—Competed

Competition

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Small Business ..

Large Business ..

Socioeconomic
Status

............................

3 .........................

10 .......................

8 .........................

............................

Novation .............

1 .........................

8 .........................

............................

Offerors
Solicited

81 .......................

3 .........................

5 .........................

6 .........................

3 .........................

Novation .............

1 .........................

3 .........................

81 .......................

Proposals
Received

FIGURE 11: LIST OF PROCUREMENT CONTRACTS DETAILING COMPETITION AND SOCIOECONOMIC STATUS OF CONTRACTORS 396

TOFS–10–D–
0005

Contract Number

smartinez on DSKB9S0YB1PROD with HEARING

Multiple Programs

Auto Industry

Multiple Programs

Auto Industry

SBA

SBA

Program Operations

PPIP

Multiple Programs

Program

84

C540A

VerDate Mar 15 2010

04:38 Oct 23, 2010

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PO 00000

Colonial Parking
Inc.
CQ–Roll Call Inc.

CCH Incorporated

Cushman &
Wakefield of
VA Inc.
Davis Audrey
Robinette.

Frm 00091

Fmt 6602

Sfmt 6602

E:\HR\OC\C540A.XXX

Digital Management Inc..
Ennis Knupp &
Associates Inc.
Ennis Knupp &
Associates Inc.

Equilar Inc. ........

TOFS–09–D–
0012

TOFS–10–B–
0003
TOFS–10–D–
0004
TOS–09–008

TOFS–09–O–
0013
T2009–TARP–
0002
TOFS–10–B–
0007
TOFS–09–B–
0001

Ernst & Young
LLP.
Ernst & Young
LLP.
FI Consulting Inc.

Debevoise &
Plimpton, LLP.

TOFS–10–D–
0019

TOS09–016

TOFS–10–O–
0020

TOS09–017

TOFS–10–G–
0008

smartinez on DSKB9S0YB1PROD with HEARING

C540A

Program Compliance Support Services.
Credit Reform Modeling and Analysis.

21,993,424
1,935,866

0

11,397,968

59,990

2,495,190

6,000,000

100,000,000

20,687,500

6,000,000

8,750

7,500

566,050

2,430

21,993,424

0

59,990

2,495,190

Investment and Advisory Services

Executive Compensation Data Subscription.
Accounting Services .......................

6,000,000

100,000,000

20,687,500

6,000,000

8,750

7,500

566,050

2,430

Data and Document Management
Consulting Services.
Investment Consulting Services .....

Program Operations Support Services to include project management, scanning and document
management and correspondence.
Restructuring Legal Services .........

One year subscription (3 users) to
the CQ Today Breaking News &
Schedules, CQ Congressional &
Financial Transcripts, CQ Custom Email Alerts.
Painting Services for TARP Offices

GSA Task Order for procurement
books—FAR, T&M, Government
Contracts Reference, World
Class Contracting.
Lease of parking spaces ................

GSA Schedule
Competition.
GSA Schedule
Competition.
GSA Schedule
Competition.

Limited Competition—Unusual
and Compelling Urgency.
Full and Open ....

Full and Open
after Exclusion
of Sources
(Total SB setaside).
Limited Competition—Unusual
and Compelling Urgency.
GSA Schedule
Competition.
Full and Open ....

Full and Open ....

SAP—Not Competed.

Full and Open ....

SAP—Not Competed.

Small Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Small Business ..

Large Business ..

Woman and Minority Owned
Small business.

Large Business ..

Large Business ..

Large Business ..

Large Business ..

6 .........................

............................

7 .........................

Full and Open ....

6 .........................

............................

10 .......................

10 .......................

............................

1 .........................

Full and Open
Competition.
1 .........................

1 .........................

2 .........................

............................

6 .........................

1 .........................

3 .........................

............................

5 .........................

5 .........................

............................

1 .........................

1 .........................

............................

1 .........................

Multiple Programs
Multiple Programs
Multiple Programs
Multiple Programs

Program Operations
Multiple Programs
Multiple Programs

Multiple Programs

Multiple Programs

Program Operations

Program Operations
HPO

Program Operations

85

VerDate Mar 15 2010

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Fox Hefter Swibel
Levin & Carol,
LLP.

Contractor

PO 00000

Frm 00092

Fmt 6602

Herman Miller
Inc.
Hughes Hubbard
& Reed LLP.
Hughes Hubbard
& Reed LLP.
Hughes Hubbard
& Reed LLP.

Haynes and
Boone LLP.

Sfmt 6602

Korn/Ferry International.

TOFS–09–O–
0012
TDO10–F–249

TOFS–09–G–
0002

TOFS–10–B–
0001
TOFS–10–D–
0009

Knowledge Mosaic Inc.
Knowledge Mosaic Inc.

TOFS–09–O–
0003
T09BPA–002

TOFS–10–D–
0008

TOFS–09–D–
0007

Fox Hefter Swibel
Levin & Carol,
LLP.
Haynes and
Boone LLP.

TOFS–10–D–
0007

53,799

99,791,842

8,590,000

99,791,842

20,687,500

Original
Potential
Contract
Value 397

E:\HR\OC\C540A.XXX

5,000

SEC filings subscription service ....

75,017

5,000

75,017

5,000

5,000

99,791,842

99,791,842

SEC filings subscription service ....

Executive search services for the
OFS Chief Investment Officer
position.

5,645,162
13,464,607

Legal services for the Capital Purchase Program.
Document Production services and
Litigation Support.
Omnibus procurement for legal
services.

53,799

99,791,842

26,756,322

99,791,842

20,687,500

Adjusted
Potential
Contract
Value 398

13,464,607

5,645,162

Aeron Chairs ...................................

Omnibus procurement for legal
services.

Auto Investment Legal Services .....

Omnibus procurement for legal
services.

Restructuring Legal Services .........

Description

Sole Source—
Only Responsible Source.
GSA Schedule
Competition.

Limited Competition—Unusual
and Compelling Urgency.
Full and Open w/
Small Business Set-aside.
Limited Competition—Unusual
and Compelling Urgency.
Full and Open w/
Small Business Set-aside.
GSA Schedule
Competition.
GSA Schedule
Competition.
GSA Schedule
Competition.
Full and Open w/
Small Business Set-aside.
Full and Open ....

Competition

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Socioeconomic
Status

4 .........................

1 .........................

3 .........................

............................

5 .........................

5 .........................

............................

............................

8 .........................

............................

10 .......................

Offerors
Solicited

4 .........................

1 .........................

3 .........................

81 .......................

3 .........................

4 .........................

GSA Competition

81 .......................

6 .........................

81 .......................

5 .........................

Proposals
Received

FIGURE 11: LIST OF PROCUREMENT CONTRACTS DETAILING COMPETITION AND SOCIOECONOMIC STATUS OF CONTRACTORS 396—Continued

TOFS–09–D–
0013

Contract Number

smartinez on DSKB9S0YB1PROD with HEARING

Program Operations

Multiple Programs
Multiple Programs

Multiple Programs
Multiple Programs

Program Operations
CPP

Multiple Programs

Auto Industry

Multiple Programs

Multiple Programs

Program

86

C540A

Lindholm & Associates Inc.

VerDate Mar 15 2010

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Omnibus procurement for legal
services.

Initiate Interim Legal Services in
support of Treasury Investments
under EESA.

PO 00000

Frm 00093

Fmt 6602

Sfmt 6602

E:\HR\OC\C540A.XXX

T2009–TARP–
0001
TOFS–09–B–
0002

PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP.

0
2,897,400

PPIP compliance .............................

103,425

99,791,842

99,791,842

461,956

99,791,842

7,765

21,993,424

100,000,000

3,000

99,791,842

2,000,000

710,528

Freedom of Information Act (FOIA)
Analysts to support the Disclosure Services, Privacy and
Treasury Records.
Internal control services ................

Phacil, Inc. .........

TOS–07–109

TOFS–10–D–
0013

TOFS–10–D–
0012

Pat Taylor and
Temporary Services for Document
Associates, Inc.
Production, FOIA Assistance,
and Program Support.
Paul Weiss
Omnibus procurement for legal
Rifkind Wharservices.
ton & Garrison
LLP.
Perkins Coie LLP Omnibus procurement for legal
services.

TDOX09–0039

Orrick Herrington
Sutcliffe LLP.

Navigant Consulting Inc.
NNA Inc. .............
Omnibus procurement for legal
services.

Mercer (US) Inc.

TOFS–09–O–
0011
TOFS–10–B–
0004
TOFS–10–B–
0008
TOFS–10–O–
0001
TOFS–10–D–
0011

Microlink LLC .....

Executive Compensation Data Subscription.
Data and Document Management
Consulting Services.
Program Compliance Support Services.
Newspaper delivery ........................

Love & Long LLP

TDOX09–0040

Human resources services .............

TOFS–10–D–
0010

Locke Lord Bissell & Liddell
LLP.

TDO–TARP–
2009–0003

smartinez on DSKB9S0YB1PROD with HEARING

C540A

2,897,400

25,361,407

103,425

99,791,842

99,791,842

692,108

99,791,842

7,765

21,993,424

100,000,000

3,000

99,791,842

2,000,000

710,528

Woman Owned
Small Business.
Large Business ..

Large Business ..

Large Business ..

Large Business ..

GSA Schedule
Competition.
GSA Schedule
Competition.

Large Business ..

Large Business ..

Full and Open w/ Large Business ..
Small Business Set-aside.
Full and Open .... Small Business ..

Full and Open w/ Large Business ..
Small Business Set-aside.
GSA Schedule
Woman Owned
Competition.
Small Business.
Full and Open w/ Large Business ..
Small Business Set-aside.

GSA Schedule
Competition.
GSA Schedule
Competition.
Full and Open ....

Limited Competition—Unusual
and Compelling Urgency.
Full and Open w/ SDB Woman
Small BusiOwned Small
ness Set-aside.
Business.
Full and Open .... Large Business ..

GSA Schedule
Competition.

7 .........................

6 .........................

............................

............................

............................

3 .........................

Full and Open
Competition.
............................

9 .........................

10 .......................

3 .........................

............................

3 .........................

4 .........................

4 .........................

6 .........................

............................

81 .......................

81 .......................

3 .........................

81 .......................

1 .........................

6 .........................

5 .........................

1 .........................

81 .......................

3 .........................

3 .........................

Multiple Programs
PPIP

Program Operations

Multiple Programs

Multiple Programs

Multiple Programs

Multiple Programs
Program Operations
Multiple Programs
Program Operations
Multiple Programs

Multiple Programs

Multiple Programs

Program Operations

87

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Housing Legal Services ..................

Simpson Thacher
& Bartlett LLP.

Simpson Thacher
& Bartlett LLP.

TOFS–09–D–
0009

E:\HR\OC\C540A.XXX

TOS09–007

C540A

Legal services for the implementation of TARP.

Legal services for work under
Treasury’s Public Private Investment Funds (PPIF) program.

Capital Assistance Program (I) .....

Omnibus procurement for legal
services.

Omnibus procurement for legal
services.

Seyfarth Shaw
LLP.

Shulman Rogers
Gandal Pordy
& Ecker PA.
Simpson Thacher
& Bartlett LLP.

TOFS–09–D–
0001

Program Compliance Support Services.

Data and Document Management
Consulting Services.
Accurint subscription services for
one year—4 users.

Program Compliance Support Services.
FOIA Support Services ....................

Description

Schiff Hardin LLP

Reed Elselvier
Inc. (dba
LexisNexis).
Regis & Associates, PC.

RDA Corporation

PricewaterhouseCoopers LLP.
Qualx Corporation

Contractor

21,993,424

Adjusted
Potential
Contract
Value 398

500,000

15,000,000

5,000,000

99,791,842

99,791,842

537,375

21,993,424

8,208

1,025,000

15,000,000

5,000,000

99,791,842

99,791,842

537,375

21,993,424

8,208

100,000,000

14,000,000

100,000,000

14,000,000

21,993,424

Original
Potential
Contract
Value 397

GSA Schedule
Competition.
Full and Open w/
Small Business Set-aside.
Full and Open w/
Small Business Set-aside.
Limited Competition—Unusual
and Compelling Urgency.
Limited Competition—Unusual
and Compelling Urgency.
GSA Schedule
Competition.

GSA Schedule
Competition.

GSA Schedule
Competition.
GSA Schedule
Competition.

GSA Schedule
Competition.
Full and Open ....

Competition

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

8(a) and Small
Disadvantaged
Business.
Large Business ..

Large Business ..

Service Disabled
Veteran Owned
Small Business.
Small Business ..

Large Business ..

Socioeconomic
Status

6 .........................

8 .........................

6 .........................

............................

............................

............................

9 .........................

4 .........................

10 .......................

Unlimited to
SDVOSB vendors.

9 .........................

Offerors
Solicited

2 .........................

3 .........................

3 .........................

81 .......................

81 .......................

............................

6 .........................

1 .........................

5 .........................

15 .......................

6 .........................

Proposals
Received

FIGURE 11: LIST OF PROCUREMENT CONTRACTS DETAILING COMPETITION AND SOCIOECONOMIC STATUS OF CONTRACTORS 396—Continued

TOFS–10–D–
0015

TOFS–10–G–
0007
TOFS–10–D–
0014

TOFS–10–B–
0010

TOFS–10–B–
0005
TOFS–10–G–
0005

TOFS–10–B–
0009
TOFS–10–D–
0003

Contract Number

smartinez on DSKB9S0YB1PROD with HEARING

Multiple Programs

Multiple Programs

Multiple Programs

Multiple Programs

Multiple Programs

HAMP

Multiple Programs

Program Operations

Multiple Programs
Program Operations

Program

88

VerDate Mar 15 2010

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Sonnenschein
Nath & Rosenthal LLP.

Squire Sanders &
Dempsey LLP.
Squire Sanders &
Dempsey LLP.
Sullivan Cove
Reign Enterprises JV.

TOS09–014C

T09BPA–001

Fmt 6602

Sfmt 6602

E:\HR\OC\C540A.XXX

The Boston Consulting Group
Inc.

The George
Washington
University.
The Mitre Corporation.

Venable LLP .......

TOFS–09–D–
0008

TOFS–10–O–
0017

TOFS–09–D–
0002

TOFS–10–I–
0001

The Boston Consulting Group
Inc.

TOFS–09–D–
0003

TOFS–10–B–
0002
TOFS–10–D–
0016

Sonnenschein
Nath & Rosenthal LLP.

Sonnenschein
Nath & Rosenthal LLP.

SNL Financial LC

TOS09–010A

TOFS–09–O–
0016
TOFS–09–D–
0004

smartinez on DSKB9S0YB1PROD with HEARING

C540A

Capital Assistance Program (II)
Legal Services.

Financial Institution Mgmt & Modeling—Training course (J.
Talley).
FNMA IR2 Assessment—OFS task
order on Treasury Mitre Contract.

Management Consulting relating to
the Auto industry.

Management Consulting relating to
the Auto industry.

Omnibus procurement for legal
services.

Legal services for the Capital Purchase Program.
Housing Legal Services ..................

Legal Services for the purchase of
asset backed securities.

Legal services related to auto industry loans.

SNL Unlimited, a web-based financial analytics service.
Auto Investment Legal services .....

5,000,000

408,075

5,000

7,000,000

1,000,000

99,791,842

1,229,350

5,520,000

249,999

233,663

8,590,000

460,000

5,000,000

740,526

5,000

7,000,000

1,000,000

99,791,842

1,229,350

5,520,000

249,999

233,663

26,756,322

460,000

Sole Source—
Only Responsible Source.
Limited Competition—Unusual
and Compelling Urgency.

Limited Competition—Unusual
and Compelling Urgency.
Limited Competition—Unusual
and Compelling Urgency.
SAP—Competed

Limited Competition—Unusual
and Compelling Urgency.
Limited Competition—Unusual
and Compelling Urgency.
Limited Competition—Unusual
and Compelling Urgency.
GSA Schedule
Competition.
GSA Schedule
Competition.
Full and Open w/
Small Business Set-aside.

Full and Open ....

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Service Disabled
Veteran Owned
Small Business.
Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

Large Business ..

6 .........................

1 .........................

............................

7 .........................

5 .........................

............................

5 .........................

5 .........................

7 .........................

4 .........................

8 .........................

Full and Open ....

3 .........................

1 .........................

1 .........................

5 .........................

3 .........................

81 .......................

2 .........................

4 .........................

6 .........................

4 .........................

6 .........................

3 .........................

Multiple Programs

HAMP

Auto Industry

Auto Industry

Multiple Programs

HAMP

CPP

CPP

Auto Industry

Multiple Programs
Auto Industry

89

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Venable LLP .......

