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United States Government Accountability Office

GAO

Report to Congressional Committees

March 2009

TROUBLED ASSET
RELIEF PROGRAM
March 2009 Status of
Efforts to Address
Transparency and
Accountability Issues

GAO-09-504

March 2009

TROUBLED ASSET RELIEF PROGRAM
Accountability Integrity Reliability

Highlights

March 2009 Status of Efforts to Address
Transparency and Accountability Issues

Highlights of GAO-09-504, a report to
congressional committees

Why GAO Did This Study

What GAO Found

GAO’s third report on the Troubled
Asset Relief Program (TARP)
follows up on recommendations
from the January 28, 2009, report
(GAO-09-296). It also reviews (1)
the nature and purpose of activities
that had been initiated under TARP
as of March 27, 2009; (2) the
Department of Treasury’s Office of
Financial Stability’s (OFS) hiring
efforts, use of contractors, and
progress in developing an internal
control system; and (3) TARP
performance indicators. For this
work, GAO reviewed signed
agreements and other relevant
documentation and met with
officials from OFS, contractors,
and federal agencies.

As of March 27, 2009, Treasury had disbursed $303.4 billion of the $700 billion
in TARP funds (see table). Most of the funds (almost $199 billion) went to
purchase preferred shares of 532 financial institutions under the Capital
Purchase Program (CPP), Treasury’s primary vehicle under TARP for
stabilizing financial markets. Treasury has continued to improve the integrity,
accountability and transparency of TARP. For example, it recently expanded
monthly surveys of the largest institutions’ lending activity to cover all CPP
participants, as GAO recommended. These surveys should provide additional
important information about how the capital investments are impacting
participants’ lending activities and capital levels.
Status of TARP Funds as of March 27, 2009 (dollars in billions)
Maximum announced Projected use
a
Program
program funding level
of funds Disbursed
Capital Purchase Program

In written comments, Treasury
described steps it had taken in the
last 60 days to address the
extraordinary economic
challenges.
To view the full product, including the scope
and methodology, click on GAO-09-504.
For more information, contact Thomas
McCool at (202) 512-2642 or
mccoolt@gao.gov. To view the e-supplement
online, click on GAO-09-522SP.

$218.0

70.0

70.0

40.0

Targeted Investment Program

40.0

40.0

40.0

Automotive Industry Financing Program

$198.8

24.9

24.9

24.5

Citigroup Asset Guarantee

5.0

5.0

0.0

Bank of America Asset Guarantee

What GAO Recommends
This report has six new
recommendations to Treasury,
including to continue developing an
integrated communication strategy;
require AIG to seek appropriate
concessions from employees and
derivatives counterparties, among
others; update documentation of
certain internal control procedures
and the public guidance on
determining warrant exercise
prices; publicly report monies, such
as dividends received from TARP
participants; and finish reviewing
existing conflict mitigation plans,
renegotiate them as appropriate,
and improve associated conflicts
documentation.

$250.0

Systemically Significant Failing Institutions

7.5

7.5

0.0

50.0

50.0

0.0

Homeowner Affordability & Stability Plan
Term Asset-Backed Securities Loan Facility
b
(TALF)
Unlocking Credit for Small Business
Auto Supplier Support Program

100.0

55.0

0.1

15.0

15.0

0.0

5.0

5.0

0.0

Public Private Investment Program

100.0

100.0

0.0

Capital Assistance Program

TBD

c

TBD

0.0

$667.4

$590.4

$303.4

Total
Source: Treasury OFS, unaudited.
a

Some of Treasury’s announced transactions are not yet legal obligations and actual amounts will
depend on participation.
b
Treasury considers this program part of its Consumer & Business Lending initiative.
c
Treasury has announced the Capital Assistance Program, but has not yet announced the funding
level for that program.

Treasury also continues to develop a process to monitor compliance with the
terms of the agreements but has not yet hired asset managers. Treasury
officials told GAO that these managers will have a role in helping ensure that
institutions were honoring dividend and stock repurchase requirements. In
February 2009, Treasury announced its broad strategy for using the remaining
TARP funds and in the following weeks provided details for its major
components. While articulating its plan was an important step, Treasury
continues to struggle with developing an effective overall communication
strategy that is integrated into TARP operations. Without such a strategy,
Treasury may face challenges should it need additional funding for the
program. Finally, as Treasury finalizes the terms of the agreement with
American International Group, Inc. (AIG) for $30 billion in additional
assistance, it should require that AIG seek additional concessions from
employees and existing derivatives counterparties, as appropriate.
United States Government Accountability Office

Highlights of GAO-09-504 (continued)

Timeline of Programs and Selected Actions under TARP, January 30, 2009, to March 23, 2009
3/4: The Administration announces the
Making Home Affordable Program, part of the
Homeowner Affordability and Stability Plan.

2/13: Treasury purchases about $429
million in preferred stock and warrants
from 29 institutions under CPP.
2/10: Treasury
announces the
Financial
Stability Plan.

2/18: Treasury announces
the Homeowner
Affordability and Stability
Plan.

2/27: Treasury
announces plans to
restructure assistance
to Citigroup.
Treasury purchases
about $395 million in
preferred stock and
warrants from 28
institutions under CPP.

3/6:Treasury
3/13:Treasury purchases about $1.5
purchases
billion in preferred stock and warrants
about $285
from 19 institutions under CPP.
million in
preferred stock
and warrants
3/20: Treasury purchases
from 22
about $80.7 million in
institutions
preferred stock and
under CPP.
warrants from 10 financial
institutions under CPP.

2009
February

1/30: Treasury
purchases about
$1.2 billion in
preferred stock
and warrants from
42 institutions
under the Capital
Purchase
Program (CPP).

2/6: Treasury
purchases
about $239
million in
preferred
stock and
warrants from
28 institutions
under CPP.

2/17: Treasury
loans an
additional $4
billion to GM.

March

2/20: Treasury
purchases
about $365
million in
preferred stock
and warrants
from 23
institutions
under CPP.

3/2: Treasury
and the
Federal
Reserve
announce
plans to
restructure
assistance to
AIG.

2/25: Treasury announces the terms and
conditions for the Capital Assistance Program,
part of the Financial Stability Plan.

3/3: Treasury and the
Federal Reserve
announce the launch
of TALF.

3/16:Treasury
announces that it will
begin purchasing
securities backed by
Small Business
Administration (SBA)
loans, temporarily
raise guarantees,
and eliminate certain
SBA loan fees.

3/23: Treasury, FDIC,
and Federal Reserve
announce details of the
Public-Private Investment
Program, part of the
Financial Stability Plan.

Source: GAO.

GAO’s January 2009 report also included
recommendations about OFS’s management
infrastructure, including hiring, contract oversight, and
internal controls. Treasury has continued to take steps
to address GAO’s recommendations. First, it has
continued to hire additional permanent staff to address
OFS’s long-term organizational needs. Second, Treasury
has enhanced its capacity to manage vendors by using
trained oversight personnel and looking for
opportunities to use fixed-price arrangements. Further
actions are needed to complete its review of existing
vendor conflict-of-interest mitigation plans and to
improve documentation of decisions relating to
potential conflicts. Third, OFS continued to refine,
develop, and document its internal control framework
over financial reporting and compliance, including its
risk assessment activities. However, GAO noted that
certain internal control procedures and the guidance
pertaining to determining warrant exercise prices had
not been updated to be consistent with actual practice.
GAO also noted that Treasury had not publicly reported
that through March 20, 2009, it had received dividends
totaling almost $2.9 billion from TARP participants.
Further steps in these areas are needed to improve the
program’s transparency and integrity.

credit has increased in interbank and corporate bond
markets and decreased in mortgage markets, while
perceptions of risk (as measured by premiums over
Treasury securities) have declined in interbank and
mortgage markets and risen in corporate debt markets.
In addition, although Federal Reserve survey data
suggest that lending standards remained tight, the
largest CPP recipients extended roughly $245 billion in
new loans to consumers and businesses in both
December 2008 and January 2009, according to the
Treasury’s new loan survey. However, attributing any
of these changes directly to TARP continues to be
problematic because of the range of actions that have
been and are being taken to address the current crisis.
While these indicators may be suggestive of TARP’s
ongoing impact, no single indicator or set of indicators
can provide a definitive determination of the program’s
impact.

GAO again notes the difficulty of measuring the effect
of TARP’s activities. Developments in the credit
markets have generally been mixed since the January
2009 report. Some indicators revealed that the cost of

United States Government Accountability Office

Contents

Letter

1
Scope and Methodology
Background
Treasury’s Strategy for Deploying TARP Funds Continues to
Evolve, Though CPP Remains the Key Effort to Stabilize the
Financial Markets
Treasury Continues to Make Progress in Establishing OFS
Indicators Suggest Mixed Recent Developments in Credit Markets,
but Isolating the Impact of TARP Continues to Present
Challenges
Conclusions
Recommendations for Executive Action
Agency Comments and Our Analysis

49
59
64
65

Appendix I

Comments from the Department of the Treasury

68

Appendix II

Status of GAO Recommendations (January 2009
Report)

70

Treasury’s Actions in Response to Our January
2009 Report Recommendations

71

GAO Contact and Staff Acknowledgments

91

Appendix III

Appendix IV

Related GAO Products

2
5

8
31

92

Tables
Table 1: Status of TARP Funds as of March 27, 2009
Table 2: Capital Investments Made through the Capital Purchase
Program, as of March 27, 2009
Table 3: TARP Dividends through March 20, 2009
Table 4: Agencies Detailing Federal Employees to the Office of
Financial Stability

Page i

9
10
28
33

GAO-09-504 Troubled Asset Relief Program

Table 5: Services and Support Tasks Provided by Selected TARP
Contractors and a Financial Agent
Table 6: Key Positions for TARP Oversight of Contracts and
Financial Agency Agreements, as of March 2009
Table 7: OFS Actions Since January 2009 to Enhance Oversight of
TARP Contractors’ and Financial Agents’ Performance
Table 8: Changes in Selected Credit Market Indicators, January 22,
2008, and March 25, 2009
Table 9: New Lending at 20 Largest Recipients of CPP, between
October 1, 2008, and January 31, 2009

37
39
41
52
55

Figures
Figure 1: Timeline of Program Activities for TARP, October 2008March 2009
Figure 2: Number of Permanent Staff and Detailees, November
2008 through March 2009
Figure 3: Number of and Expenses for OFS Financial Agency
Agreements, Contracts, and Blanket Purchase
Agreements, as of March 13, 2009
Figure 4: New Lending at 20 Largest Recipients of CPP, between
October 1, 2008, and January 31, 2009
Figure 5: Net Percentages of Banks Tightening Lending Standards,
Increasing Spreads, and Reporting Stronger Demand for
Loans, by firm size, between October 1997 and March
2009
Figure 6: Average Finance Rate for New Cars at Auto Finance
Companies and Banks, February 2006 and January 2009

Page ii

6
32

36
54

57
59

GAO-09-504 Troubled Asset Relief Program

Abbreviations
ABS
AGP
AIG
CAP
CBOE
CDFI
CMBS
COP
COTR
CPP
FDIC
FHA
FHFA
FinSOB
GM
GSE
HAMP
HUD
LIBOR
MBS
OCC
OFS
OGE
OMB
OTS
SBA
SES
SIGTARP
SSFI
TALF
TARP
TIP

Page iii

asset-backed security
Asset Guarantee Program
American International Group Inc.
Capital Assistance Program
Chicago Board Options Exchange
Community Development Financial Institutions Fund
commercial mortgage-backed security
Congressional Oversight Panel
Contracting Officer’s Technical Representative
Capital Purchase Program
Federal Deposit Insurance Corporation
Federal Housing Administration
Federal Housing Finance Agency
Financial Stability Oversight Board
General Motors Corporation
government-sponsored enterprise
Home Affordable Modification Program
Department of Housing and Urban Development
London Interbank Offered Rate
mortgage-backed security
Office of the Comptroller of the Currency
Office of Financial Stability
Office of Government Ethics
Office of Management and Budget
Office of Thrift Supervision
Small Business Administration
Senior Executive Service
Special Inspector General for TARP
Systemically Significant Failing Institutions Program
Term Asset-Backed Securities Loan Facility
Troubled Asset Relief Program
Targeted Investment Program

GAO-09-504 Troubled Asset Relief Program

This is a work of the U.S. government and is not subject to copyright protection in the
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necessary if you wish to reproduce this material separately.