Contractor

PO 00000

Frm 00096

Fmt 6602

3,213

5,972

99,791,842

Original
Potential
Contract
Value 397

3,213

5,972

99,791,842

Adjusted
Potential
Contract
Value 398
Socioeconomic
Status

Full and Open w/ Large Business ..
Small Business Set-aside.
GSA Schedule
Large Business ..
Competition.
GSA Schedule—
Small Business ..
Sole Source.

Competition

Contractor

Anderson McCoy & Orta ....................
Cadwalader Wickersham & Taft LLP
Ennis Knupp & Associates Inc ..........
Ennis Knupp & Associates Inc ..........
Ennis Knupp & Associates Inc ..........
Ennis Knupp & Associates Inc ..........
Ennis Knupp & Associates Inc ..........
Ennis Knupp & Associates Inc ..........
Ennis Knupp & Associates Inc ..........

Ennis Knupp & Associates Inc ..........
Ernst & Young LLP ............................

Ernst & Young LLP ............................
Ernst & Young LLP ............................
Ernst & Young LLP ............................

TOFS–09–D–0010 .......
TOFS–09–D–0006 .......
TOS–09–008 ...............
TOS–09–008 ...............
TOS–09–008 ...............
TOS–09–008 ...............
TOS–09–008 ...............
TOS–09–008 ...............
TOS–09–008 ...............

TOS–09–008 ...............
T2009–TARP–0002 ......

Sfmt 6602

E:\HR\OC\C540A.XXX

T2009–TARP–0002 ......
T2009–TARP–0002 ......
T2009–TARP–0002 ......

C540A

James K Hess ....................................
Morgan Franklin ................................
R Moran Co .......................................

Vedder Price-Legal ............................
Emax Financial ..................................

Cadwalader Wickersham & Taft LLP
Driven ................................................
Korn Ferry ..........................................
Spencer Stuart ...................................
FirstAdvantage ...................................
Bishops Services ...............................
Delves Group .....................................
FedEx-Courier .....................................
ABS–IT services (2%) .......................

Subcontractor Name

303,880
814,984
19,291

2,106
358,300

$3,940,925
15,452
375,000
275,000
117,500
19,850
26,000
58
7,000

Subcontract
Value

Large Business ......................
Small Business ......................
Large Business ......................
Large Business ......................
Large Business ......................
Large Business ......................
Large Business ......................
Large Business ......................
Woman Owned Small Business.
Small Business ......................
Woman and Minority Owned
Small Business.
Small Business ......................
Large Business ......................
Service Disabled Veteran
Owned Small Business.

Socioeconomic Status

FIGURE 12: LIST OF SUBCONTRACTS UNDER THE PROCUREMENT CONTRACTS

documents provided to Panel staff (Oct. 8, 2010).
Potential Contract Value is the amount listed in the base contract.
Potential Contract Value includes amounts from the base contract, task orders and modifications.

Paper Shredder ...............................

Subscription Service for 4 users ...

Contract Number

398 Adjusted

397 Original

396 Treasury

West Publishing
Corporation.
Whitaker Brothers
Bus Machines
Inc.

TOFS–10–G–
0006
TDOX09–0038

Omnibus procurement for legal
services.

Description

Category

Accounting/Internal Controls
Accounting/Internal Controls
Accounting/Internal Controls

Financial Advisory .................
Accounting/Internal Controls

Program

Program Operations

Anti-Fraud

Multiple Programs

Program

Multiple Programs
Multiple Programs
Multiple Programs

Multiple Programs
Multiple Programs

PPIP
Auto Industry
Multiple Programs
Multiple Programs
Multiple Programs
Multiple Programs
Multiple Programs
Multiple Programs
Multiple Programs

1 .........................

............................

81 .......................

Proposals
Received

Legal Advisory .......................
Legal Advisory .......................
Financial Advisory .................
Financial Advisory .................
Financial Advisory .................
Financial Advisory .................
Financial Advisory .................
Financial Advisory .................
Financial Advisory .................

399

1 .........................

............................

............................

Offerors
Solicited

FIGURE 11: LIST OF PROCUREMENT CONTRACTS DETAILING COMPETITION AND SOCIOECONOMIC STATUS OF CONTRACTORS 396—Continued

TOFS–10–D–
0017

Contract Number

smartinez on DSKB9S0YB1PROD with HEARING

90

Ernst & Young LLP ............................
Ernst & Young LLP ............................

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FI Consulting Inc. ..............................
Hughes Hubbard & Reed LLP ...........

T2009–TARP–0002 ......
T2009–TARP–0002 ......

TOFS–09–B–0001 .......
T09BPA–002 ................

McKee Nelson LLP .............................
McKee Nelson LLP .............................
McKee Nelson LLP .............................

Ernst & Young LLP ............................
Ernst & Young LLP ............................

T2009–TARP–0002 ......

Frm 00097

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TOFS–09–D–0005 .......

McKee Nelson LLP .............................
Microlink LLC .....................................
PricewaterhouseCoopers LLP .............

McKee Nelson LLP .............................

TOFS–09–D–0005 .......
TOFS–09–D–0005 .......

Sfmt 6602

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PricewaterhouseCoopers LLP .............

T2009–TARP–0001 ......
T2009–TARP–0001 ......

T2009–TARP–0001 ......

C540A

399 Treasury

documents provided to Panel staff (Oct. 8, 2010).

Qualx Corporation ..............................
The Boston Consulting Group Inc. ....
The Boston Consulting Group Inc. ....
Venable LLP .......................................

PricewaterhouseCoopers LLP .............
PricewaterhouseCoopers LLP .............

T2009–TARP–0001 ......

.......
.......
.......
.......

PricewaterhouseCoopers LLP .............

T2009–TARP–0001 ......
T2009–TARP–0001 ......

TOFS–10–D–0003
TOFS–09–D–0008
TOFS–09–D–0008
TOFS–09–D–0002

PricewaterhouseCoopers LLP .............
PricewaterhouseCoopers LLP .............

TOFS–09–D–0005 .......
TOFS–10–B–0004 .......
T2009–TARP–0001 ......

McKee Nelson LLP .............................
McKee Nelson LLP .............................

TOFS–09–D–0005 .......
TOFS–09–D–0005 .......
TOFS–09–D–0005 .......

Ernst & Young LLP ............................

T2009–TARP–0002 ......
T2009–TARP–0002 ......

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McNeil Technologies ..........................
Oxnard MB LLC ..................................
PR & Associates ................................
Brown Sheehan LLP ...........................

Synergy Services ................................

GRC Assurance ..................................
JH2 Risk Advisors ..............................

Evergreen Associates of Virginia ......

Bert Smith .........................................
DP George ..........................................

Washington Express ..........................
I3 Solutions .......................................
A11 Services Corporation ..................

Total Document Solutions, Inc. .........

Merrill Communications LLC .............
Miller’s Office Products .....................

American Detail Cleaning Corp .........
Document Technologies, Inc. .............
Great Performances ...........................

Internet Security Corp .......................
Leftwich & Ludaway, LLC ..................

Tom Horton ........................................
Lani Ecko ...........................................

Peggy Kuhn ........................................

Misha Libman ....................................
T Curtis Co ........................................

103,000
25,437
113,544
130,429

1,617,819

326,565
422,499

65,230

324,904
168,552

100
65,520
3,025

2,100

2,600
1,200

500
3,100
400

17,241
158,835

18,750
60,939

108,000

194,508
1,082,558

Small Business ......................
Woman and Minority Owned
Small Business.
Woman Owned Small Business.
Small Business ......................
Small Disadvantaged Business.
Small Business ......................
Woman Owned Small Business.
Small Business ......................
Large Business ......................
Woman Owned Small Business.
Large Business ......................
Woman Owned Small Business.
Woman Owned Small Business.
Small Business ......................
Small Business ......................
Woman Owned Small business.
Large Business ......................
Service Disabled Veteran
Owned Small Business.
Woman Owned Small Business.
Small Business ......................
Woman Owned Small Disadvantaged Business.
Woman Owned Small Business.
Large Business ......................
Small Business ......................
Small Business ......................
Small Disadvantaged Business.
Administrative Support ..........
Financial Advisory .................
Financial Advisory .................
Legal Advisory .......................

Accounting/Internal Controls

Accounting/Internal Controls
Accounting/Internal Controls

Accounting/Internal Controls

Accounting/Internal Controls
Accounting/Internal Controls

Legal Advisory .......................
Information Technology .........
Accounting/Internal Controls

Legal Advisory .......................

Legal Advisory .......................
Legal Advisory .......................

Legal Advisory .......................
Legal Advisory .......................
Legal Advisory .......................

Accounting/Internal Controls
Legal Advisory .......................

Accounting/Internal Controls
Accounting/Internal Controls

Accounting/Internal Controls

Accounting/Internal Controls
Accounting/Internal Controls

Program Operations
Auto Industry
Auto Industry
CAP

Multiple Programs

Multiple Programs
Multiple Programs

Multiple Programs

Multiple Programs
Multiple Programs

SBA
Program Operations
Multiple Programs

SBA

SBA
SBA

SBA
SBA
SBA

Multiple Programs
CPP

Multiple Programs
Multiple Programs

Multiple Programs

Multiple Programs
Multiple Programs

91

Financial Agent

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Avondale Investments, LLC ................

The Bank of New York Mellon Corporation.
Bell Rock Capital, LLC .......................

Earnest Partners ................................

TOFA–09–FAA–0005 .....

TOFA–10–FAA–0001 .....

TOFA–09–FAA–0001 .....

TOFA–09–FAA–0004 .....

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Fannie Mae .........................................

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Howe Barnes Hoefer & Arnett, Inc. ....

KBW Asset Management, Inc. ............

Lazard Freres & Co. LLC ....................

Lombardia Capital Partners, LLC ......

Morgan Stanley & Co. ........................

Paradigm Asset Management Co.,
LLC.
Piedmont Investment Advisors LLC ...

TOFA–09–FAA–0003 .....
TOFA–09–FAA–0006 .....

TOFA–10–FAA–0003 .....

TOFA–10–FAA–0004 .....

TOFA–10–FAA–0009 .....

TOFA–10–FAA–0005 .....

TOFA–10–FAA–0008 .....

TOFA–10–FAA–0006 .....

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401 Treasury

400 Treasury

documents provided to Panel staff (Oct. 8, 2010).
documents provided to Panel staff (Oct. 5, 2010).

TOFA–09–FAA–0007 .....

Freddie Mac ........................................
FSI Group LLC ....................................

TOFA–09–FAA–0002 .....

TOFA–10–FAA–0002 .....

AllianceBernstein L.P. ........................

Financial Agency
Agreement
Number

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Asset Management
Services.
Asset Management
Services.
HAMP Administration.
HAMP Compliance
Asset Management
Services.
Asset Management
Services.
Asset Management
Services.
Transaction Structuring.
Asset Management
Services.
Disposition Services.
Asset Management
Services.
Asset Management
Services.

Asset Management
Services.
Asset Management
Services.
Custodian .............

Description

4/21/2009

12/22/2009

3/29/2010

12/22/2009

5/17/2010

12/22/2009

12/22/2009

2/18/2009
4/21/2009

2/18/2009

3/16/2009

12/22/2009

10/14/2008

12/22/2009

4/21/2009

Date of
Award

4/20/2018

4/20/2019

3/29/2012

4/20/2019

2/16/2012

4/20/2019

4/20/2019

2/17/2019
4/20/2018

2/17/2019

3/15/2013

4/20/2019

10/14/2015

4/20/2019

4/20/2018

Performance
End Date

5,615,000

1,250,000

23,577,000

1,250,000

7,500,000

3,803,333

1,250,000

88,850,000
11,102,500

126,712,000

4,050,000

750,000

28,495,412

750,000

$22,399,943

Obligated
Value

FIGURE 13: LIST OF FINANCIAL AGENCY AGREEMENTS 400

5,120,000

925,000

13,175,423

937,500

2,166,667

3,279,167

950,000

79,296,499
10,770,000

111,339,451

1,955,000

575,000

23,777,002

562,500

$21,207,253

Expended
Value

Minority Owned
Business.
Minority Owned
Business.

Minority Owned
Business.
Large Business ....

Large Business ....

Small Business ....

Small Business ....

Large Business ....
Large Business ....

Woman Owned
Business.
Minority Owned
Business.
Large Business ....

Minority Owned
Business.
Large Business ....

Large Business ....

Socioeconomic
Category 401

CPP

CPP

CPP

CPP

AIFP

Multiple Programs

CPP

HAMP
Multiple Programs

HAMP

SBA7(a)

CPP

Multiple Programs

CPP

Multiple Programs

Program

92

93
FIGURE 14: LIST OF SUBCONTRACTS UNDER FINANCIAL AGENT AGREEMENTS 402
Reported
Contract
Value 403

Financial Agent

Contractor

Socioeconomic Status

AllianceBernstein ...

Altura Capital Group LLC ......................

$816,664

Financial Advisory
Services

AllianceBernstein ...

Deutsche Bank Securities Inc. ..............

Minority and
Woman Owned
Business.
Large Business ......

250,000

AllianceBernstein ...

Jeremy Bulow, Jon Levin, Paul Milgrom
and Paul Klemperer.
American Cybersystems .........................

Large Business ......

48,920
80,168

Foxx-Pitt Kelton ......................................

Minority Owned
Business.
Minority Owned
Business.
Large Business ......

1,175,000

Gifford Fong Associates ........................

Small Business .....

268,828

Information Integration Inc. (I–3) .........

Woman Owned
Business.
Large Business ......

275,501

Minority Owned
Business.
Small Business .....

256,257
3,738,524

Small Business .....

30,987
31,163

Financial Advisory
Services
Financial Advisory
Services
Temporary Staffing
Services
Temporary Staffing
Services
Financial Advisory
Services
Financial Advisory
Services
Technical Writing
Support
Temporary Staffing
Services
Temporary Staffing
Services
Financial Advisory
Services
Financial Advisory
Services
Temporary Staffing
Services
Audit and Accounting Services

1,223,750

The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.
The Bank of New
York Mellon.

Diversant, Inc. .......................................

International Market Recruiters ............
New York Staffing Services, Inc. ...........
RangeMark (f/k/a Structured Credit Solutions (NSM)).
Robert Jarrow .........................................

67,793

Wilshire Associates Incorporated ..........

Woman Owned
Business.
Minority and
Woman Owned
Business.
Large Business ......

Accenture ...............................................

Large Business ......

4,587,626

Fannie Mae ............

Beers & Cutler .......................................

Large Business ......

103,225

Fannie Mae ............

Bloomfield Knoble, Inc. .........................

Large Business ......

100,310

Fannie Mae ............

Cap Gemini ............................................

Large Business ......

154,307

Fannie Mae ............

Ernst & Young LLP ................................

Large Business ......

3,777,188

Fannie Mae ............

Homeownership Preservation Foundation.
Iron Mountain ........................................

Small Business .....

8,049,969

Fannie Mae ............

Large Business ......

7,141

Fannie Mae ............

LPS/McDash ...........................................

Large Business ......

6,117,500

Fannie Mae ............

Newbold, LLC .........................................

Small Business .....

204,057

Fannie Mae ............
Fannie Mae ............

Pace Harmon, LLC .................................
PERC ......................................................

Small Business .....
Large Business ......

82,094
135,927

Fannie Mae ............

PricewaterhouseCoopers LLP .................

Large Business ......

3,371,008

Fannie Mae ............
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The Bank of New
York Mellon.
Fannie Mae 404 ......

Robbins Gioia ........................................
The Ad Council ......................................
The Oakleaf Group LLC .........................

Minority Owned
Business.
Large Business ......
Small Business .....

349,619

Fannie Mae ............
Fannie Mae ............

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539,371

Williams, Adley & Company, LLP ..........

PO 00000

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276,227

1,042,716
842,967

E:\HR\OC\C540A.XXX

Category

Portfolio Analystic
Services
Project Management & Reporting Support
Business Process
Support
Web Development
Support
Records Retention
Support
Business Process
Support
Call Center Support
Data Storage Services
Data Management
Services
Project Management Support
Call Center Support
Information Protection Support
Phone Bank Support
MHA Operating
Model Support
Marketing Support
Program Support
(Reporting)

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94
FIGURE 14: LIST OF SUBCONTRACTS UNDER FINANCIAL AGENT AGREEMENTS 402—Continued
Financial Agent

Contractor

Socioeconomic Status

Freddie Mac ...........

AllonHill, LLC .........................................

Freddie Mac ...........
Freddie Mac ...........
Freddie Mac ...........

American Research Institute .................
Celerity IT, LLC ......................................
Clayton Holdings ...................................

Woman Owned
Business.
Large Business ......
Large Business ......
Large Business ......

Freddie Mac ...........

Collaberra ..............................................

Freddie Mac ...........
Freddie Mac ...........
Freddie Mac ...........

Comsys Info Tech Services, Inc. ...........
Edge Professional Services ...................
Ernst & Young LLP ................................

Freddie Mac ...........

Esolution First, LLC ...............................

Freddie Mac ...........

Grant Thornton ......................................

Freddie Mac ...........

Helen Thompson ....................................

Freddie Mac ...........
Freddie Mac ...........

Idea Integration .....................................
Inscope Solutions ..................................

Freddie Mac ...........
Freddie Mac ...........

Minority Owned
Business.
Large Business ......
Large Business ......
Large Business ......
Woman Owned
Business.
Large Business ......

Reported
Contract
Value 403

Category

4,442,955

Program Support

269,019
23,364
3,864,205

Training Support
Staff Augmentation
Compliance Support (File Reviews)
Professional Training
Staff Augmentation
Staff Augmentation
Business Process
Support
Staff Augmentation

409,240
450,509
437,968
17,761,258
997,566
1,115,161

Kforce .....................................................
Lender Processing Services ...................

Woman Owned
Business.
Large Business ......
Minority Owned
Business.
................................
Large Business ......

87,360
1,458,143

Freddie Mac ...........

MODIS, Inc. ............................................

Large Business ......

435,253

Freddie Mac ...........

Mortgage Analytics & Consulting .........

10,983

Freddie Mac ...........

Oliver Wyman .........................................

Woman Owned
Business.
Large Business ......

5,930,308

Freddie Mac ...........

Pace Harmon, LLC .................................

Large Business ......

466,830

Freddie Mac ...........

Protiviti ..................................................

Large Business ......

28,341

Freddie Mac ...........
Freddie Mac ...........
Freddie Mac ...........

Sapphire Government Technologies ......
Spectrum Technology Services ..............
Syapps ...................................................

301,577
1,130,031
1,223,175

Freddie Mac ...........

VisionIT ..................................................

52,848

Staff Augmentation

Freddie Mac ...........

Williams, Adley & Company, LLP ..........

Freddie Mac ...........

Willmott & Associates ...........................

Large Business ......
Large Business ......
Minority Owned
Business.
Minority Owned
Business.
Minority and
Woman Owned
Business.
Large Business ......

IT Support Services
Project Management Support
Staff Augmentation
Compliance Program Support
Project Management Support
Financial Support
Services
Data Validation
Support
Procurement Support
Governance Audit
Support
Staff Augmentation
IT Support Services
IT Support Services

FSI Group ...............

Elizabeth Park Capital Management,
Ltd..
N/A 405 ...................................................

Minority Owned
Business.
Small Business .....

106,250

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Piedmont Investment Advisors.

171,100

Governance Audit
Support
Training Support

57,295
982,193

933,231

Governance Audit
Support

200,875

Recruitment Support
Recruitment Support
Financial Advisory
Services

320,000

402 Data on contractors to financial agents is current through August 31, 2010. Reports are based on representations by the financial
agents, as Treasury does not have contractual privity with contractors to financial agents. Treasury documents provided to Panel staff (Oct. 8,
2010).
403 Contract value refers to the amount payable from the agent to the contractor. Not all contractor costs are compensated by Treasury on
a pass-through basis.
404 Fannie Mae also engages numerous marketing, site hosting and IT vendors that are not individually reported on an due to the quantity
of these contractors, their low average dollar-value and that the associated costs of these contracts are included in the fixed fee we pay
Fannie Mae under their FAA with the Treasury.
405 This subcontractor was a sole proprietor and Treasury requested that the name be withheld.

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95
SECTION TWO: TARP UPDATES SINCE LAST REPORT
A. Community Development Capital Initiative
Treasury completed funding for the Community Development
Capital Initiative (CDCI) on September 30, 2010. Although Treasury committed to spend up to $780 million in TARP funds for the
CDCI, only $570 million was allocated to 84 Community Development Financial Institutions (CDFIs). Among these institutions
were 28 banks and thrifts that issued preferred shares through
CPP and later exchanged these securities for an equivalent investment amount under the CDCI. The number of participating CDFIs
grew more than six times in September, with 73 banks, thrifts, and
credit unions entering the program. More than half of the final investment amount ($312 million) came during the final round of
funding on September 29 and 30, 2010.
B. Citigroup AGP TruPS and Common Stock Sales
On September 30, 2010, Treasury completed a third round of
sales for Citigroup common stock, which it received in July 2009
as part of an exchange for preferred shares issued under CPP. A
total of 1.5 billion shares were sold between July 30 and September
30, 2010, at $3.91 per share. Gross proceeds from the three disposition periods completed thus far total $16.4 billion. Approximately
$13.4 billion of this amount represents a repayment for Citigroup’s
CPP funding, while the remaining $3 billion represents a net profit
for taxpayers. Treasury still holds 3.1 billion common shares, which
represents 12.4 percent of Citigroup’s outstanding common equity.
Treasury also completed a public offering for $2.2 billion in trust
preferred securities (TruPS) issued under the Asset Guarantee Program (AGP). These securities were a premium for Treasury’s $5
billion guarantee on a $301 billion pool of Citigroup ring-fenced assets. Treasury initially received a $4 billion premium; however,
$1.8 billion was cancelled upon the December 2009 termination of
the guarantee. All proceeds from the TruPS sale constitute further
profits for taxpayers since Treasury did not make any payments associated with the loss-share agreement during the life of the program.
Treasury also plans to sell $800 million in AGP TruPS currently
held by the FDIC. The FDIC will transfer these securities to Treasury upon Citigroup’s exit from the Temporary Liquidity Guarantee
Program (TLGP), provided that there are no losses from the company’s participation in TLGP.

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C. AIG Repayment Plan
On September 30, 2010, American International Group Inc.
(AIG) announced that it had entered an agreement-in-principle
with Treasury, the Federal Reserve Bank of New York (FRBNY),
and the AIG Credit Facility Trust that would allow the company
to repay its outstanding obligations to the federal government.
AIG’s repayment plan involves three components:
• AIG will repay its balance on the revolving credit facility
(RCF) with FRBNY. As of September 29, 2010, the amount of
funds outstanding from the facility was $18.9 billion. To repay

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96
the RCF, AIG plans to use proceeds from the initial public offering for American International Assurance Company Ltd.
(AIA) and the pending sale of American Life Insurance Company (ALICO) to MetLife, Inc. AIG will also use funds from the
parent company to pay down and, ultimately, terminate the facility.
• AIG will draw down up to $22.3 billion in Series F funds available through the TARP to help purchase FRBNY’s $25.7 billion
preferred equity interests in the AIA Aurora LLC and ALICO
Holdings LLC special purpose vehicles (SPVs). The company
will also use proceeds from two future asset sales (AIG Star
Life Insurance Co. and AIG Edison Life Insurance) to purchase
the remaining shares held in the SPVs. AIG will then transfer
the preferred interests to Treasury as part of its consideration
for the Series F preferred shares. In order to repay Treasury
for the equity interest in the SPVs, AIG will use proceeds from
future sales of AIA and MetLife equity, which AIG will own
upon completion of the ALICO sale.
• Upon full repayment of the RCF, AIG will issue approximately
1.655 billion shares of common stock to Treasury in exchange
for $49.1 billion of Series E and Series F preferred equity
issued under the TARP and Series C preferred convertible
stock held by the AIG Credit Facility Trust. AIG will also issue
up to 75 million warrants for common equity to all existing
common shareholders. Once the exchange is complete, Treasury will have a 92.1 percent common equity stake in AIG.

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D. FHA Short Refinance Program
On September 7, 2010, the U.S. Department of Housing and
Urban Development (HUD) began offering an additional refinance
option for borrowers in negative equity positions through the Federal Housing Administration (FHA) Short Refinance Program. For
a homeowner to qualify for a new FHA-insured loan under the program, the borrower must be current on their mortgage payments,
and the first-lien mortgage holder must write down at least 10 percent of the loan’s principal. The loan-to-value ratio can be no higher than 97.75 percent after the refinancing, and the combined loanto-value ratio on the refinanced mortgage (which would also include any junior liens) can be no greater than 115 percent.
Treasury has allocated approximately $3 billion in TARP funds
for this program to support existing second-lien holders who agree
to full or partial extinguishment of the liens.
On September 3, 2010, Treasury purchased an $8 billion, 10-year
letter of credit facility from Citibank, N.A. to cover losses on new
FHA loans. Treasury will incrementally increase the amount available under the facility in proportion to the dollar value of mortgages refinanced under the FHA Short Refinance Program. After
the first two-and-a-half years, the amount available under the credit facility will be capped at the level of draws up to that point in
time. As part of the purchase agreement with Citibank, N.A.,
Treasury will pay up to $117 million in fees for the availability and
usage of the credit facility.

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97
E. Treasury Releases Two-Year Retrospective Report on the
TARP
Two days following the expiration of the TARP on October 3,
2010, Treasury released a Two-Year Retrospective report assessing
the program. The report cites a number of key accomplishments
Treasury attributes to the TARP. Treasury also estimates that the
total cost of the TARP will be $51 billion. The total cost to Treasury would be $29 billion after factoring in an estimated profit of
$22 billion associated with its investments in AIG outside of the
TARP. Treasury expects most of the residual cost to come from
losses from the TARP’s investments in the automotive industry as
well as expenditures for foreclosure mitigation initiatives.
F. Metrics
Each month, the Panel’s report highlights a number of metrics
that the Panel and others, including Treasury, the Government Accountability Office (GAO), the Special Inspector General for the
Troubled Asset Relief Program (SIGTARP), and the Financial Stability Oversight Board, consider useful in assessing the effectiveness of the Administration’s efforts to restore financial stability
and accomplish the goals of EESA. This section discusses changes
that have occurred in several indicators since the release of the
Panel’s September report.

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1. Macroeconomic Indices
Real GDP growth quarter-over-quarter peaked at an annual rate
of 5 percent in the fourth quarter of 2009 and has decreased during
2010. Real GDP increased at rates of 3.7 and 1.6 percent in the
first and second quarters of 2010, respectively.406 These growth
rates were also affected by the spike in employment resulting from
the 2010 U.S. Census.407

406 Bureau of Economic Analysis, Table 1.1.6.: Real Gross Domestic Product, Chained Dollars
(online
at
www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=6&Freq=Qtr&
FirstYear=2008&LastYear=2010) (hereinafter ‘‘Bureau of Economic Analysis, Table 1.1.6’’). Until
the year-over-year decrease from 2007 to 2008, nominal GDP had not decreased on an annual
basis since 1949. Bureau of Economic Analysis, Table 1.1.5.: Gross Domestic Product (online at
www.bea.gov/national/nipaweb/
TableView.asp?SelectedTable=5&Freq=Qtr&FirstYear=2008&LastYear=2010) (accessed Oct. 12,
2010).
407 The Economics and Statistics Administration within the U.S. Department of Commerce estimated that the spending associated with the 2010 Census would peak in the second quarter
of 2010 and could boost annualized nominal and real GDP growth by 0.1 percentage point in
the first quarter of 2010 and 0.2 percentage point in the second quarter of 2010. As the boost
from the Census is a one-time occurrence, continuing increases in private investment and personal consumption expenditures as well as in exports will be needed to sustain the resumption
of growth that has occurred in the U.S. economy over the past year. Economics and Statistics
Administration, U.S. Department of Commerce, The Impact of the 2010 Census Operations on
Jobs and Economic Growth, at 8 (Feb. 2010) (online at www.esa.doc.gov/02182010.pdf).

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98
FIGURE 15: REAL GDP 408

Since our September report, both underemployment and unemployment have increased marginally. Median duration of unemployment has decreased by 10 percent.
FIGURE 16: UNEMPLOYMENT, UNDEREMPLOYMENT, AND MEDIAN DURATION OF
UNEMPLOYMENT 409

408 Bureau

of Economic Analysis, Table 1.1.6, supra note 406.
is important to note that the measures of unemployment and underemployment do not
include people who have stopped actively looking for work altogether. While the Bureau of Labor
Statistics (BLS) does not have a distinct metric for ‘‘underemployment,’’ the U–6 category of
Table A–15 ‘‘Alternative Measures of Labor Underutilization’’ is used here as a proxy. BLS defines this measure as: ‘‘Total unemployed, plus all persons marginally attached to the labor
force, plus total employed part time for economic reasons, as a percent of the civilian labor force
plus all persons marginally attached to the labor force.’’ U.S. Department of Labor, International
Comparisons of Annual Labor Force Statistics (online at www.bls.gov/webapps/legacy/
cpsatab15.htm) (accessed Oct. 12, 2010).

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409 It

99
2. Financial Indices
a. Overview
Since its post-crisis trough in April 2010, the St. Louis Federal
Reserve Financial Stress Index has increased over elevenfold, although it has fallen by nearly half since the post-crisis peak in
June 2010. The recent trend suggests that financial stress continues moving towards its long-run norm. The index has decreased
over three standard deviations since October 2008, the month when
the TARP was initiated.
FIGURE 17: ST. LOUIS FEDERAL RESERVE FINANCIAL STRESS INDEX 410

410 Federal Reserve Bank of St. Louis, Series STLFSI: Business/Fiscal: Other Economic Indicators (Instrument: St. Louis Financial Stress Index, Frequency: Weekly) (online at research.stlouisfed.org/fred2/categories/98) (accessed Oct. 12, 2010). The index includes 18 weekly
data series, beginning in December 1993 to the present. The series are: effective federal funds
rate, 2-year Treasury, 10-year Treasury, 30-year Treasury, Baa-rated corporate, Merrill Lynch
High Yield Corporate Master II Index, Merrill Lynch Asset-Backed Master BBB-rated, 10-year
Treasury minus 3-month Treasury, Corporate Baa-rated bond minus 10-year Treasury, Merrill
Lynch High Yield Corporate Master II Index minus 10-year Treasury, 3-month LIBOR–OIS
spread, 3-month TED spread, 3-month commercial paper minus 3-month Treasury, the J.P. Morgan Emerging Markets Bond Index Plus, Chicago Board Options Exchange Market Volatility
Index, Merrill Lynch Bond Market Volatility Index (1-month), 10-year nominal Treasury yield
minus 10-year Treasury Inflation Protected Security yield, and Vanguard Financials ExchangeTraded Fund (equities). The index is constructed using principal components analysis after the
data series are de-meaned and divided by their respective standard deviations to make them
comparable units. The standard deviation of the index is set to 1. For more details on the construction of this index, see Federal Reserve Bank of St. Louis, National Economic Trends Appendix: The St. Louis Fed’s Financial Stress Index (Jan. 2010) (online at research.stlouisfed.org/publications/net/NETJan2010Appendix.pdf).

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Volatility has decreased recently. The Chicago Board Options Exchange Volatility Index (VIX) has fallen about half since the postcrisis peak in May 2010 and has fallen nearly 15 percent since its
slightly elevated level in August. However, volatility is still nearly
50 percent higher than its post-crisis low on April 12, 2010.

100
FIGURE 18: CHICAGO BOARD OPTIONS EXCHANGE VOLATILITY INDEX 411

b. Interest Rates, Spreads, and Issuance
As of October 4, 2010, the 3-Month and 1-Month London Interbank Offer Rates (LIBOR), the prices at which banks lend and borrow from each other, were 0.291 and 0.257, respectively. Rates
have fallen by nearly half since post-crisis highs in June 2010 and
have remained nearly constant since our September report. Over
the longer term, however, interest rates remain extremely low relative to pre-crisis levels.412
FIGURE 19: 3-MONTH AND 1-MONTH LIBOR RATES (AS OF OCTOBER 6, 2010)
Current Rates
(as of 10/4/2010)

Indicator

3-Month LIBOR 413 ...............................................................
1-Month LIBOR 414 ...............................................................
413 Data
414 Data

Percent Change from Data
Available at Time of Last
Report (9/6/2010)

0.291
0.257

(0.01)%
(0.00)%

accessed through Bloomberg data service on October 4, 2010.
accessed through Bloomberg data service on October 4, 2010.