Page iv

GAO-09-504 Troubled Asset Relief Program

United States Government Accountability Office
Washington, DC 20548

March 31, 2009
Congressional Committees
On October 3, 2008, the Emergency Economic Stabilization Act of 2008
(the act) was signed into law. The act established the Office of Financial
Stability (OFS) within the Department of the Treasury (Treasury) and
authorized the Troubled Asset Relief Program (TARP).1 Among other
things, the act provides Treasury with broad, flexible authorities to buy or
guarantee up to $700 billion in “troubled assets,” which include mortgages
and mortgage-related instruments, and any other financial instrument
whose purchase Treasury determines is needed to stabilize the financial
markets.2
The act also created oversight mechanisms for the implementation and
operations of TARP. Among other things, the U.S. Comptroller General is
required to report at least every 60 days on findings resulting from GAO’s
oversight of TARP’s performance in meeting the purposes of the act; the
financial condition and internal controls of TARP, its representatives, and
agents; the characteristics of both asset purchases and the disposition of
assets acquired, including any related commitments that are entered into;
TARP’s efficiency in using the funds appropriated for the program’s
operation; TARP’s compliance with applicable laws and regulations;
efforts to prevent, identify, and minimize conflicts of interest among those
involved in TARP’s operations; and the efficacy of contracting
procedures.3
This report follows up on the status of recommendations from our
December 2008 and January 2009 reports and addresses (1) the nature and
purpose of activities that have been initiated under TARP from January 30,
2009, through March 27, 2009, unless otherwise noted; (2) OFS’s progress

1

Pub. L. No. 110-343, 122 Stat. 3765 (2008), codified at 12 U.S.C. §§ 5201 et seq.

2

Section 102 of the act, 12 U.S.C. § 5212, authorizes Treasury to guarantee troubled assets
originated or issued prior to March 14, 2008, including mortgage-backed securities.
3

Section 116 of the act, 12 U.S.C. § 5226.

Page 1

GAO-09-504 Troubled Asset Relief Program

in hiring, use of contractors, and developing a system of internal control;
and (3) outcomes measured by indicators of TARP’s performance.4

Scope and
Methodology

To determine the nature and purpose of TARP activities from January 30,
2009, through March 27, 2009, unless noted, and the status of actions taken
in response to our recommendations from our prior reports, we reviewed
documents from OFS that described the amounts, types, and terms of
Treasury’s purchases of preferred stocks and warrants under the Capital
Purchase Program (CPP), the Systemically Significant Failing Institutions
Program (SSFI), the Automotive Industry Financing Program (AIFP), the
Targeted Investment Program (TIP), the Capital Assistance Program
(CAP), and the Term Asset-Backed Securities Loan Facility (TALF).5 We
also reviewed documentation and interviewed officials from OFS
responsible for selecting financial institutions to participate in CPP.
Additionally, we contacted officials from the four federal banking
regulators—the Federal Deposit Insurance Corporation (FDIC), the Office
of the Comptroller of the Currency (OCC), the Board of Governors of the
Federal Reserve System (Federal Reserve), and the Office of Thrift
Supervision (OTS)—to obtain information on their process for reviewing
CPP applications, the status of pending applications, and their
examination process for reviewing uses of CPP funds and compliance with
TARP requirements. Also, we have developed an approach to determine
the extent to which the review and approval process for CPP applications
has been consistently applied across financial institutions. Specifically, we
have collected documentation supporting all funding decisions for the
period covering October 28, 2008, through January 31, 2009, and are in the
process of reviewing these decisions. For SSFI and TALF, we reviewed
program revisions and agreements, as appropriate, and contacted officials
from OFS.
To describe Treasury’s efforts to preserve homeownership, we reviewed
announcements, fact sheets, and program guidelines issued by Treasury
and held meetings to discuss these documents with OFS. To describe how
Treasury estimated the cost of the loan modification program and the
number of borrowers it expected to reach, we reviewed written

4

GAO, Troubled Asset Relief Program: Additional Actions Needed to Better Ensure
Integrity, Accountability, and Transparency, GAO-09-161 (Washington, D.C.: Dec. 2,
2008) and Troubled Asset Relief Program: Status of Efforts to Address Transparency and
Accountability Issues, GAO-09-296 (Washington, D.C.: Jan. 30, 2009).
5

A warrant is an option to buy shares of common stock or preferred stock at a
predetermined price on or before a specified date.

Page 2

GAO-09-504 Troubled Asset Relief Program

explanations of OFS’s projections. To discuss the cross-agency effort to
design and plan the implementation of the loan modification program, we
reviewed Financial Agent Agreements that Treasury executed with Fannie
Mae and Freddie Mac, and met with representatives of Fannie Mae,
Freddie Mac, and the Federal Housing Finance Agency (FHFA), Federal
Housing Administration (FHA), OCC, and OTS.
To assess the progress of OFS’s hiring efforts, we reviewed OFS’s
workforce planning documents, updated organizational chart, and OFS job
announcements posted on USAJOBS. To assess its performance, we
reviewed our prior work on human capital flexibilities, organizational
transformation, and strategic workforce planning. In addition, we met with
a variety of Treasury and OFS officials to discuss their approach to staffing
the office in the near and long terms and their strategies for recruiting
qualified individuals. We also discussed Treasury’s efforts to coordinate its
recruitment and hiring efforts, including its use of human capital
flexibilities, with officials from the Office of Personnel Management
(OPM).
To assess OFS’s use of contractors and financial agents to support TARP
administration and operation for the period of January 21 through March
13, 2009, we reviewed information from Treasury for new
(1) contracts and financial agency agreements and (2) task orders,
modifications, and amendments involving ongoing contracts and financial
agency agreements. We also identified any small and/or disadvantaged
business contractors or subcontractors providing TARP services and
supplies. To obtain information concerning (1) the progress of ongoing
actions taken by OFS and Treasury in response to our recommendation to
improve oversight of TARP contractors and financial agents and (2) OFS’s
reliance on contractors and financial agents to perform a range of
professional and financial services in support of key TARP programs, we
reviewed applicable documents and interviewed officials from Treasury
and two TARP contractors and one financial agent. To assess OFS’s
progress responding to our recommendation for addressing potential
conflicts of interest for new contractors and financial agents, we reviewed
solicitation and contract documentation describing organizational and
personal conflicts-of-interest issues and mitigation plans to address those
issues. We interviewed officials and senior managers from Treasury and
the TARP contractors and financial agent to obtain information on OFS’s
and contractor’s policies and processes to ensure compliance with TARP
conflicts of interest requirements.
To assess the status of internal controls related to TARP activities and the
status of TARP’s consideration of accounting and reporting topics, we

Page 3

GAO-09-504 Troubled Asset Relief Program

reviewed documents provided by OFS and conducted interviews and made
inquiries with officials from OFS, including the Chief Financial Officer,
Deputy Chief Financial Officer, Cash Management Officer, Director of
Internal Controls, and their representatives. Additionally, we made
inquiries with contractor personnel, including PricewaterhouseCoopers.
To evaluate selected internal control activities related to the CPP and SSFI
programs, we designed tests using the OFS’s process flows, narratives,
risk matrices, and high-level operational procedures. For CPP, we made a
statistical selection of 45 unique transactions for the 4 months ending
January 31, 2009, using a monetary unit sampling (probability
proportionate to size) methodology. For this sample, we tested selected
CPP control activities related to asset purchases and dividend receipts.
For SSFI, we tested the only SSFI transaction completed as of March 27,
2009, including selected control activities related to dividends.
In our initial report under the mandate, we identified a preliminary set of
indicators on the state of credit and financial markets that might be
suggestive of the performance and effectiveness of TARP. We consulted
Treasury officials and other experts and analyzed available data sources
and the academic literature. We selected a set of preliminary indicators
that offered perspectives on different facets of credit and financial
markets, including perceptions of risk, cost of credit, and flows of credit to
businesses and consumers.6 We assessed the reliability of the data upon
which the indicators are based and found that, despite certain limitations,
they were sufficiently reliable for our purposes. To update the indicators
in this report, we primarily used data from the Federal Reserve. As these
data are widely used, including by GAO and the Federal Reserve, and are
considered to be a reliable and often definitive source for banking sector
data, we conducted only a limited review of the data but ensured that the
trends we found were consistent with other research. We also relied on
data from the Chicago Board Options Exchange (CBOE), Inside Mortgage
Finance, Treasury, and Global Insight. We have relied on CBOE and
Global Insight data for past reports, and we determined that, considered
together, these auxiliary data were sufficiently reliable for the purpose of
presenting and analyzing trends in financial markets. The data from
Treasury’s survey of lending at the top 20 CPP recipients (as of December
31, 2008) are based on internal reporting from participating institutions,
and the definitions of loan categories may vary across banks. Because the

6

No indicator on its own provides a definitive perspective on the state of markets;
collectively, the indicators should provide a broad sense of stability and liquidity in the
financial system and could be suggestive of the program’s impact. However, it is difficult to
draw conclusions about causality.

Page 4

GAO-09-504 Troubled Asset Relief Program

data are unique, we are not able to benchmark the origination levels
against historical lending or seasonal patterns at these institutions. Based
on discussions with Treasury and our review of the data, we found that the
data are sufficiently reliable for the purpose of documenting trends in
lending. The survey data will prove valuable for more thorough analyses of
lending activity in future reports.
We plan to continue to monitor the issues highlighted in our prior reports,
as well as future and ongoing capital purchases, other more recent
transactions undertaken as part of TARP, and the status of other aspects
of TARP. Together with the Special Inspector General for TARP, we also
plan to review the payment of taxes by the recipients of TARP funds.
We conducted this performance audit between February 2009 and March
2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.

Background

Treasury has engaged in a variety of activities to address instability in the
financial markets (see fig. 1). Leading up to the transition to the new
administration, Treasury made additional equity purchases in financial
institutions under CPP and invested in and announced future plans to
support the automotive industry under AIFP. Following the transition to
the new administration on January 20, 2009, Treasury continued to make
additional equity investments in financial institutions under CPP,
announced plans to restructure the assistance previously provided to
Citigroup Inc. (Citigroup) and American International Group, Inc. (AIG),
and launched TALF, a consumer lending facility established by the Federal
Reserve Bank of New York for which Treasury originally pledged support
in November 2008. In addition, the new administration announced its plan
to pursue new initiatives under the authority of the act.

Page 5

GAO-09-504 Troubled Asset Relief Program

Figure 1: Timeline of Program Activities for TARP, October 2008-March 2009
12/5: Treasury
purchases about
$3.8 billion in
preferred stock
Treasury purchases $40 billion in preferred stock and warrants from and warrants
AIG under the Systemically Significant Failing Institutions Program from 35 financial
institutions under
(SSFI).
CPP.
11/14: Treasury purchases about $33.6 billion in preferred
stock and warrants from 21 financial institutions under CPP.

10/14: Treasury announces that it will purchase up to $250 billion in financial firms’ preferred
stock under TARP via the Capital
11/25: Treasury announces allocation of $20 billion to back Term
Purchase Program (CPP).
Asset-Backed Securities Loan Facility (TALF).
10/3: Congress passes P.L.
110-343, Emergency
Economic Stabilization Act
(the act), which authorized
the Troubled Assets Relief
Program (TARP).