411 Data accessed through Bloomberg data service on October 4, 2010. The CBOE VIX is a
key measure of market expectations of near-term volatility. CBOE, The CBOE Volatility Index—
VIX 2009 (online at www.cboe.com/micro/vix/vixwhite.pdf) (accessed Oct. 12, 2010).
412 Data accessed through Bloomberg data service on October 4, 2010.
415 SIFMA, US Mortgage-Related Securities Issuance (online at www.sifma.org/uploadedFiles/
Research/Statistics/SIFMA_USMortgageRelatedIssuance.xls) (accessed Oct. 7, 2010).
416 Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release
H.15: Selected Interest Rates: Historical Data (Instrument: Conventional Mortgages, Frequency:
Weekly)
(online
at
www.federalreserve.gov/releases/h15/data/Weekly_Thursday_/

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However, in spite of extremely low interest rates, the non-Agency
U.S. mortgage-backed securities (MBS) market remains moribund,
with August issuance below $1 billion, and a 77-percent decrease
in issuance year to date between 2010 and 2009.415
Since the Panel’s September report, interest rate spreads have
stayed fairly constant. Thirty-year mortgage interest rates and 10year Treasury bond yields have both remained relatively unchanged as well. The conventional mortgage spread, which measures the 30-year fixed mortgage rate over 10-year Treasury bond
yields, has risen very slightly since late August.416

101
The TED spread, which serves as an indicator for perceived risk
in the financial markets, has been falling since June, and is currently lower than pre-crisis levels.417 The LIBOR–OIS spread reflects the health of the banking system. While it increased over
threefold from early April to July, it has been falling since midJuly and is now averaging pre-crisis levels.418 Decreases in the
LIBOR–OIS spread and the TED spread suggest that hesitation
among banks to lend to counterparties has recently declined.
FIGURE 20: TED SPREAD 419

H15_MORTG_NA.txt) (accessed Oct. 5, 2010) (hereinafter ‘‘Federal Reserve Statistical Release
H.15’’).
417 Federal Reserve Bank of Minneapolis, Measuring Perceived Risk—The TED Spread (Dec.
2008) (online at www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4120).
418 Data accessed through Bloomberg data service on Oct. 5, 2010.
419 Data accessed through Bloomberg data service on Oct. 4, 2010.
420 Data accessed through Bloomberg data service on Oct. 4, 2010.

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FIGURE 21: LIBOR–OIS SPREAD 420

102
The interest rate spread for AA asset-backed commercial paper,
which is considered mid-investment grade, has fallen by about 4
percent since the Panel’s September report. The interest rate
spread on A2/P2 commercial paper, a lower grade investment than
AA asset-backed commercial paper, has fallen by nearly 6 percent
since the Panel’s September report. This indicates healthier fundraising conditions.
FIGURE 22: INTEREST RATE SPREADS
Current Spread
(as of 9/30/2010)

Indicator

Conventional mortgage rate spread 421 (percentage points) .............................................
TED spread (basis points) ...................................................................................................
Overnight AA asset-backed commercial paper interest rate spread 422 (percentage
points) .............................................................................................................................
Overnight A2/P2 nonfinancial commercial paper interest rate spread 423 (percentage
points) .............................................................................................................................

Percent Change
Since Last Report
(9/2/2010)
(Percent)

1.8
13.06

4.0
(15.4)

0.08

(4.1)

0.16

(6.2)

421 Federal

Reserve Statistical Release H.15, supra note 416; Board of Governors of the Federal Reserve System, Federal Reserve Statistical
Release H.15: Selected Interest Rates: Historical Data (Instrument: U.S. Government Securities/Treasury Constant Maturities/Nominal 10-Year,
Frequency: Weekly) (online at www.federalreserve.gov/releases/h15/data/Weekly_Friday_/H15_TCMNOM_Y10.txt) (accessed Oct. 5, 2010).
422 Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release: Commercial Paper Rates and Outstandings: Data
Download
Program
(Instrument:
AA
Asset-Backed
Discount
Rate,
Frequency:
Daily)
(online
at
www.federalreserve.gov/DataDownload/Choose.aspx?rel=CP) (accessed Oct. 5, 2010); Board of Governors of the Federal Reserve System, Federal
Reserve Statistical Release: Commercial Paper Rates and Outstandings: Data Download Program (Instrument: AA Nonfinancial Discount Rate,
Frequency: Daily) (online at www.federalreserve.gov/DataDownload/Choose.aspx?rel=CP) (accessed Oct. 5, 2010). In order to provide a more
complete comparison, this metric utilizes the average of the interest rate spread for the last five days of the month.
423 Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release: Commercial Paper Rates and Outstandings: Data
Download
Program
(Instrument:
A2/P2
Nonfinancial
Discount
Rate,
Frequency:
Daily)
(online
at
www.federalreserve.gov/DataDownload/Choose.aspx?rel=CP) (accessed Oct. 5, 2010). In order to provide a more complete comparison, this metric utilizes the average of the interest rate spread for the last five days of the month.

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The spread between Moody’s Baa Corporate Bond Yield Index
and 30-year constant maturity U.S. Treasury Bond yields doubled
from late April to mid-June. The spread has leveled-off since a
spike in mid-June to its current level of approximately 2 percent.
This spread indicates the difference in perceived risk between corporate and government bonds, and a declining spread could indicate waning concerns about the riskiness of corporate bonds.

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103
FIGURE 23: MOODY’S BAA CORPORATE BOND INDEX AND 30-YEAR U.S. TREASURY BOND
YIELD 424

Corporate bond market issuance data corroborate this analysis,
with a near doubling in fixed-rate callable issuance between July
and August 2010.425

424 Federal Reserve Bank of St. Louis, Series DGS30: Selected Interest Rates (Instrument: 30Year Treasury Constant Maturity Rate, Frequency: Daily) (online at research.stlouisfed.org/
fred2/) (accessed Oct. 5, 2010) (hereinafter ‘‘Series DGS30: Selected Interest Rates’’). Corporate
Baa rate data accessed through Bloomberg data service on Oct. 5, 2010.
425 SIFMA, US Corporate Bond Issuance (online at www.sifma.org/uploadedFiles/Research/Statistics/SIFMA_USCorporateBondIssuance.xls) (accessed Oct. 7, 2010).

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c. Condition of the Banks
Since the Panel’s last report, 11 additional banks have failed,
with an approximate total asset value of $2.5 billion. The number
of failures from January through August 2010 has nearly reached
the level for all of calendar year 2009. In general, banks failing in
2009 and 2010 have been small and medium-sized institutions;
while they are failing in high numbers, their aggregate asset size
has been relatively small.

104
FIGURE 24: BANK FAILURES AS A PERCENTAGE OF TOTAL BANKS AND BANK FAILURES
BY TOTAL ASSETS (1990–2010) 426

426 The disparity between the number of and total assets of failed banks in 2008 is driven primarily by the failure of Washington Mutual Bank, which held $307 billion in assets. The 2010
year-to-date percentage of bank failures includes failures through August. The total number of
FDIC-insured institutions as of March 31, 2010, is 7,932 commercial banks and savings institutions. As of October 7, 2010, there have been 129 failed institutions. Federal Deposit Insurance
Corporation, Failures and Assistance Transactions (online at www2.fdic.gov/hsob/
SelectRpt.asp?EntryTyp=30) (accessed Oct. 7, 2010). Asset totals adjusted for deflation into 2005
dollars using the GDP implicit price deflator. The quarterly values were averaged into a yearly
value. Series DGS30: Selected Interest Rates, supra note 424.
427 Congressional Oversight Panel, September Oversight Report: Assessing the TARP on the
Eve of its Expiration, at 81 (Sept. 16, 2010) (online at cop.senate.gov/documents/cop-091610-report.pdf).
428 SNL Financial. All loans secured by real estate, for the fully consolidated bank (includes
loans secured by real estate with original maturities of 60 months or less made to finance land
development or construction, loans secured by farmland, loans secured by 1–4 family residential

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In its September 2010 report, 427 the Panel analyzed in detail the
condition of the so-called ‘‘too big to fail’’ banks: the 19 institutions
stress-tested under the Supervisory Capital Assessment Program.
While in the aggregate these banks have improved their net income
and capital ratios significantly since the crisis, they still remain
vulnerable to problems in the residential and commercial real estate markets. Nearly $97 billion in real estate loans are at least 90
days past due as of the second quarter of 2010.

105
FIGURE 25: TOTAL REAL ESTATE LOANS 90+ DAYS PAST DUE AT STRESS-TESTED
BANKS 428

429 RealtyTrac, Foreclosure Activity Press Releases, Foreclosure Activity Increases 4 Percent in
August (Sept. 16, 2010) (online at www.realtytrac.com/content/press-releases/foreclosure-activityincreases-4-percent-in-august-6041).
430 Sales of new homes in May 2010 were 276,000, the lowest rate since 1963. It should be
noted that this number likely reflects a shifting of sales from May to April prompted by the
April expiration of tax credits designed to boost home sales. U.S. Census Bureau and U.S. Department of Housing and Urban Development, New Residential Sales in June 2010 (July 26,
2010) (online at www.census.gov/const/newressales.pdf); U.S. Census Bureau, New Residential
Sales—New One-Family Houses Sold (online at www.census.gov/ftp/pub/const/sold_cust.xls)
(accessed Oct. 5, 2010).
431 Most recent data available for July 2010. See Standard and Poor’s, S&P/Case-Shiller
Home Price Indices (Instrument: Case-Shiller 20–City Composite Seasonally Adjusted, Frequency: Monthly) (accessed Oct. 5, 2010) (online at www.standardandpoors.com/indices/sp-caseshiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----)
(hereinafter
‘‘S&P/CaseShiller Home Price Indices’’); Federal Housing Finance Agency, U.S. and Census Division
Monthly Purchase Only Index (Instrument: USA, Seasonally Adjusted) (online at www.fhfa.gov/
Default.aspx?Page=87) (accessed Oct. 5, 2010) (hereinafter ‘‘U.S. and Census Division Monthly
Purchase Only Index’’). S&P has cautioned that the seasonal adjustment is probably being distorted by irregular factors. These distortions could include distressed sales and the various government programs. See Standard and Poor’s, S&P/Case-Shiller Home Price Indices and Seasonal Adjustment, S&P Indices: Index Analysis (Apr. 2010).
432 The general concept of a Metropolitan Statistical Area is that of a core area containing a
substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with the core. U.S. Census Bureau, About Metropolitan and
Continued

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3. Housing Indices
Foreclosure actions, which consist of default notices, scheduled
auctions, and bank repossessions, increased 4 percent in August to
338,836. This metric is over 21 percent above the foreclosure action
level at the time of the EESA enactment. Five states accounted for
more than 50 percent of the national total, with California alone
accounting for 20 percent.429 Sales of new homes stayed constant
at 288,000, but remain extremely low.430 The Case-Shiller 20-City
Composite as well as the FHFA Housing Price Index decreased
slightly in July 2010. The Case-Shiller and FHFA indices are respectively 6 percent and 5 percent below their levels in October
2008.431
Additionally, Case-Shiller futures prices indicate a market expectation that home-price values for the major Metropolitan Statistical
Areas 432 (‘‘MSAs’’) will generally decrease through the end of 2010

106
and beginning of 2011.433 These futures are cash-settled to a
weighted composite index of U.S. housing prices in the top 10
MSAs, as well as to those specific markets, and are used both to
hedge by businesses whose profits and losses are related to any
area of the housing industry and to balance portfolios by businesses seeking exposure to an uncorrelated asset class. As such, futures prices are a composite indicator of market information known
to date and can be used to indicate market expectations for future
home prices.
FIGURE 26: HOUSING INDICATORS
Percent Change
from Data Available
at Time of Last
Report

Most Recent
Monthly Data

Indicator

Monthly foreclosure actions 434 ..............................................
S&P/Case-Shiller Composite 20 Index 435 ..............................
FHFA Housing Price Index 436 .................................................

338,836
147.6
192.4

Percent
Change Since
October 2008

4.2%
(0.1)
(0.5)

21.2%
(5.6)
(4.8)

434 RealtyTrac,
435 See
436 U.S.

Foreclosures (online at www.realtytrac.com/home/) (accessed Oct. 12, 2010). Most recent data available for August 2010.
S&P/Case-Shiller Home Price Indices, supra note 431. Most recent data available for July 2010.
and Census Division Monthly Purchase Only Index, supra note 431. Most recent data available for July 2010.

FIGURE 27: CASE-SHILLER HOME PRICE INDEX AND FUTURES VALUES 437

G. Financial Update

Micropolitan Statistical Areas (online at www.census.gov/population/www/metroareas/
aboutmetro.html) (accessed Oct. 7, 2010).
433 Data accessed through Bloomberg data service on Oct. 5, 2010. The Case-Shiller Futures
contract is traded on the CME and is settled to the Case-Shiller Index two months after the
previous calendar quarter. For example, the February contract is settled against the spot value
of the S&P Case-Shiller Home Price Index values representing the fourth calendar quarter of
the previous year, which is released in February one day after the settlement of the contract.
Note that most close observers believe that the accuracy of these futures contracts as forecasts
diminishes the farther out one looks.
437 All data normalized to 100 at January 2000. Futures data accessed through Bloomberg
data service on October 5, 2010. S&P/Case-Shiller Home Price Indices, supra note 431.

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Each month, the Panel summarizes the resources that the federal government has committed to the rescue and recovery of the
financial system. The following financial update provides: (1) an

107
updated accounting of the TARP, including a tally of dividend income, repayments, and warrant dispositions that the program has
received as of August 31, 2010; and (2) an updated accounting of
the full federal resource commitment as of September 29, 2010.
1. The TARP
a. Program Updates 438
Treasury’s spending authority under the TARP officially expired
on October 3, 2010. Though it can no longer make new funding
commitments, Treasury can continue to provide funding for programs with which it has existing contracts and previous commitments. As of September 30, 2010, $396.5 billion had been spent
under the TARP’s $475 billion ceiling.439 Of the amount outstanding, $209.4 billion has been repaid, while Treasury has incurred $6.1 billion in losses associated with its CPP and AIFP investments. There are currently $181 billion in funds outstanding.

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CPP Repayments
As of September 30, 2010, 110 banks have fully redeemed their
CPP preferred shares either through capital repayment or exchanges for investments under the CDCI. These institutions have
repaid a total of $152.8 billion of the $204.9 billion committed to
CPP. The amount of funds currently outstanding in the program is
$49.6 billion.
During the month of September, Treasury’s CPP investment
amount was reduced by $5.3 billion. A significant portion of this
amount ($4.9 billion) came from proceeds earned from the third
round of sales of Citigroup common stock. As of September 30,
2010, Treasury still holds 3.6 billion shares of Citigroup common
equity with a face value of $11.7 billion. In addition, Treasury received $220 million in repayments for its preferred and subordinated debt investments in 12 participating institutions. Another 17
institutions also exchanged $253 million of CPP funds for an equivalent investment under the CDCI.
The reduction in outstanding CPP funds also includes a net loss
from Treasury’s investments in South Financial Group, Inc. and
TIB Financial Corp. These two institutions received a total of $384
million through CPP. On September 30, 2010, Treasury sold the
preferred stock and warrants issued by South Financial to TorontoDominion Bank (TD Bank) for $130.6 million as part of the com438 U.S. Department of the Treasury, Cumulative Dividends, Interest and Distributions Report
as of August 31, 2010 (Sept. 10, 2010) (online at financialstability.gov/docs/dividends-interestreports/August%202010%20Dividends%20and%20Interest%20Report.pdf) (hereinafter ‘‘Cumulative Dividends, Interest and Distributions Report as of August 31, 2010’’); Treasury Transactions Report, supra note 128.
439 The original $700 billion TARP ceiling was reduced by $1.26 billion as part of the Helping
Families Save Their Homes Act of 2009. 12 U.S.C. § 5225(a)-(b); Helping Families Save Their
Homes Act of 2009, Pub. L. No. 111–22 § 40. On June 30, 2010, the House-Senate Conference
Committee agreed to reduce the amount authorized under the TARP from $700 billion to $475
billion as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that was
signed into law on July 21, 2010. See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111–203 (2010); The White House, Remarks by the President at Signing of
Dodd-Frank Wall Street Reform and Consumer Protection Act (July 21, 2010) (online at
www.whitehouse.gov/the-press-office/remarks-president-signing-dodd-frank-wall-street-reformand-consumer-protection-act).