October

November

12/31: Treasury purchases about $15
billion in preferred stock and warrants from
7 financial institutions under CPP.
Treasury purchases $20 billion in preferred
stock and warrants from Citigroup that
were announced on November 23, 2008,
under the newly created Targeted
Investment Program (TIP).
Treasury loans $4 billion to GM.

December

2008
10/28: Treasury purchases $115 billion in preferred 11/21: Treasury purchases about $2.9
billion in preferred stock and warrants
stock and warrants from 8 national financial
from 23 financial institutions under CPP.
institutions under the first round of CPP.a

12/12: Treasury purchases about $2.5
billion in preferred stock and warrants
from 28 financial institutions under CPP.

11/23: Treasury, FDIC, and the Federal Reserve enter into an agreement with
Citigroup to provide a package of guarantees, liquidity access, and capital.

1/16: Treasury announces that it will make a $1.5
billion loan to a special purpose entity created by
Chrysler Financial to finance the extension of new
consumer auto loans as part of the AIFP.

12/19: Treasury purchases about $2.8 billion in preferred
stock and warrants from 49 financial institutions under CPP.

Treasury, the Federal Reserve, and FDIC announce finalization of the terms of
the guarantee agreement with Citigroup announced on November 23, 2008.

12/29: Treasury
announces purchase
of $5 billion in senior
preferred equity from
GMAC LLC and
agrees to loan $1
billion to support its
reorganization as a
bank holding company.

12/23: Treasury purchases about $1.9 billion in preferred
stock and warrants from 43 financial institutions under CPP.

Treasury, the Federal Reserve, and FDIC enter into an agreement with Bank of
America to guarantee about $118 billion of assets and provide capital
assistance via purchase of preferred stock under TIP.
3/2: Treasury and the Federal Reserve announce plans to restructure assistance to AIG.
3/4: The
3/13:Treasury purchases about $1.5
Administration
billion in preferred stock and warrants
2/18:
announces the
2/27: Treasury announces
from 19 institutions under CPP.
Treasury
Making Home
plans to restructure
announces
Affordable
assistance to Citigroup.
3/20: Treasury purchases
the
Program, part of
about $80.7 million in
Homeowner Treasury purchases about
the Homeowner
preferred stock and
Affordability $395 million in preferred
Affordability and
warrants from 10 financial
and Stability stock and warrants from 28
Stability Plan.
institutions under CPP.
institutions under CPP.
Plan.

Treasury purchases about $1.5 billion in preferred stock and warrants from 39
institutions under CPP.
1/2: Treasury
completes $4
billion loan
transaction with
Chrysler Holding
LLC as part of
Auto Industry
Financing
Program (AIFP).

1/9: Treasury
purchases about
$14.8 billion in
preferred stock
and warrants
from 43 financial
institutions under
CPP.b

1/21:
Treasury
loans an
additional
$5.4
billion to
GM.

2/13: Treasury
purchases about
$429 million in
preferred stock
and warrants
from 29
institutions
under CPP.

January

February

March

2009
2/6: Treasury
purchases
about $239
1/23: Treasury purchases about $386
million in
million in preferred stock and warrants from
preferred
23 institutions under CPP.
stock and
1/30: Treasury purchases about $1.2 billion in warrants from
28 institutions
preferred stock and warrants from 42
under CPP.
institutions under CPP.

2/17: Treasury loans
an additional $4
billion to GM.

1/20: Inauguration Day: Transition to the
new administration.

2/10: Treasury announces the Financial Stability Plan.

2/20: Treasury
purchases about $365
million in preferred
stock and warrants
from 23 institutions
under CPP.

2/25: Treasury
announces the
terms and
conditions for
the Capital
Assistance
Program, part
of the Financial
Stability Plan.

3/16:Treasury announces it will
begin purchasing securities
backed by Small Business
Administration (SBA) loans,
temporarily raise guarantees and
eliminate certain SBA loan fees.

3/23: Treasury, FDIC,
and Federal Reserve
announce details of the
Public-Private Investment
Program, part of the
Financial Stability Plan.

3/6:Treasury purchases about $285 million in preferred
stock and warrants from 22 institutions under CPP.

3/3: Treasury and the Federal Reserve announce the launch of TALF.

Source: GAO.
a

The participation of a ninth institution was deferred to allow for completion of its merger with another
institution.

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GAO-09-504 Troubled Asset Relief Program

b

This includes purchases of preferred stock and warrants from the institution whose receipt of CPP
funds was deferred pending the completion of a merger (see October 28, 2009 CPP transaction). The
merger was completed on January 1, 2009.

As we described in our January 2009 report, the act created other
oversight entities in addition to our oversight responsibilities, including
the Congressional Oversight Panel (COP), the Special Inspector General
for TARP (SIGTARP), and the Financial Stability Oversight Board
(FinSOB).7 We are coordinating our work with COP, SIGTARP, and
FinSOB, and are meeting with officials from these entities to share
information and effectively make use of our combined resources. These
meetings help to ensure that we collaborate appropriately and eliminate
unnecessary duplication of effort.
After we issued our January 2009 report on TARP, COP issued reports in
February and March 2009.8 COP’s February 2009 report focused on the
methods Treasury used to make equity investments in financial
institutions under the CPP and concluded that Treasury paid substantially
more for the assets it purchased under TARP than their then-current
market value. COP’s March 2009 report reviewed Treasury’s plans to
mitigate foreclosures, in particular Treasury’s Homeowner Affordability
and Stability Plan. While the report acknowledges Treasury’s progress in
providing increased refinancing and loan modification opportunities to
homeowners, it also raised questions about, for example, legal protection
for loan servicers involved with voluntary loan modifications, the role of
second mortgages in the foreclosure process, and the federal regulators’
enforcement of new industrywide standards for financial institutions
receiving TARP funds.
In addition, SIGTARP issued its first report to Congress in February 2009.9
The report covers TARP activities through January 23, 2009, and describes
how financial institutions used TARP funds during that period. SIGTARP
recommended that TARP managers take action to increase transparency
and oversight through various means, such as acknowledging SIGTARP’s
oversight authority in TARP agreements, developing and communicating

7

GAO-09-296.

8

Congressional Oversight Panel, Valuing Treasury’s Acquisitions (Washington, D.C.,
Feb. 6, 2009) and The Foreclosure Crisis: Working Towards a Solution (Washington, D.C.,
Mar. 6, 2009).
9

Special Inspector General for Troubled Asset Relief Program, Initial Report to the
Congress (Washington, D.C., Feb. 6, 2009).

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GAO-09-504 Troubled Asset Relief Program

methods used to value program investments, and taking steps to prevent
fraud, waste, and abuse of funds provided.
FinSOB issued its first quarterly report on December 31, 2008, on
Treasury’s policies to implement TARP.10 We summarized FinSOB’s report
in our January 2009 report. FinSOB plans to issue its next quarterly report
in spring 2009.

Treasury’s Strategy
for Deploying TARP
Funds Continues to
Evolve, Though CPP
Remains the Key
Effort to Stabilize the
Financial Markets

As of March 27, 2009, Treasury had announced several programs under
TARP with a maximum announced total funding of $667.4 billion of its
$700 billion. As shown in table 1, as of that date Treasury’s projected use
of funds was $590.4 billion and it had disbursed about $303.4 billion in
TARP funds, approximately $198.8 billion of it for CPP. Included in this
amount was $24.5 billion for General Motors Corporation (GM), Chrysler
Holdings LLC (Chrysler), GMAC LLC, and Chrysler Financial Services
Americas LLC. We have initiated a separate effort to, among other things,
discuss the impact of federal financial assistance on the viability of GM
and Chrysler. Treasury has recently announced the Financial Stability
Plan, which outlines a set of measures to address the financial crisis and
hopefully restore confidence in the U.S. financial and housing markets and
a Homeowner Affordability and Stability Plan to mitigate foreclosures and
preserve homeownership. A key component of the Financial Stability Plan
is CAP, for which Treasury recently announced standardized terms.

10
Financial Stability Oversight Board, First Quarterly Report to Congress Pursuant to
Section 104(g) of the Emergency Economic Stabilization Act of 2008 (Washington, D.C.,
Dec. 31, 2008).

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GAO-09-504 Troubled Asset Relief Program

Table 1: Status of TARP Funds as of March 27, 2009
Dollars in billions
Maximum
announced program
funding levela
$250.0

$218.0

70.0

Program

Projected use
of funds
70.0

Capital Purchase Program
Systemically Significant Failing Institutions

Apportioned

Asset
purchase
b
price

Disbursed

$230.0

$198.8

$198.8

70.0

40.0

40.0

Targeted Investment Program

40.0

40.0

40.0

40.0

40.0

Automotive Industry Financing Program

24.9

24.9

24.9

24.8

24.5

5.0

5.0

5.0

5.0

0.0

Citigroup Asset Guarantee
Bank of America Asset Guarantee

7.5

0.0

55.0

20.0

20.0

0.1

15.0

0.0

0.0

0.0

5.0

Public-Private Investment Program

0.0

0.0

5.0

0.0

0.0

0.0

100.0

Auto Supplier Support Program

0.0

32.5

15.0

Unlocking Credit for Small Business

0.0

50.0

100.0

Term Asset-Backed Securities Loan Facility
(TALF)c

7.5

50.0

Homeowner Affordability & Stability Plan

100.0

0.0

0.0

0.0

d

TBD

Total

TBD

0.0

0.0

0.0

$667.4

Capital Assistance Program

$590.4

$422.4

$328.6

$303.4

Source: Treasury OFS, unaudited.
a

Some of Treasury’s announced transactions are not yet legal obligations and actual amounts will
depend on participation.

b

The Asset Purchase Price reflects the aggregate purchase price amount of outstanding troubled
assets purchased by Treasury that are subject to the $700 billion purchase limit in section 115 of the
act. It also includes the aggregate amount of outstanding guaranteed obligations subject to the limit,
but before subtracting the balance in the Troubled Assets Insurance Financing Fund required by
section 102.
c

Treasury considers this program part of its Consumer & Business Lending Initiative.

d

Treasury has announced CAP but has not yet announced its funding level.

Officers and employees of Treasury may not obligate or expend
appropriated funds in excess of the amount apportioned by the Office of
Management and Budget (OMB) on behalf of the President. Of the funding
levels announced for TARP, Treasury stated that OMB had apportioned
about $422.4 billion as of March 27, 2009. Based on this information, it
appears that Treasury has not exceeded the troubled asset purchase limit
or obligated funds in excess of those OMB has apportioned. We are
continuing to obtain additional information from Treasury and to review
the controls that Treasury has in place to help ensure compliance with
these restrictions. We will discuss these issues in subsequent reports.

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CPP Continued to Be a
Primary Vehicle for
Stabilizing the Financial
Markets

Treasury has continued to use CPP as a primary vehicle under TARP as it
attempts to stabilize financial markets. As of March 27, 2009, Treasury had
disbursed about 80 percent of the $250 billion it had allocated for CPP to
purchase almost $198.8 billion in preferred shares of 532 qualified financial
institutions.11 These purchases ranged from about $300,000 to $25 billion
per institution. About $4.6 billion in preferred stock shares of 215 financial
institutions has been purchased since our January 2009 report.