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108
pany’s acquisition of South Financial.440 Treasury also sold the preferred shares and warrants it received from TIB Financial for $12.2
million to North American Financial Holdings, Inc.441 As a result
of these sales, Treasury incurred a loss of $241.7 million, bringing
total losses on CPP investments to $2.6 billion.
b. Income: Dividends, Interest, and Warrant Sales
As of September 30, 2010, 45 institutions have repurchased their
warrants for common shares that Treasury received in conjunction
with its preferred stock investments. Treasury received $19.7 million from six banks that agreed to repurchase their warrants in
September. Treasury has also sold the warrants for common shares
for 15 other institutions at auction. On September 16, 2010, Treasury held an auction for 13 million warrants to purchase common
shares of Lincoln National Corporation. The offering yielded $213.7
million in net proceeds to Treasury. On September 21, 2010, Treasury also auctioned off 52 million warrants issued by the Hartford
Financial Services Group, Inc. for $706.3 million in proceeds.
In addition to warrant disposition proceeds, Treasury also receives dividend payments on the preferred shares that it holds,
usually 5 percent per annum for the first five years and 9 percent
per annum thereafter.442 In total, Treasury has received approximately $25.3 billion in net income from warrant repurchases, dividends, interest payments, and other proceeds deriving from TARP
investments (after deducting losses).443 For further information on
TARP profit and loss, see Figure 29.
c. TARP Accounting
FIGURE 28: TARP ACCOUNTING (AS OF SEPTEMBER 30, 2010)
[billions of dollars] i
Maximum
Amount
Allotted

Program

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Capital Purchase Program
(CPP) ..............................
Targeted Investment Program (TIP) ......................
Asset Guarantee Program
(AGP) ..............................
AIG Investment Program
(AIGIP) ............................
Auto Industry Financing
Program (AIFP) ...............

Actual
Funding

Total
Repayments/
Reduced
Exposure

$204.9

$204.9

ii ($152.8)

40.0

40.0

(40.0)

5.0

iv 5.0

69.8

vi 49.1

81.3

81.3

Total
Losses

iii ($2.6)

Funding
Currently
Outstanding

Funding
Available

$49.6

$0

0

0

0

v (5.0)

0

0

0

0

0

49.1

20.7

(10.8)

vii (3.5)

viii 67.1

0

440 Treasury Transactions Report, supra note 128; TD Bank Financial Group, TD Bank Marks
Another Important Milestone in Expansion of U.S. Footprint (Oct. 1, 2010) (online at
td.mediaroom.com/index.php?s=43&item=1045).
441 As part of its $175 billion investment in TIB Financial Corp., North American Financial
Holdings, Inc. also agreed to purchase 37,000 shares of CPP preferred stock, along with related
warrants, from Treasury. TIB Financial Corp., TIB Financial Corp. Announces Closing of $175
Million Investment From North American Financial Holdings, Inc. (Sept. 30, 2010) (online at
www.tibfinancialcorp.com/file.aspx?IID=108287&FID=10162725).
442 U.S. Department of the Treasury, Securities Purchase Agreement for Public Institutions
(online at www.financialstability.gov/docs/CPP/spa.pdf) (accessed Oct. 12, 2010).
443 Cumulative Dividends, Interest and Distributions Report as of August 31, 2010, supra note
438; Treasury Transactions Report, supra note 128. Treasury also received an additional $1.2
billion in participation fees from its Guarantee Program for Money Market Funds. U.S. Department of the Treasury, Treasury Announces Expiration of Guarantee Program for Money Market
Funds (Sept. 18, 2009) (online at www.ustreas.gov/press/releases/tg293.htm).

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109
FIGURE 28: TARP ACCOUNTING (AS OF SEPTEMBER 30, 2010)—Continued
[billions of dollars] i
Maximum
Amount
Allotted

Program

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Auto Supplier Support Program (ASSP) ix ...............
Term Asset-Backed Securities Loan Facility (TALF)
Public-Private Investment
Program (PPIP) xii ..........
SBA 7(a) Securities Purchase ..............................
Home Affordable Modification Program (HAMP) .....
Hardest Hit Fund (HHF) ......
FHA Refinance Program .....
Community Development
Capital Initiative (CDCI)
Total ..........................

Actual
Funding

0.4

0.4

x 4.3

xi 0.1

22.4

xiii 14.2

0.4
29.9
xvi 7.6

8.1
0.8
$475

xv 0.36

0.5
xvii 0.06

0
xviii 0.57

396.48

Total
Repayments/
Reduced
Exposure

Total
Losses

Funding
Currently
Outstanding

Funding
Available

(0.4)

0

0

0

0

0

0.1

4.2

0

13.8

8.2

xiv (0.4)

0

0

0.36

0

0
0
0

0
0
0

0.5
0.06
0

29.4
7.5
8.1

0.57
181.07

0
78.2

0
(209.4)

0
(6.1)

i Figures affected by rounding. Unless otherwise noted, data in this table are from the following source: U.S. Department of the Treasury,
Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
ii Total amount repaid under CPP includes $13.4 billion Treasury received as part of its sales of Citigroup common stock. As of September
30, 2010, Treasury had sold 4.1 billion Citigroup common shares for $16.4 billion in gross proceeds. Treasury has received $3 billion in net
profit from the sale of Citigroup common stock. In June 2009, Treasury exchanged $25 billion in Citigroup preferred stock for 7.7 billion
shares of the company’s common stock at $3.25 per share. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report
for
the
Period
Ending
September
30,
2010,
at
13,
14
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf); U.S. Department of the Treasury,
Troubled
Asset
Relief
Program:
Two-Year
Retrospective,
at
25
(Oct.
2010)
(online
at
www.financialstability.gov/docs/TARP%20Two%20Year%20Retrospective_10%2005%2010_transmittal%20letter.pdf).
Total CPP repayments also include amounts repaid by institutions that exchanged their CPP investments for investments under the CDCI,
as well as proceeds earned from the sale of preferred stock and warrants issued by South Financial Group, Inc. and TIB Financial Corp.
iii On the TARP Transactions Report, Treasury has classified the investments it made in two institutions, CIT Group ($2.3 billion) and Pacific Coast National Bancorp ($4.1 million), as losses. In addition, Treasury sold its preferred ownership interests, along with warrants, in
South Financial Group, Inc. and TIB Financial Corp. to non-TARP participating institutions. These shares were sold at prices below the value
of the original CPP investment. Therefore, Treasury’s net current CPP investment is $49.6 billion due to the $2.6 billion in losses thus far.
U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 13, 14
(Oct. 4, 2010) (online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
iv The $5 billion AGP guarantee for Citigroup was unused since Treasury was not required to make any guarantee payments during the life
of the program. U.S. Department of the Treasury, Troubled Asset Relief Program: Two-Year Retrospective, at 31 (Oct. 2010) (online at
www.financialstability.gov/docs/TARP%20Two%20Year%20Retrospective_10%2005%2010_transmittal%20letter.pdf).
v Although this $5 billion is no longer exposed as part of the AGP, Treasury did not receive a repayment in the same sense as with other
investments. Treasury did receive other income as consideration for the guarantee, which is not a repayment and is accounted for in Figure
29.
vi AIG has completely utilized the $40 billion that was made available on November 25, 2008 in exchange for the company’s preferred
stock. It has also drawn down $7.5 billion of the $29.8 billion made available on April 17, 2009. This figure also reflects $1.6 billion in accumulated but unpaid dividends owed by AIG to Treasury due to the restructuring of Treasury’s investment from cumulative preferred shares
to non-cumulative shares. AIG expects to draw down up to $22.3 billion in outstanding funds from the TARP as part of its plan to repay the
revolving credit facility provided by the Federal Reserve Bank of New York. American International Group, Inc., Form 10–K for the Fiscal Year
Ended December 31, 2009, at 45 (Feb. 26, 2010) (online at www.sec.gov/Archives/edgar/data/5272/000104746910001465/a2196553z10-k.htm);
American International Group, Inc., AIG Announces Plan to Repay U.S. Government (Sept. 30, 2010) (online at
www.aigcorporate.com/newsroom/2010_September/AIGAnnouncesPlantoRepay30Sept2010.pdf); U.S. Department of the Treasury, Troubled Asset
Relief Program Transactions Report for the Period Ending September 30, 2010, at 21 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
vii On May 14, 2010, Treasury accepted a $1.9 billion settlement payment for its $3.5 billion loan to Chrysler Holding. The payment represented a $1.6 billion loss from the termination of the debt obligation. U.S. Department of the Treasury, Chrysler Financial Parent Company
Repays $1.9 Billion in Settlement of Original Chrysler Loan (May 17, 2010) (online at www.financialstability.gov/latest/pr_05172010c.html).
Also, following the bankruptcy proceedings for Old Chrysler, which extinguished the $1.9 billion debtor-in-possession (DIP) loan provided to Old
Chrysler, Treasury retained the right to recover the proceeds from the liquidation of specified collateral. To date, Treasury has collected $40.2
million in proceeds from the sale of collateral, and it does not expect a significant recovery from the liquidation proceeds. Treasury includes
these proceeds as part of the $10.8 billion repaid under the AIFP. U.S. Department of the Treasury, Troubled Assets Relief Program Monthly
105(a)
Report—August
2010
(Sept.
10,
2010)
(online
at
financialstability.gov/docs/105CongressionalReports/August%202010%20105(a)%20Report_final_9%2010%2010.pdf); Treasury conversations
with Panel staff (Aug. 19, 2010); U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending
September
30,
2010,
at
18
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
viii On the TARP Transactions Report, the $1.9 billion Chrysler debtor-in-possession loan, which was extinguished April 30, 2010, was deducted from Treasury’s AIFP investment amount. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the
Period
Ending
September
30,
2010,
at
18
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf). See note vii, supra, for details
on losses from Treasury’s investment in Chrysler.
ix On April 5, 2010, Treasury terminated its commitment to lend to the GM SPV under the ASSP. On April 7, 2010, it terminated its commitment to lend to the Chrysler SPV. In total, Treasury received $413 million in repayments from loans provided by this program ($290 million
from the GM SPV and $123 million from the Chrysler SPV). Further, Treasury received $101 million in proceeds from additional notes associated with this program. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September
30,
2010,
at
19
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).

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110
x For the TALF program, one dollar of TARP funds was committed for every $10 of funds obligated by the Federal Reserve. The program
was intended to be a $200 billion initiative, and the TARP was responsible for the first $20 billion in loan-losses, if any were incurred. The
loan is incrementally funded. When the program closed in June 2010, a total of $43 billion in loans was outstanding under the TALF program, and the TARP’s commitments constituted $4.3 billion. The Federal Reserve Board of Governors agreed that it was appropriate for Treasury to reduce TALF credit protection from TARP to $4.3 billion. Board of Governors of the Federal Reserve System, Federal Reserve Announces
Agreement with the Treasury Department Regarding a Reduction of Credit Protection Provided for the Term Asset-Backed Securities Loan Facility (TALF) (July 20, 2010) (online at www.federalreserve.gov/newsevents/press/monetary/20100720a.htm).
xi As of September 30, 2010, Treasury had provided $105 million to TALF LLC. This total includes accrued payable interest. Federal Reserve
Bank
of
New
York,
Factors
Affecting
Reserve
Balances
(H.4.1),
at
5
(Sept.
30,
2010)
(online
at
www.federalreserve.gov/releases/h41/20100930/h41.pdf).
xii On July 19, 2010, Treasury released its third quarterly report on the Legacy Securities Public-Private Investment Partnership (PPIP). As of
June 30, 2010, the total value of assets held by the PPIP managers was $16 billion. Non-agency Residential Mortgage-Backed Securities represented 85 percent of the total; CMBS represented the balance. U.S. Department of the Treasury, Legacy Securities Public-Private Investment
Program, Program Update—Quarter Ended June 30, 2010, at 3, 4 (July 19, 2010) (online at www.financialstability.gov/docs/111.pdf).
xiii U.S. Department of the Treasury, Troubled Asset Relief Program: Two-Year Retrospective, at i (Oct. 2010) (online at
www.financialstability.gov/docs/TARP%20Two%20Year%20Retrospective_10%2005%2010_transmittal%20letter.pdf).
xiv As of September 30, 2010, Treasury has received $428 million in capital repayments from two PPIP fund managers. U.S. Department of
the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 23 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xv Treasury made $64 million in purchases under the SBA 7(a) Securities Purchase Program in September. As of September 30, 2010,
Treasury’s purchases totaled $322.9 million. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period
Ending
September
30,
2010,
at
22
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf). Treasury will not make additional purchases pursuant to the expiration of its purchasing authority under EESA. U.S. Department of the Treasury, Troubled Asset Relief
Program:
Two-Year
Retrospective,
at
43
(Oct.
2010)
(online
at
www.financialstability.gov/docs/TARP%20Two%20Year%20Retrospective_10%2005%2010_transmittal%20letter.pdf).
xvi As part of its revisions to TARP allocations upon enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Treasury allocated an additional $2 billion in TARP funds to mortgage assistance for unemployed borrowers through the Hardest Hit Fund (HHF).
U.S. Department of the Treasury, Obama Administration Announces Additional Support for Targeted Foreclosure-Prevention Programs to Help
Homeowners Struggling with Unemployment (Aug. 11, 2010) (online at www.ustreas.gov/press/releases/tg823.htm). Another $3.5 billion was allocated among the 18 states and the District of Columbia currently participating in HHF. The amount each state received during this round of
funding is proportional to its population. U.S. Department of the Treasury, Troubled Asset Relief Program: Two Year Retrospective, at 72 (Oct.
2010) (online at www.financialstability.gov/docs/TARP%20Two%20Year%20Retrospective_10%2005%2010_transmittal%20letter.pdf). Additional
information provided by Treasury staff (Sept. 28, 2010).
xvii This figure represents the total amount paid to date to state Housing Finance Agencies (HFAs). As of October 12, 2010, six state HFAs
have drawn down funds from their total investment amount. Data provided by Treasury (Oct. 12, 2010).
xviii Seventy-three Community Development Financial Institutions (CDFIs) entered the CDCI in September. Among these institutions, 17 banks
exchanged their CPP investments for an equivalent investment amount under the CDCI. U.S. Department of the Treasury, Troubled Asset Relief
Program Transactions Report for the Period Ending September 30, 2010, at 1–13, 16–17 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf). Treasury closed the program on
September 30, 2010, after investing $570 million in 84 CDFIs. U.S. Department of the Treasury, Treasury Announces Special Financial Stabilization Initiative Investments of $570 Million in 84 Community Development Financial Institutions in Underserved Areas (Sept. 30, 2010)
(online at financialstability.gov/latest/pr_09302010b.html).

FIGURE 29: TARP PROFIT AND LOSS
[millions of dollars]

TARP
Initiativexix

Total .....................
CPP .......................
TIP .........................
AIFP .......................
ASSP .....................
AGP .......................
PPIP ......................
SBA 7(a) ...............
Bank of America
Guarantee .........

Dividendsxx
(as of
8/31/2010)

Warrant
Disposition
Proceedsxxii
(as of
9/30/2010)

Interestxxi
(as of
8/31/2010)

$16,540
9,754
3,004
xxv 3,371
—
411
—
—

$912
49
—
802
15
—
46
1

$8,160
6,904
1,256
—
—
0
—
—

—

—

—

Other
Proceeds
(as of
8/31/2010)

Lossesxxiii
(as of
9/30/2010)

$5,768

Total

—

($6,034)
(2,576)
—
(3,458)
—
—
—
—

$25,346
17,194
4,260
730
116
2,657
161
1

xxx 276

—

276

xxiv 3,015

—
xxvi 15
xxvii 101
xxviii 2,246
xxix 115

smartinez on DSKB9S0YB1PROD with HEARING

xix AIG

is not listed on this table because no profit or loss has been recorded to date for AIG. Its missed dividends were capitalized as
part of the issuance of Series E preferred shares and are not considered to be outstanding. Treasury currently holds non-cumulative preferred
shares, meaning AIG is not penalized for non-payment. Therefore, no profit or loss has been realized on Treasury’s AIG investment to date.
xx U.S. Department of the Treasury, Cumulative Dividends, Interest and Distributions Report as of August 31, 2010 (Sept. 10, 2010) (online
at financialstability.gov/docs/dividends-interest-reports/August%202010%20Dividends%20and%20Interest%20Report.pdf).
xxi U.S. Department of the Treasury, Cumulative Dividends, Interest and Distributions Report as of August 31, 2010 (Sept. 10, 2010) (online
at financialstability.gov/docs/dividends-interest-reports/August%202010%20Dividends%20and%20Interest%20Report.pdf).
xxii U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 13,
20 (Oct. 4, 2010) (online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xxiii In the TARP Transactions Report, Treasury classified the investments it made in two institutions, CIT Group ($2.3 billion) and Pacific
Coast National Bancorp ($4.1 million), as losses. Treasury has also sold its preferred ownership interests and warrants from South Financial
Group, Inc. and TIB Financial Corp. This represents a $241.7 million loss on its CPP investments in these two banks. Two TARP recipients,
UCBH Holdings, Inc. ($298.7 million) and a banking subsidiary of Midwest Banc Holdings, Inc. ($89.4 million), are currently in bankruptcy
proceedings. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010
(Oct. 4, 2010) (online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf). Finally, Sonoma Valley Bancorp, which received $8.7 million in CPP funding, was placed into receivership on August 20, 2010. Federal Deposit
Insurance Corporation, Westamerica Bank, San Rafael, California, Assumes All of the Deposits of Sonoma Valley Bank, Sonoma, California
(Aug. 20, 2010) (online at www.fdic.gov/news/news/press/2010/pr10196.html).