Table 2: Capital Investments Made through the Capital Purchase Program, as of March 27, 2009
Amount of CPP capital
investment

Cumulative percentage of
allocated fund used for CPP
capital investment

Number of qualified financial
institutions receiving CPP capital

10/28/2008

$115,000,000,000

46.0

8

11/14/2008

33,561,409,000

59.4

21

11/21/2008

2,909,754,000

60.6

23

12/05/2008

3,835,635,000

62.1

35

12/12/2008

2,450,054,000

63.1

28

12/19/2008

2,791,950,000

64.2

49

12/23/2008

1,911,751,000

65.0

43

12/31/2008

15,078,947,000

71.0

7

1/09/2009

14,771,598,000

76.9

43

1/16/2009

1,479,938,000

77.5

39

Closing date of
transaction

1/23/2009

385,965,000

77.7

23

1/30/2009

1,151,218,000

78.1

42

2/06/2009

238,555,000

78.2

28

2/13/2009

429,069,000

78.4

29

2/20/2009

365,397,000

78.5

23

2/27/2009

394,906,000

78.7

28

3/06/2009

284,675,000

78.8

22

3/13/2009

1,455,160,000

79.4

19

3/20/2009

80,748,000

79.4

10

3/27/2009

192,958,000

79.5

14

$198,769,687,000

79.5%

532a

Total

Source: Treasury and GAO.

11

For purposes of CPP, financial institutions generally include qualifying U.S.-controlled
banks, savings associations, and both bank and savings and loan holding companies.

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GAO-09-504 Troubled Asset Relief Program

a

The total number of financial institutions was reduced by two because SunTrust Banks, Inc.
(SunTrust) and Bank of America Corporation (Bank of America) each received two capital
investments under CPP. SunTrust received a partial capital investment of $3.5 billion on November
14, 2008, and another of $1.35 billion on December 31, 2008. Bank of America received $15 billion
on October 28, 2008, and, after merging with Merrill Lynch & Co., Inc., an additional $10 billion on
January 9, 2009.

As of March 27, 2009, the types of institutions that had received CPP
capital included 272 publicly held institutions, 248 privately held
institutions, and 12 community development financial institutions
(CDFI).12 These purchases represented investments in state-chartered and
national banks and bank holding companies located in 48 states, the
District of Columbia, and Puerto Rico. For a detailed listing of banks that
received CPP funds as of March 20, 2009, see the e-supplement to
GAO-09-504, available electronically at GAO-09-522SP.13
According to OFS and the bank regulators, over a thousand applications
for funding are under review. As of March 27, 2009, Treasury was in the
process of reviewing approval recommendations from bank regulators for
1,190 qualified financial institutions. Treasury also reported that the bank
regulators were reviewing applications from more than 750 institutions
that had not yet been forwarded to Treasury. Qualified financial
institutions generally have 30 calendar days after Treasury notifies them of
preliminary approval for CPP funding to submit investment agreements
and related documentation. OFS officials stated that over 250 financial
institutions that received preliminary approval had withdrawn their CPP
applications as of March 27, 2009. Further, Treasury officials stated that
some of these institutions had indicated that they were uncomfortable
with the uncertainty surrounding future program requirements. As of
March 27, 2009, Treasury had yet to deny an application.
We are continuing to examine the process for accepting and approving
CPP applications. Specifically, we have developed a methodology for
reviewing CPP applications that had been funded from October 2008

12

A CDFI is a specialized financial institution that works in market niches that are
underserved by traditional financial institutions. CDFIs provide a range of financial
products and services, such as mortgage financing for low-income and first-time
homebuyers and not-for-profit developers; flexible underwriting and risk capital for needed
community facilities; and technical assistance, commercial loans, and investments to small
start-up or expanding businesses in low-income areas.

13
GAO, Troubled Asset Relief Program: Capital Purchase Program Transactions for the
Period of October 28, 2008, through March 20, 2009, and Information on Financial
Agency Agreement, Contract, and Blanket Purchase Agreements Awarded as of March 13,
2009, GAO-09-522SP (Washington, D.C.: Mar. 31, 2009).

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GAO-09-504 Troubled Asset Relief Program

through January 2009 to determine the extent to which the regulators and
OFS were consistently applying established criteria and adequately
documenting the regulators’ recommendations and OFS’s final decisions.
As part of this review, we have collected relevant case decision memos
and other supporting documentation from Treasury and the regulators. We
will also continue to coordinate and leverage the work of other agencies
and offices involved in the oversight of CPP, including the COP, the
Offices of the Inspector General of FDIC, Federal Reserve, Treasury, and
SIGTARP, all of which have work under way on their review of CPP’s
implementation at their respective agencies. In coordination with the
other oversight agencies and offices, we plan to focus our initial review on
the final phases of the CPP application process—from the point at which
the regulators transmit their recommendations to Treasury to the final
approval by OFS’s Interim Assistant Secretary.

OFS Has Started
Monitoring All
Participants’ Use of CPP
Funds but Has Not Yet
Hired Asset Managers to
Help Ensure Compliance
with Purchase Agreements

Treasury has taken a number of important steps toward better reporting
and monitoring of CPP. These steps are consistent with our prior
recommendations that Treasury bolster its ability to determine whether all
institutions are using CPP proceeds in ways that are consistent with the
act’s purposes. Treasury has completed the first 2 monthly surveys of the
20 largest institutions to monitor their lending and issued its first report in
February 2009.14 In our January 2009 report, we recommended that
Treasury expand these surveys to include all CPP participants. In
response, Treasury expanded the monthly survey to all CPP participants
as of March 2009. In addition, it plans to release its analysis of quarterly
monitoring data (call reports) for all reporting institutions by June 30,
2009.15 Treasury is also requiring that, starting in April 2009, the monthly
surveys of the large CPP recipients collect information on lending to small
businesses. Taken together, these monthly surveys are a step toward
greater transparency and accountability for institutions of all sizes. Survey
results will allow Treasury’s newly created team of analysts to understand
how institutions are using CPP funds and will help in measuring the
program’s effectiveness. We will continue to monitor Treasury’s oversight
efforts, including implementation of its new survey of smaller institutions.

14

See Treasury Department Monthly Lending and Intermediation Snapshot: Summary
Analysis for October-December 2008, http://www.ustreas.gov/press/releases/tg30.htm.

15
Call reports are quarterly reports that collect basic financial data of commercial banks in
the form of a balance sheet and income statement (formally known as Report of Condition
and Income).

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GAO-09-504 Troubled Asset Relief Program

Also consistent with our prior recommendations, Treasury has continued
to take steps to increase its oversight of compliance with terms of the CPP
agreements, including limitations on executive compensation, dividends,
and stock repurchases. Participating institutions are required to comply
with the terms of these agreements, and we recommended that Treasury
develop a process to monitor and enforce them. Treasury has named an
Interim Chief Compliance Officer and uses information sources such as
Bloomberg, SEC filings, press releases, and other information sources to
monitor dividend payments and stock repurchases. Treasury officials told
us that they still plan to hire asset managers, whose primary role will be to
provide market advice about the portfolio, but also will help monitor
dividends and stock purchase limitations. They noted that asset managers
will have a limited role in the area of executive compensation. To date,
they had not yet hired any asset managers. Without a more structured
mechanism in place, and with a growing number of institutions
participating in the program, ensuring compliance with these important
aspects of the program will become increasingly challenging. While the
institutions are obligated to comply with the terms of the agreement,
Treasury has not developed a process to help ensure this compliance and
to verify that any required certifications are accurate.
On February 4, 2009, Treasury issued a press release announcing a new set
of guidelines on executive pay for financial institutions that receive
government assistance. However, the Emergency Economic Stabilization
Act, as amended by the American Recovery and Reinvestment Act of 2009,
imposed additional standards. Specifically, it generally prohibits (1) bonus
and incentive compensation payments to certain employees, depending on
the amount of TARP assistance received, (2) certain golden parachutes,
and (3) compensation that encourages risk-taking that would threaten the
value of the institution. The new law also requires (1) reimbursement
(clawback) of certain bonus or incentive compensation based on
materially inaccurate criteria, (2) compensation tax deduction limits, (3)
compliance certification, (4) establishment of a policy on excessive or
luxury expenditures, (5) creation of a board compensation committee, and
(6) permission to conduct a nonbinding shareholder vote on pay.
According to Treasury, it is planning to implement its guidelines and the
new law. We will be monitoring these efforts.

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GAO-09-504 Troubled Asset Relief Program

Treasury Agrees to
Participate in Citigroup’s
Proposed Exchange
Offering If Certain
Conditions Are Met

On February 27, 2009, Treasury announced that Citigroup had asked it to
participate in an exchange of preferred shares for common stock so that
the institution could strengthen its capital structure by increasing tangible
common equity. According to Citigroup, this would help remove
uncertainty and help restore confidence in the company. But the
conversion potentially increases risks to the government and taxpayers,
because common stockholders are lower in the ownership structure than
preferred shareholders.16 Terms of the transaction were also announced,
but the exchange offering had not occurred as of March 27, 2009. Treasury
noted that it was willing to participate in Citigroup’s exchange offering on
the following conditions:
•

Treasury would convert its preferred shares only in an amount equal to
the amount of preferred stock converted by other preferred
shareholders and would only participate if at least $11.5 billion in
privately held preferred stock was converted.

•

Up to $25 billion of Treasury’s CPP senior preferred shares would be
converted to common stock in the exchange offering.

•

The $20 billion in Treasury’s preferred shares issued under TIP and the
$4 billion in preferred shares issued under the Asset Guarantee
Program (AGP) to Treasury would be converted into a trust preferred
security of greater seniority that would have the same 8 percent
dividend rate as the existing preferred stock.17

•

Treasury would receive the most favorable terms and price offered
through the exchange offering.

16

Tangible common equity equals shareholder’s equity minus preferred shares minus
intangible assets.
17

FDIC will also receive $3 billion in preferred stock, for a total of $7 billion.

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GAO-09-504 Troubled Asset Relief Program

Treasury’s Recently
Announced Assistance to
AIG Provides an
Opportunity to Encourage
AIG to Renegotiate
Contracts as Appropriate

On March 2, 2009, the Federal Reserve and Treasury announced plans to
restructure and expand AIG’s assistance.18 Under the announced plans,
Treasury is to receive noncumulative preferred stock equal to the sum of
the $40 billion in cumulative preferred stock previously issued to Treasury
on November 25, 2008, plus any accrued and unpaid dividends related to
those shares.19 According to OFS officials, this conversion will not increase
the amount of money the government has invested in AIG but will help
AIG maintain its credit rating, because credit rating agencies generally
weight noncumulative preferred stock as 75 percent equity when
calculating capital, compared with 25 percent for cumulative preferred
stock.20 This change will result in a more favorable treatment of Treasury’s
investment in AIG by the credit rating agencies. In addition, the
restructuring plan creates an equity capital facility that will enable AIG to
issue to Treasury up to $30 billion in new preferred shares that generally
will have the same terms as the planned $40 billion preferred stock
restructuring. The equity capital facility had not been funded as of March
27, 2009, and negotiations are ongoing.
In reviewing government assistance to the private sector in the past, we
found that it was essential to establish mechanisms, structures, and
protections to help ensure prudent use of taxpayer resources and to
manage the government’s risk, consistent with the congressional goals and
objectives of any federal financial assistance program such as SSFI.21
Further, because assistance programs pose significant financial risk to the
federal government, consistent with Treasury’s announced executive
compensation guidelines, appropriate mechanisms are needed to help
protect the government and taxpayers from excessive or unnecessary
risks.

18

See GAO, Federal Financial Assistance: Preliminary Observations on Assistance
Provided to AIG, GAO-09-490T (Washington, D.C.: Mar. 18, 2009) for discussion on the
Federal Reserve’s restructuring of AIG’s debt.
19

Dividends do not accumulate on noncumulative preferred stock.

20

This statement reflects the market’s view that cumulative preferred stock is generally
viewed as more akin to debt than equity.
21

GAO, Troubled Financial Institutions: Solutions to the Thrift Industry Problem
(GAO/GGD-89-47, Feb. 21, 1989), Resolving the Savings and Loan Crisis
(GAO/T-GGD-89-3, Jan. 26, 1989), Guidelines for Rescuing Large Failing Firms and
Municipalities (GAO/GGD-84-34, Mar. 29, 1984), and Commercial Aviation: A Framework
for Considering Federal Financial Assistance (GAO-01-1163T, Sept. 20, 2001).