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111
xxiv This figure represents net proceeds to Treasury from the sale of Citigroup common stock to date. For details on Treasury’s sales of
Citigroup common stock, see Section Two and note ii, supra. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report
for
the
Period
Ending
September
30,
2010
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xxv This figure includes $815 million in dividends from GMAC preferred stock, trust preferred securities, and mandatory convertible preferred
shares. The dividend total also includes a $748.6 million senior unsecured note from Treasury’s investment in General Motors. Data provided
by Treasury.
xxvi Treasury received proceeds from an additional note connected with the loan made to Chrysler Financial on January 16, 2009. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 18 (Oct. 4, 2010)
(online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xxvii This represents the total proceeds from additional notes connected with Treasury’s investments in GM Supplier Receivables LLC and
Chrysler Receivables SPV LLC. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September
30,
2010,
at
19
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xxviii As a fee for taking a second-loss position of up to $5 billion on a $301 billion pool of ring-fenced Citigroup assets as part of the
AGP, Treasury received $4.03 billion in Citigroup preferred stock and warrants. Treasury exchanged these preferred stocks for trust preferred
securities in June 2009. Following the early termination of the guarantee in December 2009, Treasury cancelled $1.8 billion of the trust preferred securities, leaving Treasury with a premium of $2.23 billion in Citigroup trust preferred securities. On September 30, 2010, Treasury
sold these securities for $2.25 billion in total proceeds. At the end of Citigroup’s participation in the FDIC’s TLGP, the FDIC may transfer
$800 million of $3.02 billion in Citigroup Trust Preferred Securities it received in consideration for its role in the AGP to Treasury. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 20 (Oct. 4, 2010)
(online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf); U.S. Department of
the Treasury, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Citigroup Inc., Termination Agreement,
at
1
(Dec.
23,
2009)
(online
at
www.financialstability.gov/docs/Citi%20AGP%20Termination%20Agreement%20-%20Fully%20Executed%20Version.pdf); U.S. Department of the
Treasury, Treasury Announces Further Sales of Citigroup Securities and Cumulative Return to Taxpayers of $41.6 Billion (Sept. 30, 2010) (online at financialstability.gov/latest/pr_09302010c.html); Federal Deposit Insurance Corporation, 2009 Annual Report, at 87 (June 30, 2010) (online at www.fdic.gov/about/strategic/report/2009annualreport/AR09final.pdf).
xxix As of August 31, 2010, Treasury has earned $93.9 million in membership interest distributions from the PPIP. Additionally, Treasury
has earned $20.6 million in total proceeds following the termination of the TCW fund. See U.S. Department of the Treasury, Cumulative Dividends, Interest and Distributions Report as of August 31, 2010, at 12–13 (Sept. 10, 2010) (online at
financialstability.gov/docs/dividends-interest-reports/August%202010%20Dividends%20and%20Interest%20Report.pdf); see U.S. Department of
the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 23 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xxx Although Treasury, the Federal Reserve, and the FDIC negotiated with Bank of America regarding a similar guarantee, the parties never
reached an agreement. In September 2009, Bank of America agreed to pay each of the prospective guarantors a fee as though the guarantee
had been in place during the negotiations period. This agreement resulted in payments of $276 million to Treasury, $57 million to the Federal
Reserve, and $92 million to the FDIC. U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Bank of America Corporation, Termination Agreement, at 1–2 (Sept. 21, 2009) (online at
www.financialstability.gov/docs/AGP/BofA%20-%20Termination%20Agreement%20-%20executed.pdf).

d. CPP Unpaid Dividend and Interest Payments 444
As of August 31, 2010, 123 institutions have at least one outstanding dividend payment on preferred stock issued under
CPP.445 Among these institutions, 98 are not current on cumulative
dividends, which amount to $129.8 million in missed payments,
while another 25 banks have not paid $8 million in non-cumulative
dividends. Of the $49.6 billion currently outstanding in CPP funding, Treasury’s investments in banks with non-current dividend
payments total $3.6 billion. A majority of the banks that remain
delinquent on dividend payments have under $1 billion in total assets on their balance sheets. Also, there are 16 institutions that
previously deferred dividend payments, but have since repaid all
accrued and unpaid dividends.446
There are six banks that have failed to make six dividend payments, while one bank has missed all seven quarterly payments.
These institutions have received a total of $207.1 million in CPP
funding. Under the terms of the CPP, after a bank fails to pay dividends for six periods, Treasury has the right to elect two individ444 Cumulative

Dividends, Interest and Distributions Report as of August 31, 2010, supra note

438.

smartinez on DSKB9S0YB1PROD with HEARING

445 Does

not include banks with missed dividend payments that have either repaid all delinquent dividends, exited TARP, gone into receivership, or filed for bankruptcy.
446 Among the institutions with no outstanding dividend payments is Sterling Financial Corporation (WA). On April 29, 2010, Sterling Financial exchanged its original $303 million preferred equity investment for an equivalent amount in mandatory convertible preferred stock.
This investment was subsequently converted to 379 million shares of common stock. Following
the exchange, no dividend payments remained outstanding with respect to the preferred investment. Treasury Transactions Report, supra note 128; Cumulative Dividends, Interest and Distributions Report as of August 31, 2010, supra note 438, at 18.

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112
uals to the company’s board of directors.447 Figure 30 below provides further details on the distribution and the number of institutions that have missed dividend payments.
In addition, eight CPP participants have missed at least one interest payment, totaling $3.6 million in non-current interest payments. Treasury’s total investments in these non-public institutions
represent less than $1 billion in CPP funding.
FIGURE 30: CPP MISSED DIVIDEND PAYMENTS (AS OF AUGUST 31, 2010) 448
Number of Missed Payments

Cumulative Dividends:
Number of Banks, by asset size ................
Under $1B ..........................................
$1B–$10B ..........................................
Over $10B ..........................................
Non-Cumulative Dividends:
Number of Banks, by asset size ................
Under $1B ..........................................
$1B–$10B ..........................................
Over $10B ..........................................
Total Missed Payments .............................

1

2

3

4

5

6

7

Total

30
21
8
1

19
15
4
0

18
12
4
2

18
11
7
0

10
5
5
0

3
1
2
0

0
0
0
0

98
65
30
3

2
1
1
0
............

5
5
0
0
............

6
5
1
0
............

3
3
0
0
............

5
5
0
0
............

3
3
0
0
............

1
1
0
0
............

25
23
2
0
123

smartinez on DSKB9S0YB1PROD with HEARING

e. Rate of Return
As of September 2, 2010, the average internal rate of return for
all public financial institutions that participated in the CPP and
fully repaid the U.S. government (including preferred shares, dividends, and warrants) was 10.3 percent. The internal rate of return
is the annualized effective compounded return rate that can be
earned on invested capital.
Treasury received $713.7 million and $216.6 million from auctions for Hartford Financial Services Group, Inc. and Lincoln National Corporation warrants, respectively. These proceeds represent
151 and 119 percent of the Panel’s best valuation estimate at the
disposition date. As of September 30, 2010, Treasury has received
$8.1 billion in total proceeds from warrant repurchases and auctions.
The Panel’s estimates on individual rates of return also indicate
negative values for the two CPP investments that were sold in September. The internal rates of return for South Financial Group and
TIB Financial Corp. were –34.2 percent and –38 percent as Treasury sold its CPP preferred equity in these two companies for an aggregate loss of $241.7 million.

447 U.S. Department of the Treasury, Frequently Asked Questions Capital Purchase Program
(CPP): Related to Missed Dividend (or Interest) Payments and Director Nomination (online at
www.financialstability.gov/docs/CPP/CPP%20Directors%20FAQs.pdf) (accessed Oct. 12, 2010).
448 Cumulative Dividends, Interest and Distributions Report as of August 31, 2010, supra note
438. Data on total bank assets compiled using SNL Financial data service (accessed Oct. 5,
2010).

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113
f. Warrant Disposition
FIGURE 31: WARRANT REPURCHASES/AUCTIONS FOR FINANCIAL INSTITUTIONS WHO HAVE FULLY
REPAID CPP FUNDS (AS OF OCTOBER 5, 2010)
Investment
Date

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Institution

Old National Bancorp .....
Iberiabank Corporation ...
Firstmerit Corporation .....
Sun Bancorp, Inc. ...........
Independent Bank Corp.
Alliance Financial Corporation ......................
First Niagara Financial
Group ..........................
Berkshire Hills Bancorp,
Inc. ..............................
Somerset Hills Bancorp ..
SCBT Financial Corporation .............................
HF Financial Corp ...........
State Street .....................
U.S. Bancorp ...................
The Goldman Sachs
Group, Inc. ..................
BB&T Corp. .....................
American Express Company ............................
Bank of New York Mellon
Corp ............................
Morgan Stanley ...............
Northern Trust Corporation .............................
Old Line Bancshares Inc.
Bancorp Rhode Island,
Inc. ..............................
Centerstate Banks of
Florida Inc. .................
Manhattan Bancorp ........
CVB Financial Corp .........
Bank of the Ozarks .........
Capital One Financial .....
JPMorgan Chase & Co. ...
TCF Financial Corp .........
LSB Corporation ..............
Wainwright Bank & Trust
Company .....................
Wesbanco Bank, Inc. ......
Union First Market
Bankshares Corporation (Union
Bankshares Corporation) ............................
Trustmark Corporation ....
Flushing Financial Corporation ......................
OceanFirst Financial Corporation ......................
Monarch Financial Holdings, Inc. ....................
Bank of America .............

Warrant
Repurchase
Date

Warrant
Repurchase/
Sale Amount

Panel’s Best
Valuation
Estimate at
Disposition
Date

Price/
Estimate
Ratio

IRR
(Percent)

12/12/2008
12/5/2008
1/9/2009
1/9/2009
1/9/2009

5/8/2009
5/20/2009
5/27/2009
5/27/2009
5/27/2009

$1,200,000
1,200,000
5,025,000
2,100,000
2,200,000

$2,150,000
2,010,000
4,260,000
5,580,000
3,870,000

0.558
0.597
1.180
0.376
0.568

9.3
9.4
20.3
15.3
15.6

12/19/2008

6/17/2009

900,000

1,580,000

0.570

13.8

11/21/2008

6/24/2009

2,700,000

3,050,000

0.885

8.0

12/19/2008
1/16/2009

6/24/2009
6/24/2009

1,040,000
275,000

1,620,000
580,000

0.642
0.474

11.3
16.6

1/16/2009
11/21/2008
10/28/2008
11/14/2008

6/24/2009
6/30/2009
7/8/2009
7/15/2009

1,400,000
650,000
60,000,000
139,000,000

2,290,000
1,240,000
54,200,000
135,100,000

0.611
0.524
1.107
1.029

11.7
10.1
9.9
8.7

10/28/2008
11/14/2008

7/22/2009
7/22/2009

1,100,000,000
67,010,402

1,128,400,000
68,200,000

0.975
0.983

22.8
8.7

1/9/2009

7/29/2009

340,000,000

391,200,000

0.869

29.5

10/28/2008
10/28/2008

8/5/2009
8/12/2009

136,000,000
950,000,000

155,700,000
1,039,800,000

0.873
0.914

12.3
20.2

11/14/2008
12/5/2008

8/26/2009
9/2/2009

87,000,000
225,000

89,800,000
500,000

0.969
0.450

14.5
10.4

12/19/2008

9/30/2009

1,400,000

1,400,000

1.000

12.6

11/21/2008
12/5/2008
12/5/2008
12/12/2008
11/14/2008
10/28/2008
1/16/2009
12/12/2008

10/28/2009
10/14/2009
10/28/2009
11/24/2009
12/3/2009
12/10/2009
12/16/2009
12/16/2009

212,000
63,364
1,307,000
2,650,000
148,731,030
950,318,243
9,599,964
560,000

220,000
140,000
3,522,198
3,500,000
232,000,000
1,006,587,697
11,825,830
535,202

0.964
0.453
0.371
0.757
0.641
0.944
0.812
1.046

5.9
9.8
6.4
9.0
12.0
10.9
11.0
9.0

12/19/2008 12/16/2009
12/5/2008 12/23/2009

568,700
950,000

1,071,494
2,387,617

0.531
0.398

7.8
6.7

12/19/2008 12/23/2009
11/21/2008 12/30/2009

450,000
10,000,000

1,130,418
11,573,699

0.398
0.864

5.8
9.4

12/19/2008 12/30/2009

900,000

2,861,919

0.314

6.5

1/16/2009

2/3/2010

430,797

279,359

1.542

6.2

12/19/2008

2/10/2010
3/3/2010

260,000
1,566,210,714

623,434
1,006,416,684

0.417
1.533

6.7
6.5

449 10/28/2008
450 1/9/2009
451 1/14/2009

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114
FIGURE 31: WARRANT REPURCHASES/AUCTIONS FOR FINANCIAL INSTITUTIONS WHO HAVE FULLY
REPAID CPP FUNDS (AS OF OCTOBER 5, 2010)—Continued
Institution

Investment
Date

Warrant
Repurchase
Date

Washington Federal Inc./
Washington Federal
Savings & Loan Association .........................
11/14/2008
3/9/2010
Signature Bank ...............
12/12/2008 3/10/2010
Texas Capital Bancshares, Inc. .................
1/16/2009 3/11/2010
Umpqua Holdings Corp. ..
11/14/2008 3/31/2010
City National Corporation
11/21/2008
4/7/2010
First Litchfield Financial
Corporation .................
12/12/2008
4/7/2010
PNC Financial Services
Group Inc. ...................
12/31/2008 4/29/2010
Comerica Inc. ..................
11/14/2008
5/4/2010
Valley National Bancorp
11/14/2008 5/18/2010
Wells Fargo Bank ............
10/28/2008 5/20/2010
First Financial Bancorp ..
12/23/2008
6/2/2010
Sterling Bancshares, Inc./
Sterling Bank ..............
12/12/2008
6/9/2010
SVB Financial Group .......
12/12/2008 6/16/2010
Discover Financial Services .............................
3/13/2009
7/7/2010
Bar Harbor Bancshares ..
1/16/2009 7/28/2010
Citizens & Northern Corporation ......................
1/16/2009
8/4/2010
Columbia Banking System, Inc. .....................
11/21/2008 8/11/2010
Hartford Financial Services Group, Inc. ..........
6/26/2009 9/21/2010
Lincoln National Corporation .............................
7/10/2009 9/16/2010
Fulton Financial Corporation .............................
12/23/2008
9/8/2010
The Bancorp, Inc./The
Bancorp Bank .............
12/12/2008
9/8/2010
South Financial Group,
Inc./Carolina First
Bank ...........................
12/5/2008 9/30/2010
TIB Financial Corp./TIB
Bank ...........................
12/5/2008 9/30/2010
Total 452 .................. ........................ ....................

Panel’s Best
Valuation
Estimate at
Disposition
Date

Warrant
Repurchase/
Sale Amount

Price/
Estimate
Ratio

IRR
(Percent)

15,623,222
11,320,751

10,166,404
11,458,577

1.537
0.988

18.6
32.4

6,709,061
4,500,000
18,500,000

8,316,604
5,162,400
24,376,448

0.807
0.872
0.759

30.1
6.6
8.5

1,488,046

1,863,158

0.799

15.9

324,195,686
183,673,472
5,571,592
849,014,998
3,116,284

346,800,388
276,426,071
5,955,884
1,064,247,725
3,051,431

0.935
0.664
0.935
0.798
1.021

8.7
10.8
8.3
7.8
8.2

3,007,891
6,820,000

5,287,665
7,884,633

0.569
0.865

10.8
7.7

172,000,000
250,000

166,182,652
518,511

1.035
0.482

17.1
6.2

400,000

468,164

0.854

5.9

3,301,647

3,291,329

1.003

7.3

713,687,430

472,221,996

1.511

30.3

216,620,887

181,431,182

1.194

27.1

10,800,000

15,616,013

0.692

6.7

4,753,985

9,947,683

0.478

12.8

400,000

1,164,486

0.343

(34.2)

40,000
$8,148,332,166

235,757
$7,999,280,713

0.170
1.019

(38.0)
10.3

449 Investment

date for Bank of America in CPP.
date for Merrill Lynch in CPP.
date for Bank of America in TIP.
452 Total warrant repurchase/sale amount does not include $11.5 million in proceeds from private institutions whose warrants for preferred
stock were immediately exercised.
450 Investment
451 Investment

FIGURE 32: VALUATION OF CURRENT HOLDINGS OF WARRANTS (AS OF OCTOBER 5, 2010)
[Dollars in millions]
Warrant Valuation

smartinez on DSKB9S0YB1PROD with HEARING

Financial Institutions with
Warrants Outstanding

Low
Estimate

Citigroup, Inc.453 ....................................................................................................
SunTrust Banks, Inc. ..............................................................................................
Regions Financial Corporation ................................................................................
Fifth Third Bancorp .................................................................................................
KeyCorp ...................................................................................................................
AIG ...........................................................................................................................

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$15.90
18.90
11.62
83.86
21.91
282.18

High
Estimate

$1,134.42
375.09
213.46
377.93
176.85
1,824.23

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Best
Estimate

$84.61
141.10
99.85
170.00
81.47
783.69

115
FIGURE 32: VALUATION OF CURRENT HOLDINGS OF WARRANTS (AS OF OCTOBER 5, 2010)—
Continued
[Dollars in millions]
Warrant Valuation
Financial Institutions with
Warrants Outstanding

Low
Estimate

All Other Banks .......................................................................................................
Total ...............................................................................................................
453 Includes

High
Estimate

Best
Estimate

845.40
$1,279.77

3,832.34
$7,934.32

1,794.84
$3,155.56

warrants issued under CPP, AGP, and TIP.

2. Federal Financial Stability Efforts
a. Federal Reserve and FDIC Programs
In addition to the direct expenditures Treasury has undertaken
through the TARP, the federal government has engaged in a much
broader program directed at stabilizing the U.S. financial system.
Many of these initiatives explicitly augment funds allocated by
Treasury under specific TARP initiatives, such as FDIC and Federal Reserve asset guarantees for Citigroup, or operate in tandem
with Treasury programs, such as the interaction between PPIP and
TALF. Other programs, like the Federal Reserve’s extension of
credit through its Section 13(3) facilities and SPVs and the FDIC’s
Temporary Liquidity Guarantee Program, operate independently of
the TARP.

smartinez on DSKB9S0YB1PROD with HEARING

b. Total Financial Stability Resources
Beginning in its April 2009 report, the Panel broadly classified
the resources that the federal government has devoted to stabilizing the economy through myriad new programs and initiatives as
outlays, loans, or guarantees. With the reductions in funding for
certain TARP programs, the Panel calculates the total value of
these resources to be over $2.5 trillion. However, this would translate into the ultimate ‘‘cost’’ of the stabilization effort only if: (1) assets do not appreciate; (2) no dividends are received, no warrants
are exercised, and no TARP funds are repaid; (3) all loans default
and are written off; and (4) all guarantees are exercised and subsequently written off.
With respect to the FDIC and Federal Reserve programs, the
risk of loss varies significantly across the programs considered
here, as do the mechanisms providing protection for the taxpayer
against such risk. As discussed in the Panel’s November 2009 report, the FDIC assesses a premium of up to 100 basis points on
TLGP debt guarantees.454 In contrast, the Federal Reserve’s liquidity programs are generally available only to borrowers with good
credit, and the loans are over-collateralized and with recourse to
other assets of the borrower. If the assets securing a Federal Reserve loan realize a decline in value greater than the ‘‘haircut,’’ the
Federal Reserve is able to demand more collateral from the borrower. Similarly, should a borrower default on a recourse loan, the
Federal Reserve can turn to the borrower’s other assets to make
454 Congressional Oversight Panel, November Oversight Report: Guarantees and Contingent
Payments in TARP and Related Programs, at 36 (Nov. 6, 2009) (online at cop.senate.gov/documents/cop-110609-report.pdf).

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116
the Federal Reserve whole. In this way, the risk to the taxpayer
on recourse loans only materializes if the borrower enters bankruptcy.
c. Credit Union Assistance
Apart from the assistance credit unions have recently received
through the CDCI, the National Credit Union Administration
(NCUA), the federal agency charged with regulating federal credit
unions (FCUs), has also made efforts to stabilize the corporate
credit union (CCU) system. Corporate credit unions provide correspondent services, as well as liquidity and investment services to
retail (or consumer) credit unions.455 Since March 2009, the NCUA
has placed five CCUs into conservatorship due to their exposure to
underperforming private-label mortgage-backed securities. The
NCUA estimates that these five institutions, which have $72 billion in assets and provide services for 4,600 retail credit unions,
hold more than 90 percent of the MBS in the corporate credit union
system.456
To assist in the NCUA’s stabilization efforts, the Temporary Corporate Credit Union Stabilization Fund (‘‘Stabilization Fund’’) was
created to help cover costs associated with CCU conservatorships
and liquidations. The Stabilization Fund was established on May
20, 2009, as part of the Helping Families Save Their Homes Act
of 2009, and allows the NCUA to borrow up to $6 billion from the
Treasury on a revolving basis.457 As of August 2010, the NCUA
had drawn $1.5 billion from the Stabilization Fund, and had
planned to repay this balance by the end of September.458

smartinez on DSKB9S0YB1PROD with HEARING

d. Mortgage Purchase Programs
On September 7, 2008, Treasury announced the GSE Mortgage
Backed Securities Purchase Program. The Housing and Economic
Recovery Act of 2008 provided Treasury with the authority to purchase MBS guaranteed by government-sponsored enterprises
(GSEs) through December 31, 2009. Treasury purchased approximately $225 billion in GSE MBS by the time its authority expired.459 As of September 2010, there was approximately $159.6
billion in MBS still outstanding under this program.460
In March 2009, the Federal Reserve authorized purchases of
$1.25 MBS guaranteed by Fannie Mae, Freddie Mac, and Ginnie
Mae, and $200 billion of agency debt securities from Fannie Mae,
455 National Credit Union Administration, Corporate System Resolution: Corporate Credit
Unions Frequently Asked Questions (FAQs), at 1 (online at www.ncua.gov/Resources/
CorporateCU/CSR/CSR-6.pdf).
456 National Credit Union Administration, Corporate System Resolution: National Credit
Union Administration Virtual Town Hall, at 14 (Sept. 27, 2010) (online at www.ncua.gov/Resources/CorporateCU/CSR/10-0927WebinarSlides.pdf); National Credit Union Administration,
Fact Sheet: Corporate Credit Union Conservatorships (Sept. 14, 2010) (online at www.ncua.gov/
Resources/CorporateCU/CSR/CSR-14.pdf).
457 National Credit Union Administration, Board Action Memorandum (June 15, 2010) (online
at
www.ncua.gov/GenInfo/BoardandAction/DraftBoardActions/2010/Jun/
Item6aBAMSFAssessmentJune2010(1%20billion)FINAL.pdf).
458 Id.
459 U.S. Department of the Treasury, FY2011 Budget in Brief, at 138 (Feb. 2010) (online at
www.treas.gov/offices/management/budget/budgetinbrief/fy2011/FY%202011%20BIB%20(2).pdf).
460 U.S. Department of the Treasury, MBS Purchase Program: Portfolio by Month (online at
www.financialstability.gov/docs/September%202010%20Portfolio%20by%20month.pdf) (accessed
Oct. 12, 2010).

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117
Freddie Mac, and the Federal Home Loan Banks.461 The intended
purchase amount for agency debt securities was subsequently decreased to $175 billion.462 All purchasing activity was completed on
March 31, 2010. As of September 29, 2010, the Federal Reserve
holds $1.08 trillion of agency MBS and $154 billion of agency
debt.463
FIGURE 33: FEDERAL GOVERNMENT FINANCIAL STABILITY EFFORT (AS OF SEPTEMBER 29,
2010)xxxi
[Dollars in billions]
Treasury
(TARP)

Program

smartinez on DSKB9S0YB1PROD with HEARING

Total ...............................................................................
Outlays xxxii ..........................................................
Loans .....................................................................
Guarantees xxxiii ...................................................
Repaid and Unavailable TARP Funds ...................
AIG xxxiv .........................................................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Citigroup ........................................................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Capital Purchase Program (Other) ..............................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Capital Assistance Program .........................................
TALF ................................................................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
PPIP (Loans) xliii ...........................................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
PPIP (Securities) ...........................................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Making Home Affordable Program/Foreclosure Mitigation ........................................................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Automotive Industry Financing Program .....................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Automotive Supplier Support Program ........................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
SBA 7(a) Securities Purchase ......................................
Outlays ..................................................................

Federal
Reserve

FDIC

Total

$475
234.9
23.4
4.3
212.4
69.8
xxxv 69.8
0
0
11.6
xxxviii11.6
0
0
40.5
xxxix 40.5
0
0
N/A
4.3
0
0
xli 4.3
0
0
0
0
xliv 22.4
7.5
14.9
0

$1,414.6
1,258.3
156.3
0
0
84.7
xxxvi 25.7
xxxvii 59
0
0
0
0
0
0
0
0
0
0
38.7
0
xlii 38.7
0
0
0
0
0
0
0
0
0

$694.9
188.9
0
506
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

$2,584.5
1,682.1
179.7
510.3
212.4
154.5
95.5
59
0
11.6
11.6
0
0
40.5
40.5
0
0
xl N/A
43
0
38.7
4.3
0
0
0
0
22.4
7.5
14.9
0

45.6

0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0

45.6
45.6
0
0
67.1
59.0
8.1
0
0.4
0
0.4
0
0.36
0.36

xlv 45.6

0
0
xlvi 67.1
59.0
8.1
0
0.4
0
xlvii 0.4
0
xlviii 0.36
0.36

461 Board of Governors of the Federal Reserve System, Federal Reserve System Monthly Report
on Credit and Liquidity Programs and the Balance Sheet, at 5 (Sept. 2010) (online at
www.federalreserve.gov/monetarypolicy/files/monthlyclbsreport201009.pdf).
462 Id. at 5.
463 Board of Governors of the Federal Reserve System, Factors Affecting Reserve Balances
(H.4.1) (Sept. 30, 2010) (online at www.federalreserve.gov/releases/h41/) (accessed Oct. 12, 2010).

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118
FIGURE 33: FEDERAL GOVERNMENT FINANCIAL STABILITY EFFORT (AS OF SEPTEMBER 29,
2010)xxxi—Continued
[Dollars in billions]
Treasury
(TARP)

Program

smartinez on DSKB9S0YB1PROD with HEARING

Loans .....................................................................
Guarantees ............................................................
Community Development Capital Initiative .................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Temporary Liquidity Guarantee Program ....................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Deposit Insurance Fund ...............................................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................
Other Federal Reserve Credit Expansion ....................
Outlays ..................................................................
Loans .....................................................................
Guarantees ............................................................

0
0
xlix0.57
0
0.57
0
0
0
0
0
0
0
0
0
0
0
0
0

Federal
Reserve

0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,291.2
lii 1,232.6
liii 58.6
0

FDIC

Total

0
0
0
0
0
0
506
0
0
l 506
188.9
li 188.9
0
0
0
0
0
0

0
0
0.57
0
0.57
0
506
0
0
506
188.9
188.9
0
0
1,291.2
1,232.6
58.6
0

xxxi All data in this figure are as of September 29, 2010, except for information regarding the FDIC’s Temporary Liquidity Guarantee Program (TLGP). Those data figures are as of August 31, 2010.
xxxii The term ‘‘outlays’’ is used here to describe the use of Treasury funds under the TARP, which are broadly classifiable as purchases of
debt or equity securities (e.g., debentures, preferred stock, exercised warrants, etc.). These values were calculated using (1) Treasury’s actual
reported expenditures, and (2) Treasury’s anticipated funding levels as estimated by a variety of sources, including Treasury statements and
GAO estimates. Anticipated funding levels are set at Treasury’s discretion, have changed from initial announcements, and are subject to further change. Outlays used here represent investment and asset purchases—as well as commitments to make investments and asset
purchases—and are not the same as budget outlays, which under section 123 of EESA are recorded on a ‘‘credit reform’’ basis.
xxxiii Although many of the guarantees may never be exercised or will be exercised only partially, the guarantee figures included here represent the federal government’s greatest possible financial exposure.
xxxiv AIG received an $85 billion credit facility from the Federal Reserve Bank of New York (FRBNY) (reduced to $60 billion in November
2008, to $35 billion in December 2009, and then to $30 billion in September 2010). A Treasury trust received Series C preferred convertible
stock in exchange for the facility and $0.5 million. The Series C shares amount to 79.9 percent ownership of common stock, minus the percentage of common shares acquired through warrants. U.S. Government Accountability Office, Troubled Asset Relief Program: Status of Government Assistance Provided to AIG (Sept. 2009) (GAO–09–975) (online at www.gao.gov/new.items/d09975.pdf). On September 30, 2010, AIG announced its plans to repay its outstanding obligations to Treasury, FRBNY, and the trust. For details on AIG’s repayment plans, see Section
Two. See also American International Group, AIG Announces Plan to Repay U.S. Government (Sept. 30, 2010) (online at
www.aigcorporate.com/newsroom/2010_September/AIGAnnouncesPlantoRepay30Sept2010.pdf). For information regarding Treasury’s TARP investments in AIG, see note vi, supra. U.S. Government Accountability Office, Troubled Asset Relief Program: Status of Government Assistance Provided to AIG (Sept. 2009) (GAO–09–975) (online at www.gao.gov/new.items/d09975.pdf). Additional information was also provided by Treasury
in response to a Panel inquiry.
xxxv This number includes investments under the AIGIP/SSFI Program: a $40 billion investment made on November 25, 2008, and a $30
billion investment made on April 17, 2009 (less a reduction of $165 million representing bonuses paid to AIG Financial Products employees).
As of August 31, 2010, AIG had utilized $47.5 billion of the available $69.8 billion under the AIGIP/SSFI. U.S. Department of the Treasury,
Troubled Assets Relief Program Monthly 105(a) Report—August 2010, at 5, 24 (Sept. 10, 2010) (online at
www.financialstability.gov/docs/105CongressionalReports/August%202010%20105(a)%20Report_final_9%2010%2010.pdf).
xxxvi As part of the restructuring of the U.S. government’s investment in AIG announced on March 2, 2009, the amount available to AIG
through the Revolving Credit Facility was reduced by $25 billion in exchange for preferred equity interests in two special purpose vehicles, AIA
Aurora LLC and ALICO Holdings LLC. These SPVs were established to hold the common stock of two AIG subsidiaries: American International
Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO). As of September 29, 2010, the book value of the Federal Reserve Bank of New York’s holdings in AIA Aurora LLC and ALICO Holdings LLC is $25.7 billion in preferred equity ($16.5 billion in AIA and
$9.3 billion in ALICO). Federal Reserve Bank of New York, Factors Affecting Reserve Balances (H.4.1) (Sept. 30, 2010) (online at
www.federalreserve.gov/releases/h41/20100930/).
xxxvii This number represents the full $30 billion that is available to AIG through its Revolving Credit Facility (RCF) with FRBNY ($18.9 billion had been drawn down as of September 29, 2010) and the outstanding principal of the loans extended to the Maiden Lane II and III SPVs
to buy AIG assets (as of September 29, 2010, $13.7 billion and $14.6 billion, respectively). The maximum amount available through the RCF
decreased from $34 billion over the past two months, as a result of the sale of two AIG subsidiaries, as well as the company’s sale of CME
Group, Inc. common stock. The reduced ceiling also reflects a $3.95 billion repayment to the RCF from proceeds earned from a debt offering
by the International Lease Finance Corporation (ILFC), an AIG subsidiary.
The amounts outstanding under the Maiden Lane II and III facilities do not reflect the accrued interest payable to FRBNY. Income from the
purchased assets is used to pay down the loans to the SPVs, reducing the taxpayers’ exposure to losses over time. Federal Reserve Bank of
New York, Factors Affecting Reserve Balances (H.4.1) (Sept. 30, 2010) (online at www.federalreserve.gov/releases/h41/20100930/Board of Governors of the Federal Reserve System, Federal Reserve System Monthly Report on Credit and Liquidity Programs and the Balance Sheet, at 15
(July 2010) (online at www.federalreserve.gov/monetarypolicy/files/monthlyclbsreport201007.pdf); Board of Governors of the Federal Reserve System, Federal Reserve System Monthly Report on Credit and Liquidity Programs and the Balance Sheet, at 16 (Aug. 2010) (online at
www.federalreserve.gov/monetarypolicy/files/monthlyclbsreport201008.pdf); Board of Governors of the Federal Reserve System, Federal Reserve
System Monthly Report on Credit and Liquidity Programs and the Balance Sheet, at 15 (Sept. 2010) (online at
www.federalreserve.gov/monetarypolicy/files/monthlyclbsreport201009.pdf).
xxxviii This figure represents Treasury’s $25 billion investment in Citigroup, minus $13.4 billion applied as a repayment for CPP funding.
The amount repaid comes from the $16.4 billion in gross proceeds Treasury received from the sale of 4.1 billion Citigroup common shares.
See note ii, supra (discussing the details of the sales of Citigroup common stock to date). U.S. Department of the Treasury, Troubled Asset
Relief Program Transactions Report for the Period Ending September 30, 2010, at 13 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).