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There are a number of actions that have been taken in the past that could
be considered as Treasury completes its negotiations with AIG and any
future SSFI recipients. But one in particular—obtaining concessions from
others with an interest in the outcome—seems most relevant in light of
AIG’s recent payment of $165 million in retention bonuses to employees of
its Financial Products division. In past crises, and when asked in
December 2008 about providing assistance to the automakers as part of
the government’s response to the current crisis, we have stated that the
government should require concessions from those with a stake in the
outcome. In AIG’s case, those with such a stake would include
management, employees, derivatives counterparties, and creditors. For
example, concessions could include requiring AIG to seek to renegotiate
existing employee bonus contracts and derivatives contracts, as
appropriate. Consistent with this view, the Treasury Secretary also noted
the need for “strong conditions to protect the taxpayers” when providing
exceptional assistance when he announced the Financial Stability Plan. As
we have stated in the past, the concessions are not meant to extract
penalties for past actions, but to ensure cooperation and flexibility in
securing a successful future outcome. Treasury has an opportunity to
negotiate additional requirements into its latest agreement, including that
AIG seek additional concessions from others for the up to $30 billion in
additional federal assistance. While the purchase of preferred shares in
AIG differs from previous cases of federal assistance, which were usually
loans or loan guarantees, the fundamentals are the same in terms of the
need to protect the government’s interests. If such concessions are not
considered to be in the government’s interest, the reasons should be
clearly articulated and explained.

Treasury Has Taken Steps
to More Clearly Articulate
Its Strategy for Stabilizing
Financial Markets and
Continued to Finalize the
Details

In our January 2009 report, we recommended that Treasury articulate a
clear strategy for TARP. In response to such calls for greater transparency
and a clear strategy, Treasury announced the Financial Stability Plan in
February that outlined a comprehensive set of measures to help address
the financial crisis and restore confidence in our financial markets.
Treasury described the plan as a comprehensive approach designed to
resolve the credit crisis by restarting the flow of credit to consumers and
businesses, strengthening financial institutions, and providing aid to
homeowners and small businesses. The plan established six components:
Capital Assistance Program; Public-Private Investment Fund; Consumer
and Business Lending Initiative; Small Business and Community Lending
Initiative; Affordable Housing Support and Foreclosure Prevention Plan
(Housing Affordability and Modification Plan); and Transparency and
Accountability Agenda.

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GAO-09-504 Troubled Asset Relief Program

The Capital Assistance
Program Has Been Launched

CAP is designed to help ensure that qualified financial institutions have
sufficient capital to withstand severe economic challenges. These
institutions must meet eligibility requirements, which will be substantially
similar to those used for CPP. A key component of CAP is a forwardlooking supervisory assessment (“stress test”) of the 19 largest institutions
(those with risk-weighted assets of $100 billion or more).22 Bank regulators
will use the results of this stress test, along with their specific knowledge
of the institutions’ portfolios and management strategies, to assess
whether they have the capital necessary to continue lending and to absorb
the potential losses that could result from a more severe decline in the
economy than currently projected by professional economic forecasters.
Currently, the 19 largest institutions are undergoing comprehensive stress
tests that are expected to be completed by the end of April 2009.
Regulators will use the stress test results to determine whether the
institutions have enough capital to absorb losses from a severe economic
downturn and continue lending. Institutions that do not will have 6 months
to raise private capital or to access capital through CAP. Institutions with
less than $100 billion in risk-weighted assets do not have to complete a
stress test but are also eligible to obtain capital under CAP. In a process
similar to the one used for CPP, institutions interested in CAP must submit
their CAP applications to their primary banking regulators by May 25,
2009. The regulators are to submit recommendations to Treasury regarding
an applicant’s viability. CAP is currently available only to publicly traded
institutions, but Treasury is developing terms for privately held
institutions, subchapter S-corporations, and mutuals.23
All approved institutions will have 6 months to raise capital from the
private sector, or Treasury will purchase convertible preferred shares to
help the institution absorb losses and raise private capital.24 Any capital
investments made by Treasury under CAP will be managed by a separate
entity—the Financial Stability Trust. Under CAP, an institution can receive
an investment of 1 to 2 percent of its risk-weighted assets. These
institutions can also receive additional capital to redeem senior preferred

22

Risk-weighted assets are the total assets and off balance sheet items held by an institution
that are weighted for risk according to regulation by the Federal Reserve.
23
An S corporation makes a valid election to be taxed under Subchapter S of Chapter 1 of
the Internal Revenue Code and, thus, does not pay any income taxes. Instead, the
corporation’s income or losses are divided among and passed through to its shareholders.
A mutual organization is a company that is owned by its customers, rather than by a
separate group of stockholders. Many thrifts and insurance companies (for example,
Metropolitan and Prudential) are mutuals.
24

These preferred shares will be convertible to common shares.

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GAO-09-504 Troubled Asset Relief Program

shares issued under CPP, enabling them to replace the existing preferred
shares with convertible preferred shares.25 If applicable, the proceeds from
the sale of the convertible preferred also may be used to redeem the
preferred stock sold to Treasury under TIP. Issuance of the convertible
preferred stock to Treasury under CAP is considered Tier 1 regulatory
capital for holding companies and a “qualified equity offering” for CPP
purposes.26 In addition, the issuance of convertible preferred stock in
excess of 1 to 2 percent of the institution’s risk-weighted assets may be
available on a case-by-case basis and will constitute “exceptional
assistance” requiring additional terms and conditions. CAP convertible
preferred stock shares will carry a 9 percent dividend yield that may
increase to 20 percent if the necessary shareholder approvals are not
received by the 6-month anniversary after issuance. Subject to the
approval of the primary bank regulator, such shares can be redeemed at
their face value, plus any accrued and unpaid dividends prior to 2 years.27
These shares are convertible into common stock at a price equal to 90
percent of the average closing price for the 20 trading-day period ending
February 9, 2009.28 The convertible preferred stock mandatorily converts
to common equity after 7 years, and after the mandatory conversion date,
Treasury must make reasonable efforts to sell, on an annual basis, an
amount of common stock equal to at least 20 percent of the amount of
stock owned on the mandatory conversion date.
Under CAP, Treasury will also receive warrants to purchase a number of
shares of common stock of the financial institution equaling 20 percent of
the convertible preferred stock amount on the date of the investment.29 If

25

While the CAP term sheet and application includes TIP participants, according to
Treasury officials, CAP will be limited to CPP participants.

26

Tier 1 capital is the core measure of a bank’s financial strength from a regulator’s point of
view. It is considered the most stable and readily available capital for supporting a bank’s
operations. A “qualified equity offering” under CPP is the sale and issuance of Tier 1
qualifying perpetual preferred stock, common stock, or a combination of such stock for
cash. CPP senior preferred may be redeemed prior to 3 years from the date of investment
only if the proceeds of “qualified equity offerings” results in aggregate gross proceeds to
the financial institutions of not less than 25 percent of the issue price of the senior
preferred.
27

Such shares are redeemable with the proceeds of a cash sale of common stock, provided
that the gross proceeds from the stock sale are at least 25 percent of the CAP convertible
preferred issuance price or additions to retained earnings.
28

This date is one day before the Treasury announced its Financial Stability Plan.

29

The date of the investment is the date that Treasury provides capital assistance to a
financial institution.

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GAO-09-504 Troubled Asset Relief Program

any necessary shareholder approvals are not received, the exercise price
will be reduced by 15 percent of the original exercise price on each 6month anniversary of the issue date of the warrants,30 subject to a
maximum reduction of 45 percent of the original exercise price. Treasury
requires that participants be subject to restrictions on executive
compensation, payment of common stock dividends, repurchase of shares,
and cash acquisitions. Institutions also must comply with Treasury rules,
regulations, and guidance regarding executive compensation,
transparency, accountability, and monitoring, as published and in effect at
the time of the investment closing. In addition, as part of the application
process institutions must submit a plan showing how they intend to use
this capital to support their lending activities and how lending will
increase over what would have been possible without government
assistance. Collecting this information from CAP applicants addresses
concerns we raised in our January report about the need to ensure an
appropriate level of accountability and transparency for those institutions
receiving TARP funds. Participating institutions under CAP will be
required to submit to Treasury monthly reports—similar to those for
CPP—on their lending activities.

Public-Private Partnership
Investment Fund Programs
Have Been Established

On March 23, 2009, the Federal Reserve, FDIC, and Treasury released the
details of the Public-Private Investment Plan. The plan is designed to help
reduce the liquidity discounts currently observed in the prices of legacy
assets—troubled assets on banks’ books—and protect taxpayers by
ensuring that the government is not paying more for assets than their longrun value, as determined by private investors. The plan consists of two key
elements: the Legacy Loans Program and the Legacy Securities Program.
TARP funds will be used to invest alongside private capital on similar
terms, reducing the likelihood taxpayers will be overpaying for assets.
Through an auction process, the Legacy Loans Program will purchase
troubled and illiquid loans and other assets in “substantially sized” pools
from insured banks and thrifts. FDIC and Treasury launched this program
to attract private capital to purchase eligible legacy loans from
participating banks through the provision of FDIC debt guarantees and
Treasury equity co-investment. The funds will have asset managers for
asset management and servicing within parameters established by FDIC
and Treasury and are designed to facilitate buy-and-hold strategies. FDIC

30

If the institution does not have sufficient available authorized shares of common stock to
reserve for the conversion of the convertible preferred and the exercise of the warrants
and stockholder approval is required for issuance, the institution is to call a meeting of its
stockholders to increase the number of authorized shares of common stock.

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GAO-09-504 Troubled Asset Relief Program

will oversee the formation, funding, and operation of the new funds that
will purchase the debt, and private sector investors and Treasury will
provide equity to the funds. The funds will finance their purchases with
FDIC-guaranteed debt. FDIC, in conjunction with participating banks,
Treasury, private investors, and contractors, will administer the auctions
of the asset pools. With input from a third-party valuation firm, FDIC will
establish financing terms and leverage ratios for each fund and disclose
these terms to potential investors as part of the auction process. Banks
that sell the pools get cash and FDIC-guaranteed debt issued by the funds.
Treasury and the private sector investors will share profits and losses in
proportion to their investment; FDIC’s guarantee of the public-private
investment funds’ debt will be secured by the eligible assets purchased by
the funds. FDIC and Treasury will establish governance procedures.
Eligible private investors must be prequalified by FDIC and are expected
to include, but are not limited to, financial institutions, individuals,
publicly managed investment funds, and pension funds. According to an
OFS official, participating banks will initially include the 19 banks that are
undergoing the stress test under CAP. Interested banks are to work with
their primary regulators to identify and evaluate eligible asset pools to be
sold and the corresponding impact on the bank from the sale. Once
potential pools are identified, the banks and regulators are to contact
FDIC. The banks must demonstrate to the satisfaction of Treasury and
FDIC that the contemplated loan pools qualify, based upon Treasury and
FDIC agreed-upon minimum requirements. The goal is to restore
maximum confidence for depositors, creditors, investors, and other
counterparties. OFS officials noted that the program is anticipated to
expand to include other insured institutions not participating in the stress
test.
The Legacy Securities Program consists of two related parts designed to
draw private capital into these markets: first, by providing debt financing
from the Federal Reserve under TALF; second, through Treasury’s
partnering side-by-side with private investors in legacy securities
investment funds. The goal of the Legacy Securities Program is to restart
the market for legacy securities, allowing banks and other financial
institutions to free up capital and stimulate the extension of new credit.
Treasury and FDIC encourage small, veteran-, minority- and womenowned private managers to partner with others that meet minimum
bidding criteria.
Through TALF, nonrecourse loans will be made available to investors to
fund purchases of legacy securitization assets. Eligible assets are expected
to include certain nonagency residential mortgage-backed securities that