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119
xxxix This figure represents the $204.9 billion Treasury disbursed under the CPP, minus the $25 billion investment in Citigroup identified
above, $139.4 billion in repayments (excluding the amount repaid for the Citigroup investment) that are in ‘‘repaid and unavailable’’ TARP
funds, and losses under the program. This figure does not account for future repayments of CPP investments and dividend payments from
CPP investments. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30,
2010,
at
13
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xl On November 9, 2009, Treasury announced the closing of the CAP and that only one institution, GMAC, was in need of further capital
from Treasury. GMAC, however, received further funding through the AIFP. Therefore, the Panel considers CAP unused and closed. U.S. Department of the Treasury, Treasury Announcement Regarding the Capital Assistance Program (Nov. 9, 2009) (online at
www.financialstability.gov/latest/tg_11092009.html).
xli This figure represents the $4.3 billion adjusted allocation to the TALF SPV. However, as of September 29, 2010, TALF LLC had drawn
only $105 million of the available $4.3 billion. Board of Governors of the Federal Reserve System, Factors Affecting Reserve Balances (H.4.1)
(Sept. 30, 2010) (online at www.federalreserve.gov/releases/h41/20100930/); U.S. Department of the Treasury, Troubled Asset Relief Program
Transactions
Report
for
the
Period
Ending
September
30,
2010
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf). On June 30, 2010, the Federal
Reserve ceased issuing loans collateralized by newly issued CMBS. As of this date, investors had requested a total of $73.3 billion in TALF
loans ($13.2 billion in CMBS and $60.1 billion in non-CMBS) and $71 billion in TALF loans had been settled ($12 billion in CMBS and $59
billion in non-CMBS). Earlier, it ended its issues of loans collateralized by other TALF-eligible newly issued and legacy ABS (non-CMBS) on
March 31, 2010. Federal Reserve Bank of New York, Term Asset-Backed Securities Loan Facility: Terms and Conditions (online at
www.newyorkfed.org/markets/talf_terms.html) (accessed Oct. 12, 2010); Federal Reserve Bank of New York, Term Asset-Backed Securities Loan
Facility: CMBS (online at www.newyorkfed.org/markets/cmbs_operations.html) (accessed Oct. 12, 2010); see Federal Reserve Bank of New York,
Term Asset-Backed Securities Loan Facility: CMBS (online at www.newyorkfed.org/markets/CMBS_recent_operations.html) (accessed Oct. 12,
2010); Federal Reserve Bank of New York, Term Asset-Backed Securities Loan Facility: non-CMBS (online at
www.newyorkfed.org/markets/talf_operations.html) (accessed Oct. 12, 2010); see Federal Reserve Bank of New York, Term Asset-Backed Securities Loan Facility: non-CMBS (online at www.newyorkfed.org/markets/TALF_recent_operations.html) (accessed Oct. 12, 2010).
xlii This number is derived from the unofficial 1:10 ratio of the value of Treasury loan guarantees to the value of Federal Reserve loans
under the TALF. U.S. Department of the Treasury, Fact Sheet: Financial Stability Plan, at 4 (Feb. 10, 2009) (online at
www.financialstability.gov/docs/fact-sheet.pdf) (describing the initial $20 billion Treasury contribution tied to $200 billion in Federal Reserve
loans and announcing potential expansion to a $100 billion Treasury contribution tied to $1 trillion in Federal Reserve loans). Since only $43
billion in TALF loans remained outstanding when the program closed, Treasury is currently responsible for reimbursing the Federal Reserve
Board only up to $4.3 billion in losses from these loans. Thus, the Federal Reserve’s maximum potential exposure under the TALF is $38.7
billion. See Board of Governors of the Federal Reserve System, Factors Affecting Reserve Balances (H.4.1) (Sept. 30, 2010) (online at
www.federalreserve.gov/releases/h41/20100930/).
xliii It is unlikely that resources will be expended under the PPIP Legacy Loans Program in its original design as a joint Treasury-FDIC program to purchase troubled assets from solvent banks. In several sales described in FDIC press releases, it appears that there is no Treasury
participation, and FDIC activity is accounted for here as a component of the FDIC’s Deposit Insurance Fund outlays. See, e.g., Federal Deposit
Insurance Corporation, FDIC Statement on the Status of the Legacy Loans Program (June 3, 2009) (online at
www.fdic.gov/news/news/press/2009/pr09084.html).
xliv This figure represents Treasury’s final adjusted investment amount in PPIP. As of September 30, 2010, Treasury reported commitments
of $14.9 billion in loans and $7.5 billion in membership interest associated with PPIP. On January 4, 2010, Treasury and one of the nine
fund managers, TCW Senior Management Securities Fund, L.P. (TCW), entered into a ‘‘Winding-Up and Liquidation Agreement.’’ Treasury’s final
investment amount in TCW totaled $356 million. Following the liquidation of the fund, Treasury’s initial $3.3 billion obligation to TCW was reallocated among the eight remaining funds on March 22, 2010. See U.S. Department of the Treasury, Troubled Asset Relief Program Transactions
Report
for
the
Period
Ending
September
30,
2010,
at
23
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xlv Of the $29.9 billion in TARP funding for HAMP, $28.8 billion has been allocated as of September 30, 2010. However, as of September
30, 2010, only $484.9 million in non-GSE payments has been disbursed under HAMP. U.S. Department of the Treasury, Troubled Asset Relief
Program
Transactions
Report
for
the
Period
Ending
September
30,
2010
(Oct.
4,
2010)
(online
at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf). Data provided to Panel staff by
Treasury staff (Oct. 13, 2010).
xlvi A substantial portion of the total $81.3 billion in loans extended under the AIFP has since been converted to common equity and preferred shares in restructured companies. $8.1 billion has been retained as first lien debt (with $1 billion committed to old GM and $7.1 billion to Chrysler). This figure ($67.1 billion) represents Treasury’s current obligation under the AIFP after repayments and losses. U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 18 (Oct. 4, 2010) (online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xlvii This figure represents Treasury’s total adjusted investment amount in the ASSP. U.S. Department of the Treasury, Troubled Asset Relief
Program Transactions Report for the Period Ending September 30, 2010, at 19 (Oct. 4, 2010) (online at
financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
xlviii U.S. Department of the Treasury, Troubled Asset Relief Program: Two Year Retrospective, at 43 (Oct. 2010) (online at
www.financialstability.gov/docs/TARP%20Two%20Year%20Retrospective_10%2005%2010_transmittal%20letter.pdf).
xlix U.S. Department of the Treasury, Troubled Asset Relief Program Transactions Report for the Period Ending September 30, 2010, at 17
(Oct. 4, 2010) (online at financialstability.gov/docs/transaction-reports/10-4-10%20Transactions%20Report%20as%20of%209-30-10.pdf).
l This figure represents the current maximum aggregate debt guarantees that could be made under the program, which is a function of the
number and size of individual financial institutions participating. $292.6 billion of debt subject to the guarantee is currently outstanding,
which represents approximately 57.8 percent of the current cap. Federal Deposit Insurance Corporation, Monthly Reports on Debt Issuance
Under the Temporary Liquidity Guarantee Program: Debt Issuance Under Guarantee Program (Aug. 31, 2010) (online at
www.fdic.gov/regulations/resources/TLGP/total_issuance08-10.html). The FDIC has collected $10.4 billion in fees and surcharges from this program since its inception in the fourth quarter of 2008. Federal Deposit Insurance Corporation, Monthly Reports Related to the Temporary Liquidity Guarantee Program: Fees Under Temporary Liquidity Guarantee Debt Program (Aug. 31, 2010) (online at
www.fdic.gov/regulations/resources/tlgp/fees.html).
li This figure represents the FDIC’s provision for losses to its deposit insurance fund attributable to bank failures in the third and fourth
quarters of 2008, the first, second, third, and fourth quarters of 2009, and the first quarter of 2010. Federal Deposit Insurance Corporation,
Chief Financial Officer’s (CFO) Report to the Board: DIF Income Statement—Second Quarter 2010 (online at
www.fdic.gov/about/strategic/corporate/cfo_report_2ndqtr_10/income.html). For earlier reports, see Federal Deposit Insurance Corporation, Chief
Financial Officer’s (CFO) Report to the Board (online at www.fdic.gov/about/strategic/corporate/index.html) (accessed Oct. 12, 2010). This figure
includes the FDIC’s estimates of its future losses under loss-sharing agreements that it has entered into with banks acquiring assets of insolvent banks during these eight quarters. Under a loss-sharing agreement, as a condition of an acquiring bank’s agreement to purchase the
assets of an insolvent bank, the FDIC typically agrees to cover 80 percent of an acquiring bank’s future losses on an initial portion of these
assets and 95 percent of losses on another portion of assets. See, e.g., Federal Deposit Insurance Corporation, Purchase and Assumption
Agreement—Whole Bank, All Deposits—Among FDIC, Receiver of Guaranty Bank, Austin, Texas, Federal Deposit Insurance Corporation and
Compass Bank, at 65–66 (Aug. 21, 2009) (online at www.fdic.gov/bank/individual/failed/guaranty-tx_p_and_a_w_addendum.pdf).
lii Outlays are comprised of the Federal Reserve Mortgage Related Facilities. The Federal Reserve balance sheet accounts for these facilities
under Federal agency debt securities and mortgage-backed securities held by the Federal Reserve. Board of Governors of the Federal Reserve
System, Factors Affecting Reserve Balances (H.4.1) (Sept. 30, 2010) (online at www.federalreserve.gov/releases/h41/20100930/). Although the
Federal Reserve does not employ the outlays, loans, and guarantees classification, its accounting clearly separates its mortgage-related purchasing programs from its liquidity programs. See, e.g., Board of Governors of the Federal Reserve System, Credit and Liquidity Programs and
the Balance Sheet, at 2 (Nov. 2009) (online at www.federalreserve.gov/monetarypolicy/files/monthlyclbsreport200911.pdf).

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As of September 2010, there was $159.6 billion still outstanding under Treasury’s GSE Mortgage Backed Securities Purchase Program. See
U.S.
Department
of
the
Treasury,
MBS
Purchase
Program:
Portfolio
by
Month
(online
at
www.financialstability.gov/docs/September%202010%20Portfolio%20by%20month.pdf) (accessed Oct. 5, 2010). Treasury has received $61.1 billion in principal repayments and $13.9 billion in interest payments from these securities. U.S. Department of the Treasury, MBS Purchase Program
Principal
and
Interest
Received
(online
at
www.financialstability.gov/docs/September%202010%20MBS%20Principal%20and%20Interest%20Monthly%20Breakout.pdf) (accessed Oct. 5,
2010).
liii Federal Reserve Liquidity Facilities classified in this table as loans include primary credit, secondary credit, central bank liquidity swaps,
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, loans outstanding to Commercial Paper Funding Facility LLC,
seasonal credit, term auction credit, the Term Asset-Backed Securities Loan Facility, and loans outstanding to Bear Stearns (Maiden Lane
LLC). Board of Governors of the Federal Reserve System, Factors Affecting Reserve Balances (H.4.1) (Sept. 30, 2010) (online at
www.federalreserve.gov/releases/h41/20100930/).

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121
SECTION THREE: OVERSIGHT ACTIVITIES
The Congressional Oversight Panel was established as part of
the Emergency Economic Stabilization Act (EESA) and formed on
November 26, 2008. Since then, the Panel has produced 23 oversight reports, as well as a special report on regulatory reform,
issued on January 29, 2009, and a special report on farm credit,
issued on July 21, 2009. Since the release of the Panel’s September
oversight report, the following developments pertaining to the Panel’s oversight of the TARP took place:
• The Panel held a hearing in Washington, DC on September 22,
2010, discussing Treasury’s use of its exceptional contracting
authority under EESA. The Panel heard testimony from Treasury officials, representatives from the firms that had received
the three largest TARP-related contracts, as well as independent academic and industry experts.

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Upcoming Reports and Hearings
The Panel will release its next oversight report in November. The
report will provide a progress update on Treasury’s foreclosure
mitigation programs, the Panel’s fourth full-length report on the
topic.
The Panel is planning a hearing in Washington, DC on October
21, 2010, to discuss the standards and restrictions on executive
compensation for recipients of TARP funds, as outlined in Section
111 of EESA.464 The Panel will hear testimony from Kenneth
Feinberg, former Special Master for TARP Executive Compensation, as well as various academic and industry experts.
The Panel is planning a hearing in Washington, DC on October
27, 2010, to discuss the topic of the upcoming November report.

464 12 U.S.C. § 5221. See also U.S. Department of the Treasury, Executive Compensation (Aug.
3, 2010) (online at www.financialstability.gov/about/executivecompensation.html).

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SECTION FOUR: ABOUT THE CONGRESSIONAL
OVERSIGHT PANEL
In response to the escalating financial crisis, on October 3, 2008,
Congress provided Treasury with the authority to spend $700 billion to stabilize the U.S. economy, preserve home ownership, and
promote economic growth. Congress created the Office of Financial
Stability (OFS) within Treasury to implement the TARP. At the
same time, Congress created the Congressional Oversight Panel to
‘‘review the current state of financial markets and the regulatory
system.’’ The Panel is empowered to hold hearings, review official
data, and write reports on actions taken by Treasury and financial
institutions and their effect on the economy. Through regular reports, the Panel must oversee Treasury’s actions, assess the impact
of spending to stabilize the economy, evaluate market transparency, ensure effective foreclosure mitigation efforts, and guarantee that Treasury’s actions are in the best interests of the American people. In addition, Congress instructed the Panel to produce
a special report on regulatory reform that analyzes ‘‘the current
state of the regulatory system and its effectiveness at overseeing
the participants in the financial system and protecting consumers.’’
The Panel issued this report in January 2009. Congress subsequently expanded the Panel’s mandate by directing it to produce a
special report on the availability of credit in the agricultural sector.
The report was issued on July 21, 2009.
On November 14, 2008, Senate Majority Leader Harry Reid and
the Speaker of the House Nancy Pelosi appointed Richard H.
Neiman, Superintendent of Banks for the State of New York,
Damon Silvers, Director of Policy and Special Counsel of the American Federation of Labor and Congress of Industrial Organizations
(AFL–CIO), and Elizabeth Warren, Leo Gottlieb Professor of Law
at Harvard Law School, to the Panel. With the appointment on November 19, 2008, of Congressman Jeb Hensarling to the Panel by
House Minority Leader John Boehner, the Panel had a quorum and
met for the first time on November 26, 2008, electing Professor
Warren as its chair. On December 16, 2008, Senate Minority Leader Mitch McConnell named Senator John E. Sununu to the Panel.
Effective August 10, 2009, Senator Sununu resigned from the
Panel, and on August 20, 2009, Senator McConnell announced the
appointment of Paul Atkins, former Commissioner of the U.S. Securities and Exchange Commission, to fill the vacant seat. Effective
December 9, 2009, Congressman Jeb Hensarling resigned from the
Panel and House Minority Leader John Boehner announced the appointment of J. Mark McWatters to fill the vacant seat. Senate Minority Leader Mitch McConnell appointed Kenneth Troske, Sturgill
Professor of Economics at the University of Kentucky, to fill the vacancy created by the resignation of Paul Atkins on May 21, 2010.
Effective September 17, 2010, Elizabeth Warren resigned from the
Panel, and on September 30, 2010, Senate Majority Leader Harry
Reid announced the appointment of Senator Ted Kaufman to fill
the vacant seat. On October 4, 2010, the Panel elected Senator
Kaufman as its chair.

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