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GAO-09-504 Troubled Asset Relief Program

were originally rated Aaa, outstanding commercial mortgage-backed
securities (CMBS), and asset-backed securities (ABS) that are rated Aaa.
Borrowers must meet eligibility criteria. Haircuts—a percentage reduction
of collateral valuation—minimum loan sizes, loan durations, and interest
rates have not been determined for eligible assets.
In the new program that will have Treasury partnering with private fund
managers to support the market for legacy securities, public-private
investment funds raise equity capital from private investors and receive
matching equity funds and leverage from Treasury. The investment
objective of the funds will be to generate attractive returns for both the
Treasury and the private investors, predominantly by following a longterm buy-and-hold strategy, but Treasury will consider other strategies
involving limited trading.
Treasury has published criteria for potential fund managers and is
accepting applications until April 10, 2009. The criteria include a
demonstrable historical track record in the targeted asset classes, a
minimum amount of assets under management in the targeted asset
classes, and detailed structural proposals for the proposed legacy
securities public-private investment fund. Treasury currently expects to
approve approximately five fund managers, although more may be added,
depending on the quality of applications received. Approved fund
managers for the public-private investment funds will raise the private
equity capital and make control decisions, including asset selection,
pricing, liquidation, trading, and disposition. Applicants will have a limited
period of time from preliminary approval to raise at least $500 million in
private capital and demonstrate committed capital before receiving final
approval from Treasury.
Treasury equity capital will be invested on a fully side-by-side basis with
private investors in each public-private investment fund. Moreover,
subject to certain restrictions, fund managers will have the option to
obtain secured nonrecourse loans from Treasury (up to 50 percent of a
fund’s total equity capital), an amount that could rise to 100 percent,
subject to additional restrictions. Treasury debt financing will be secured
by the eligible assets held by the applicable fund. Loans made by Treasury
to any public-private investment fund will accrue interest at an annual rate
to be determined by Treasury and will be payable in full on the date of
termination. As required by the act, Treasury will take warrants, whose
terms and amounts will be determined, in part, on the amount of Treasury
debt financing taken. Additionally, fund managers may charge private
investor fees at their discretion, and Treasury will accept proposals for

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GAO-09-504 Troubled Asset Relief Program

fixed management fees, to apply as a percentage of equity capital
contributions for invested equity capital.

Federal Reserve and Treasury
Launch Consumer and
Business Lending Initiative

This initiative builds on previous efforts of the Federal Reserve and
Treasury to establish TALF, which was announced in November 2008.
TALF is intended to increase the availability of credit for consumers and
businesses. Originally, TALF was set up as a $200 billion program to
support consumer finance securitization markets—specifically, credit
cards, auto loans, student loans, and small business loans—and would be
partially supported by $20 billion in TARP funds. In February 2009, as part
of the Financial Stability Plan, the Federal Reserve and Treasury
announced an expansion of TALF to include increasing the funding size up
to $1 trillion, with Treasury providing up to $100 billion in TARP funds. On
March 19, 2009, the Federal Reserve extended the range of eligible
collateral to include ABS backed by mortgage servicing advances,
business equipment loans or leases, floorplan loans, and leases of business
fleets. The Federal Reserve noted that the objective in expanding TALF
would be to provide additional assistance to financial markets and
institutions to meet the credit needs of households and businesses and
thus, to support overall economic growth in the current period of severe
financial strains.
Under TALF, the Federal Reserve will make nonrecourse loans to certain
holders of Aaa-rated ABS secured by newly and recently originated
consumer and small business loans. These will be 3-year loans, secured by
eligible collateral. Haircuts will be determined based on the level of risk
for each type of eligible collateral and the maturity of the pledged
collateral.
On March 3, 2009, Treasury and Federal Reserve launched TALF. Funding
requests were accepted on March 19, 2009, and on March 25, 2009, the new
securitizations were funded by the program. Since our January 2009
report, the Federal Reserve has released revised terms and conditions for
the facility and revised sets of frequently asked questions. The revisions
include (1) a reduction in the interest rate and collateral haircuts for loans
secured by the Small Business Administration (SBA) or backed by
government-guaranteed student loans; (2) a statement that executive
compensation restrictions will not apply to TALF sponsors, underwriters,
and borrowers as a result of their participation; and (3) a requirement that
participating sponsors certify that the ABS are eligible under TALF and
include an attestation by an independent accounting firm of the securities’
eligibility. TALF fundings will be held monthly and will cease at the end of
2009, unless the Federal Reserve extends the program. As described
previously, on March 23, 2009, Treasury and the Federal Reserve

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GAO-09-504 Troubled Asset Relief Program

announced that TALF would be broadened to include certain legacy
securities.

Small Business and Community
Lending Facility Was Rolled
Into TALF

Treasury announced that, working together with the Federal Reserve, it
would establish a lending facility to increase lending in the secondary
markets, reduce borrowing costs, and unfreeze the credit markets to get
credit flowing again to small businesses and consumers. Originally, this
lending facility was to be structured like TALF—Treasury providing
capital and the Federal Reserve providing financing—but, instead, it was
rolled into TALF. Treasury also announced that it would commit up to $15
billion to purchase securities backed by the guaranteed portion of loans
made under SBA’s 7(a) and the first-lien mortgages of the 504 Community
Development Loan Program.31 In addition to these activities under TARP,
SBA will take several steps to make it easier for small businesses to obtain
credit from community and large banks, including increasing the federally
guaranteed portion of loans, eliminating or reducing fees for SBA loans,
and expediting approval of loans.

A Mortgage Modification
Program Has Been Announced,
but Significant Program
Components and Controls Are
under Development

On March 4, 2009, Treasury unveiled the structure and key components of
its Making Home Affordable program. One of its components—the Home
Affordable Modification Program (HAMP)—will use $50 billion in TARP
funds to modify mortgages. According to OFS officials, Fannie Mae and
Freddie Mac will provide an additional $25 billion, for a total of $75 billion,
to help up to 3 million to 4 million homeowners avoid potential
foreclosure.32 The goal of modifying these mortgages is to reduce
participants’ monthly mortgage payments to affordable levels (a mortgage
debt-to-income ratio of 31 percent).33 Treasury will share the cost of
restructuring the mortgages with lenders (if financial institutions hold the

31
SBA’s 7(a) program guarantees loans made by commercial lenders—mostly banks—to
small businesses for working capital and other general purposes. The guarantee assures the
lender that if a borrower defaults on a loan, the lender will receive an agreed-upon portion
(generally between 50 percent and 85 percent) of the outstanding balance. The 504
program provides long-term, fixed-rate financing for major fixed assets, such as land and
buildings, through a loan backed by an SBA-guaranteed debenture from a community
development company. These purchases will include securities packaged on or after July 1,
2008.
32
According to Treasury officials, TARP funds will be used to modify mortgages that
financial institutions own and hold in their portfolios (whole loans) and private-label
securitized loans (loans not insured or guaranteed by Fannie Mae, Freddie Mac, HUD’s
FHA, the Department of Veterans Affairs, and rural housing loans).
33
Treasury’s HAMP guidelines, issued on March 4, 2009, specify the use of a ratio of
principal, interest, taxes, insurance, and any association fees to monthly gross income for
the debt-to-income calculation.

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whole loans) or investors (if the loans have been securitized). The lender
or investor must first reduce the borrower’s monthly mortgage payment
down to 38 percent of income. For these mortgages, Treasury will then
match further reductions on a dollar-for-dollar basis down to the target of
31 percent. For eligible loans where the borrower’s monthly mortgage
payment is already below 38 percent, Treasury matches reductions in
mortgage payments from the borrower’s current monthly payment.
According to Treasury, loan servicers could begin modifying mortgages
consistent with HAMP guidelines as of March 4, 2009. However, Treasury
will not make payments under HAMP until it has executed contracts,
which are currently in draft form, with the servicers. Treasury has
announced a series of financial incentives for loan servicers, mortgage
holders/investors, and borrowers that are intended to encourage servicers
to modify loans, borrowers to continue paying on time under the modified
loans, and servicers and mortgage holders/investors to modify at-risk loans
before borrowers miss payments. Within OFS, the Office of
Homeownership Preservation is responsible for administering HAMP and
is led by a new interim chief. The structure and initial hiring for this office
are in progress, and its efforts are supported by other personnel within
OFS and Treasury. The Making Home Affordable program also includes a
non-TARP funded initiative to help up to 4 million to 5 million
homeowners refinance loans owned or guaranteed by Freddie Mac and
Fannie Mae at current market rates. According to Treasury, this initiative
could help homeowners save thousands of dollars in annual mortgage
payments.
Treasury worked with other agencies to estimate the cost and number of
borrowers who would be eligible for loan modifications under HAMP and
to design program parameters. Treasury stated that it used data from
commercial vendors, Fannie Mae, and Freddie Mac to estimate the
potential universe of homeowners who were in default or likely to be in
imminent danger of default from April 2009 to March 2012 and the number
of homeowners eligible and likely to participate in HAMP during the
program’s 3-year application period. Treasury then estimated the cost of
the key parameters of HAMP, including the monthly payment subsidy,
incentive payments, and other payments—for example, payments to
homeowners for signing over deeds instead of going through foreclosure
proceedings, and payments to lenders for eliminating second liens for
HAMP participants. According to Treasury officials, HAMP parameters
were designed to provide incentives to servicers, investors, and borrowers
to modify mortgage payments quickly and efficiently without using
government funds to pay for modifications that servicers would already
complete without government assistance. Treasury officials told us that
the principal goal of HAMP was to get mortgage payments to an affordable

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GAO-09-504 Troubled Asset Relief Program

level and avoid foreclosures. Treasury officials said that they recognized
that, for some borrowers, an affordable mortgage payment was not the
only concern and that negative equity was also an issue.34 Treasury’s
HAMP guidelines allow servicers to reduce the amount of mortgage
principal, in addition to reducing interest rates to reach an affordable
payment. To reach borrowers, Treasury launched its Making Home
Affordable Web site on March 19, 2009, that, among other things, provides
program, eligibility, and housing counseling information.35
As we have previously stated, some of the challenges that loan
modification programs face include making transparent to investors the
analysis supporting the value of modification over foreclosure, designing
the program to limit the likelihood of redefault, and ensuring that the
program does not encourage borrowers who otherwise would not default
to fall behind on their mortgage payments. Treasury pointed to a number
of HAMP features designed to address these challenges. According to
Treasury, requiring the use of a standardized net present value test will
provide greater transparency to investors about the value of modification
over foreclosure. Treasury officials stated that HAMP contained features
designed to limit the likelihood of redefault, including a 90-day trial
modification period, the reduced monthly payment, and incentives to keep
borrowers current on their modified loan payments. Treasury stated that
the likelihood that performing borrowers would intentionally default on
their mortgages to access HAMP (e.g., moral hazard) was limited. For
instance, servicers are required to obtain information on borrowers’
current income to verify that the debt-to-income ratio without loan
modification is greater than 31 percent, and borrowers must also represent
and warrant that they do not have sufficient liquid assets to make their
monthly mortgage payments. To reduce adverse selection (the risk that
servicers would selectively choose loans for HAMP), Treasury requires
that servicers consider all the loans that they service for participation in its
loan modification program, unless prohibited by the rules of the applicable
servicing agreements. Treasury has begun developing a data reporting
system that will be used, among other things, to monitor servicers’
compliance with HAMP requirements, as well as the performance of loans
that have been modified.

34

Having negative equity or being “under water” means that the current market value of the
home is less than the outstanding mortgage balance.

35

See http://makinghomeaffordable.gov/.

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GAO-09-504 Troubled Asset Relief Program

While the basic structure of HAMP has been announced, Treasury has not
specified several critical components—including a system of internal
control over TARP funds used for loan modification—as of March 23,
2009.36 Treasury officials said that they plan to have a system of internal
control in place when the first payments are due to servicers. As we noted
in our first TARP report, the absence of appropriate internal control
heightens the risk that the interests of the government and taxpayers may
not be adequately protected and that the program objectives may not be
achieved in an efficient and effective manner.37 Treasury’s loan
modification proposal calls for payments to be made to offset probable
losses from home price declines in the event of failed modifications.
However, Treasury officials told us that the specifics of how this HAMP
feature would work were still being developed as of March 20, 2009.
Additionally, incentive payments to servicers and mortgage
holders/investors to offer alternatives to foreclosure to homeowners who
fail to qualify for or default under HAMP had not been specified as of
March 20, 2009. Treasury has selected Fannie Mae to administer, maintain
records for, and serve as the paying agent for its homeowner assistance
programs, including HAMP, and Freddie Mac as the compliance agent to
oversee servicers’ modifications. Fannie Mae’s responsibilities include
developing and implementing a marketing plan, call center for borrowers,
standard agreements with servicers, standardized modification
documentation, modification reporting systems, processes for servicer
data reporting and collection of data, and fraud monitoring and detection.
Freddie Mac’s compliance responsibilities include conducting
examinations, reviewing servicer compliance with HAMP’s published
rules, and reporting the results of the examinations to Treasury. According
to representatives of Fannie Mae and Freddie Mac, the governmentsponsored enterprises (GSE) are establishing separate internal
organizations and firewalls, as well as appropriate procedures and
controls—all of which must be approved by Treasury—to avoid conflicts
of interest in carrying out their compliance responsibilities. We will
continue to monitor the design and implementation of this program, with a
particular focus on the empirical basis for HAMP and the structure and
effectiveness of its internal control system.

36
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved: effectiveness and
efficiency of operations, reliability of financial reporting, and compliance with applicable
laws and regulations. Internal control comprises the plans, methods, and procedures used
to meet missions, goals, and objectives. See GAO, Standards for Internal Control in the
Federal Government, GAO/AIMD-00.21.3.1 (Washington, D.C.: November 1999).
37

GAO-09-161.

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GAO-09-504 Troubled Asset Relief Program

New Framework of Corporate
Governance, Oversight, and
Transparency

In response to concerns raised by Congress, GAO, and, subsequently, COP
and the SIGTARP about oversight, the Financial Stability Plan also calls
for a new transparency and accountability agenda that is to consist of a
framework of corporate governance and oversight to help ensure that
banks receiving government funds are held responsible for the appropriate
use of those funds through stronger requirements on acquisitions,
dividend payments, executive compensation, and enhanced public
reporting including reporting on lending activity. The new standards apply
to future participants and are not retroactive.

TARP Has Received
Approximately $2.9 Billion
in Dividend Payments,
Representing About 80
Percent of Possible
Dividends

TARP had received approximately $2.9 billion in dividend payments
through March 20, 2009. But dividends were not declared and not paid to
Treasury for $733 million of cumulative dividends from AIG under the
SSFI program and about $150,000 of noncumulative dividends from eight
institutions under CPP. The undeclared dividends, approximately 20
percent of possible dividends during the period, were identified by TARP
through a process that it implemented to identify possible dividends and
determine whether they were declared and received when due.
The approximately $2.9 billion TARP received in dividends related to
shares of preferred stock were acquired through CPP, TIP, AIFP, and AGP.
Treasury’s agreements under these programs entitled it to receive dividend
payments on varying terms and at varying rates.38 Table 3 summarizes the
dividends received and those not declared and not paid under each
program.

38

For example, according to the CPP terms for publicly held institutions, participating
institutions pay quarterly dividends at a rate of 5 percent per year for the first 5 years on
the initial preferred shares acquired by Treasury. After the first 5 years, the preferred
shares pay dividends quarterly at a rate of 9 percent per year. Any preferred shares
acquired through Treasury’s exercise of warrants pay quarterly dividends at a rate of 9
percent per year.

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GAO-09-504 Troubled Asset Relief Program

Table 3: TARP Dividends through March 20, 2009
Dollars in thousands
Dividend
payments
received

Cumulative
dividends not
declared and
not paid

Noncumulative
dividends not
declared and
not paid

$2,473,019

-

$150

Targeted Investment Program

328,889

-

-

Automotive Industry Financing
Program

53,986

-

-

Asset Guarantee Program

26,893

-

-

-

$733,333

a

-

$2,882,787

$733,333

$150

Program
Capital Purchase Program

Systemically Significant Failing
Institutions Program
Total
Source: Treasury OFS, unaudited.
a

The AIG Board of Directors did not declare a dividend for the February 1, 2009, dividend payment
date. However, the dividends are cumulative, and Treasury has announced plans to restructure and
expand AIG’s assistance. Under the announced plans, Treasury is to receive noncumulative
preferred stock equal to the sum of the $40 billion in cumulative preferred stock previously issued to
Treasury on November 25, 2008, plus any accrued and unpaid dividends related to those shares.

For the above-listed programs, the dividend payments to Treasury are
contingent on each institution declaring dividends. Generally, in the event
that an institution does not declare a dividend for cumulative preferred
stock during the dividend period, the unpaid dividends accumulate, and
the institution must pay the cumulative accrued dividends before making
dividend payments to other classes of shareholders. But if the institution
does not declare a dividend for noncumulative preferred stock during the
dividend period, the noncumulative preferred shareholders generally have
no right to receive any dividend for the period, and the issuer has no
obligation to pay a dividend for the period, whether or not dividends are
declared for any subsequent dividend period.
Treasury did not receive all possible dividend payments under two
programs. First, the sole participant in SSFI—AIG—notified Treasury that
the board of directors did not declare a dividend of approximately $733
million for the February 1, 2009, dividend payment date. The agreement
detailing the terms of Treasury’s November 25, 2008, $40 billion
investment in AIG’s senior preferred stock states that dividends will be
payable at an annual rate of 10 percent when and if declared by the AIG
Board of Directors. Under this agreement, accrued but unpaid dividends
compound quarterly. The agreement further states that if dividends on the
senior preferred stock are not paid in full for four dividend periods,

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GAO-09-504 Troubled Asset Relief Program

whether or not consecutive, the senior preferred stockholders have the
right to appoint at least two directors to the board. As discussed earlier in
our report, on March 2, 2009, the Federal Reserve and Treasury announced
plans to restructure and expand AIG’s assistance. Under the announced
plans, Treasury is to receive noncumulative preferred stock equal to the
sum of the $40 billion in cumulative preferred stock previously issued to
Treasury on November 25, 2008, plus any accrued and unpaid dividends
related to those shares.
Second, Treasury did not receive approximately $150,000 in possible
noncumulative dividends related to eight CPP participants. According to
Treasury officials, these eight banks informed Treasury that they lacked
the necessary regulatory or shareholder approvals to declare dividends on
their preferred stock. Federal banking laws and regulations include
minimum capital requirements and limitations on the use of capital to pay
dividends.39 In addition, some state laws impose similar limitations and
require shareholder approval for certain reductions of capital.40
OFS officials told us they consulted with Treasury’s Office of the General
Counsel to address these CPP dividends that were not declared. Since the
$150,000 in undeclared dividends are noncumulative and were not
declared during the dividend period, these institutions are not obligated to
pay, and Treasury has no right to receive the dividends for the period.
According to the standard terms of CPP, after six nonpayments by a CPP
institution (whether or not consecutive), Treasury and other holders of
preferred securities equivalent to Treasury’s can exercise their right to
appoint two members to the board of directors for that institution at the
institution’s first annual meeting of stockholders subsequent to the sixth
nonpayment. Although OFS indicated that they were aware of the dividend
restrictions for certain banks, Treasury officials told us that Treasury had
not directly suggested to any institution that it seek the approvals
necessary to declare dividends. These officials said that they had
contacted all eight banks regarding the undeclared dividends. Six of the
eight banks that did not declare dividends have formally communicated to
Treasury their intentions to seek necessary approvals for future dividend
payments.

39

For example, see 12 U.S.C. §§ 59 (national banks) and 1831o (FDIC insured banks) and
12 C.F.R. § 208.5(d).
40

For example, see the State of California’s Financial Code, Section 644.

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GAO-09-504 Troubled Asset Relief Program

As part of our audit work, we noted that Treasury has not report to the
Congress and the public the amount of dividends received or other
receipts from TARP participants. Disclosing amounts received by Treasury
from these participants would improve the overall transparency of TARP.
By not sharing this information, Treasury is missing an opportunity to
provide information about the return it is receiving on its investments.
Treasury officials acknowledged the benefits of such disclosures and have
agreed to consider establishing a mechanism for publicly reporting monies
received under TARP, such as dividends.

OFS Has Yet to Develop an
Integrated Communication
Strategy for TARP

Treasury has taken a number of steps to address the ongoing crisis,
creating new programs, and expanding existing initiatives. However,
Treasury continues to be hampered with questions about TARP and what
it is doing, which raises questions about the effectiveness of its existing
communication strategy. The Financial Stability Plan represents an
important step in clarifying Treasury’s strategy for addressing the financial
and housing crisis using its authorities under TARP, consistent with our
January 2009 recommendation. But Treasury’s strategy has otherwise
largely been one of posting information to its Web site, issuing press
releases, speeches, testimonies, and engaging in ad hoc outreach to
Congress, and it continues to face ongoing communication challenges. The
complexity of the issues involved and the heightened public scrutiny make
an effective communication strategy critical going forward. Treasury has
yet to develop a communication strategy for regularly and routinely
communicating its activities to relevant congressional committees,
members, the public, and other critical stakeholders. An effective
communication strategy may consist of any number of elements, such as
building understanding and support for the program (regular and routine
outreach, including confidential member briefings), integrating
communications and operations (making communication integral to the
program), and increasing the impact of communication tools (print and
video). Without a mechanism for regular and ongoing dialogue about plans
for the program and its progress, TARP continues to be poorly understood
by Congress and the public. If a communication strategy that includes
regular and routine communication with Congress is not established, any
request for additional funding, as contemplated in the President’s budget,
could be severely hampered.

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GAO-09-504 Troubled Asset Relief Program

Treasury Continues to
Make Progress in
Establishing OFS

Since our January 2009 report, Treasury has made progress in its hiring
efforts and now has a more stable workforce. Previously, we
recommended that Treasury expedite hiring to ensure that OFS had the
personnel it needed to administer TARP.41 Since our last report, Treasury
has continued to use a variety of hiring mechanisms to bring staff on board
to carry out and oversee TARP, including direct-hire authority, merit
promotion appointments, limited-term Senior Executive Service (SES)
appointments, and reassignments.42 As of March 20, 2009, OFS had 113
total staff, with the number of permanent staff increasing substantially—
from 38 to 77—since our last report and the number of detailees
decreasing from 52 to 36 (see fig. 2). Treasury anticipates that OFS will
need 196 full-time employees to operate at full capacity, an increase of 65
from its January 2009 estimate of 131.

41

GAO-09-161.

42

Under authorization by OPM, agencies may make appointments for positions that are not
of a confidential or policy-determining character, not in the SES, and not practical to
examine. These are referred to as Schedule A appointments and are exempt from the
examination requirements typically required for competitive service positions. Although
Treasury has not used Schedule A authority since our last report, it anticipates doing so in
the future. See 5 C.F.R. §§ 213.3101-3102.

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GAO-09-504 Troubled Asset Relief Program

Figure 2: Number of Permanent Staff and Detailees, November 2008 through March
2009
Number of employees
120

113
36

100
90
52
80
77
60
48
40

43
38

20

0

5
Nov. 21,
2008

Jan. 26,
2009

Mar. 16,
2009

Staff detailed to OFS from other areas of Treasury and other federal agencies (temporary)
Permanent staff (included limited-term appointments)
Source: GAO analysis of Treasury data.

Of the permanent staff currently working in OFS, 50 have come from other
parts of Treasury and the federal government and 27 from the private
sector. In addition, detailees from several Treasury and non-Treasury
offices, bureaus, and agencies currently support OFS (see table 4). As
discussed later in this report, OFS also obtains services from financial
agents and contractors to provide a variety of services in support of TARP
programs.

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Table 4: Agencies Detailing Federal Employees to the Office of Financial Stability
Treasury Departmental Offices and Bureaus

Number of employees

Alcohol and Tobacco Tax and Trade Bureau

1

Bureau of Public Debt

2

Community Development Financial Institution Fund

1

Internal Revenue Service

4

Office of the Comptroller of the Currency

1

Office of Thrift Supervision

3

Treasury Departmental Offices

4

Total Treasury

16

Non-Treasury Departments and Agencies
Department of Housing and Urban Development

3

Department of State

1

Export-Import Bank

1

Federal Deposit Insurance Corporation

2

Board of Governors of the Federal Reserve System
Securities and Exchange Commission

10
3

Total Non-Treasury

20

Source: Treasury data, as of March 12, 2009.

In prior work, we stated that it was important for agencies developing a
workforce planning strategy to implement all of the appropriate
administrative authorities to build and maintain the workforce needed for
the future.43 According to Treasury, as of March 20, 2009, 12 detailees had
been converted to permanent staff. Treasury expects that permanent staff
will be largely tasked with long-term responsibilities, but as the TARP
strategy continues to develop, detailees will continue to play a critical role
in supporting the flexibility of OFS operations. Having a mix of detailees,
permanent staff, and financial agents and contractors on board helps
ensure that OFS can fulfill its short- and long-term organizational needs.
Treasury may use detailees to perform long-term tasks when no
permanent staff are available or when Treasury expects the work to wind
down. For example, Treasury arranged for detailees to review financial
institution applications for CPP and CAP.

43

GAO, Human Capital: Key Principles for Effective Strategic Workforce Planning,
GAO-04-39 (Washington, D.C.: Dec. 2, 2003).

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Recent changes to OFS’s organizational structure have affected Treasury’s
efforts to identify its short- and long-term organizational needs and,
therefore, engage in more formal workforce planning efforts. Following
the transition to the new administration and pursuant to the introduction
of new initiatives under its Financial Stability Plan, Treasury consolidated
OFS’s chief risk and chief compliance offices into a single functional area,
the Office of the Chief Risk and Compliance Officer. Treasury said that it
consolidated these functions in order to reduce unnecessary duplication,
as the offices shared some responsibilities and performed some of the
same tasks.
Treasury said that it planned to start formal workforce planning efforts
soon, given that the organizational structure had been more clearly
defined and the new administration had articulated further details of its
Financial Stability Plan. In preparation, OFS has updated descriptions of
its various functional areas (e.g., Office of the Chief Financial Officer and
Office of the Chief Risk and Compliance Officer) to better assess the skills
and abilities needed by the organization. Treasury also has prepared a
draft workforce planning document and anticipates conducting bimonthly
reviews of OFS’s workforce operations, during which the Office of the
Chief Operating Officer will consider, among other things, organizational
hierarchies and position classifications; short-, medium- and long-range
business requirements; and skills gaps within OFS.
While Treasury has not documented information on qualified candidates’
reasons for declining offers of employment at OFS, Treasury said that, as
mentioned in our last report, compensation and conflict-of-interest issues
continued to affect their ability to recruit individuals with the appropriate
backgrounds, experience, and skills to administer TARP.44 In our ongoing
monitoring, we plan to review more detailed information on Treasury’s
efforts to (1) fill gaps in critical skills and abilities within the organization
and (2) address conflicts of interest that may be relevant to current OFS
employees and any steps taken to mitigate such conflicts. We will discuss
the findings resulting from this analysis and Treasury’s progress in OFS
workforce planning in future reports.

44

GAO-09-296.

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Treasury Has Made
Additional Progress In
Managing Contractor
Support and Addressing
Conflicts Of Interest

Since our January 2009 report, Treasury has awarded seven new contracts
and two new financial agency agreements, bringing to 25 the total number
of TARP financial agency agreements, contracts, and blanket purchase
agreements as of March 13, 2009. Four new contracts are for a variety of
legal services; others are for management consulting, document
production, and program support services; and the two new financial
agency agreements are to support the new homeownership preservation
program.45 Of these new contracts, one is with a woman-owned small
business. In addition, Treasury issued a new task order, valued at
approximately $5 million, to the internal control services contractor for
expanded OFS support.46 For detailed status information on new, ongoing,
and completed Treasury contracts and financial agency agreements, as of
March 13, see our e-Supplement at http://www.gao.gov/cgibin/getrpt?GAO-09-522SP.47
As of March 13, 2009, legal services contractors and financial agents
accounted for two-thirds of the 18 service providers directly supporting
OFS’s administration of TARP, as shown in figure 3. As of the same date,
Treasury had expended about $12 million for actions related to contractsand financial agency agreements. The largest share of the total (39
percent) was for financial services with one financial agent (Bank of New
York Mellon) while the second largest share (35 percent) was for legal
services divided among four law firms (fig. 3).

45

In addition, Treasury issued a delivery order to a small business for office equipment.
Treasury awarded another financial agency agreement on March 16, 2009, designating
EARNEST Partners as the asset manager for the small business assistance program.
EARNEST is a minority-owned firm. We will provide additional details on this agreement
in our next report.

46

Treasury also modified several other existing task orders to obligate more funds and
extend the performance periods.

47

GAO-09-522SP.

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GAO-09-504 Troubled Asset Relief Program

Figure 3: Number of and Expenses for OFS Financial Agency Agreements, Contracts, and Blanket Purchase Agreements, as
of March 13, 2009
Number of contracts

Expenses

$801,298

1

5.6%
5.6%
11.1%
50.0%
11.1%

16.7%

1

0.5%

7%

2

$59,052

19%

35%

$2,227,461

0.07%

2

$8,096

3

39%

9

$4,622,926

$4,099,625
Investment/advisory services
Human resource services
Accounting/internal control services
Miscellaneous program support
Financial agency services
Legal services

Source: GAO analysis of Treasury data.

Note: This figure reflects 18 contracts and financial agency agreements that directly support OFS’s
administration of TARP; it does not reflect one contract for management consulting services. It also
does not reflect contracts for, among other things, property leases, a human resources
advertisement, and the purchase of office equipment.

Budget officials in OFS’s Office of the Chief Financial Officer told us that
they anticipated modest increases in the volume and cost of TARP
contract and financial agency agreement activity for the remainder of
fiscal year 2009. Overall, Treasury has budgeted about $175 million to
cover anticipated OFS costs in fiscal year 2009 for the use of contractors
and financial agents, as well as for OFS interagency agreement obligations
to pay, among other things, personnel costs of employees detailed from
other agencies.

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OFS Relies on Contractors and
Financial Agents to Help
Implement TARP

As discussed in the previous section on OFS’s hiring status, a key factor in
Treasury’s ongoing efforts to quickly establish the new organization to
operate and administer TARP was the use of a mix of private contractors
and financial agents to fill short- and long-term needs. OFS relies on this
private sector workforce to help implement TARP. According to OFS
preliminary data, about 30 percent of the employees of TARP contractors
and financial agents are on site at Treasury working with OFS employees
in various program offices, primarily to perform accounting services and
support human resources, and temporary documentation activities. The
remaining 70 percent work off site at their respective offices.
OFS officials responsible for several aspects of TARP, including asset
management and legal services support of CPP and AIFP, noted that TARP
contractors and financial agents play important roles in the administration
and operations of these programs. In discussing the roles of contractors
and financial agents in TARP operations and administration, OFS program
managers we spoke with generally characterized contractors’ involvement
as providing technical and operational input into program execution.
Table 5 provides a summary of the types of services provided, based on
our analysis of selected TARP contracts and a financial agency agreement.
Table 5: Services and Support Tasks Provided by Selected TARP Contractors and a
Financial Agent
TARP contractor or
financial agent
Types of services provided
Ennis Knupp and
Associates

Page 37

This investment advisory firm assists OFS program offices with
the evaluation of potential CPP asset manager proposals by:
•
designing asset manager compensation plans and
investment policies for the request for proposals,
•
developing evaluation criteria,
•
providing a structured analysis of proposal submissions,
•
supporting follow-up interviews, and
•
evaluating potential asset manager conflicts of interest.

GAO-09-504 Troubled Asset Relief Program

TARP contractor or
financial agent
Types of services provided
Bank of New York
Mellon

As custodian for the TARP program, this financial agent conducts
the necessary tasks to complete weekly closings of CPP deals
negotiated by the OFS program office, including:
•
taking possession of certificates,
•
monitoring CPP assets,
•
tracking receipt of dividends,
•
maintaining storage of all CPP documentation, and
•
generating reports to track CPP closings and dividend
payments.
Bank of New York Mellon also provides expert advice to OFS
program offices regarding the feasibility and structure of new
TARP programs, for example, preparing various analyses on the
potential performance of asset-backed securities for TALF.

Cadwalader,
Wickhersham & Taft
LLP

This firm provides a range of legal advisory and support services
to OFS’s chief counsel and program offices on the AIFP by:
•
producing memos and discussing legal options, and
•
providing advice and expertise on bankruptcies and
restructurings.

Source: GAO analysis of Treasury information.

OFS officials told us that the use of contractors and financial agents for
the above professional services was critically important given the
technical nature of the tasks, the need for expertise, and the speed with
which OFS must act regarding TARP. OFS officials believe they retain
control over the direction of TARP and have sufficient management
oversight of the advice and assistance provided by TARP contractors and
financial agents.48 For example, an OFS program manager noted that the
advice provided by the Bank of New York Mellon did not equate to a
policy decision but rather supported OFS officials’ development and
execution of policy decisions.

48
We have previously reported that contractor services that include expert advice, opinions,
and other types of consulting require an enhanced degree of management oversight to
ensure that agency officials retain control over and remain accountable for policy decisions
that may be based, in part, on a contractor’s performance and work products. See GAO,
Department of Homeland Security: Improved Assessment and Oversight Needed to
Manage Risk of Contracting for Selected Services, GAO-07-990 (Washington, D.C.: Sept. 17,
2007).

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OFS Has Made Progress in
Strengthening Oversight of
Contractors and Financial
Agents

In response to the recommendation in our January 2009 report that
Treasury improve its oversight of contractors, Treasury has taken steps to
help ensure that sufficient personnel are assigned to facilitate effective
management and oversight of TARP contracts and financial agency
agreements. As shown in table 6, except for one key position that is to be
filled as Treasury enters into financial agency agreements for asset
managers, key contract staffing positions were filled through new hiring
and reassignment actions.

Table 6: Key Positions for TARP Oversight of Contracts and Financial Agency Agreements, as of March 2009
Position

Office

How Filled

Oversight role

Contract Administration Manager

Chief Operating Officer,
OFS

New Hire

Oversees long-range requirements planning;
improves management practices; provides
leadership and guidance to OFS staff
overseeing contractors and financial agents

Director for Financial Agents

Chief Investment Officer,
OFS

Reassignment

Supervises Custodian/Infrastructure
Program Manager and Manager of Asset
Managers

Custodian/Infrastructure Program
Manager

Chief Investment Officer,
OFS

Reassignment

Supervises Vendor Managers

Manager of Asset Managers

Chief Investment Officer,
OFS

Pendinga

Supervises Vendor Managers

Vendor Manager

Chief Investment Officer,
OFS

New Hire

Manages Financial Agents

Chief, Programs Branch

Procurement Services
Division, Treasury

New Hire

Provides full-time procurement support to
OFS

TARP Team Lead

Procurement Services
Division, Treasury

New Hire

Provides full-time procurement support to
OFS

Source: GAO analysis of Treasury information.
a

This role is currently being filled by the Custodian/Infrastructure Program Manager.

OFS also made progress responding to our recommendation to help
ensure that staff were appropriately trained to oversee contractors’
technical performance. In particular, it made progress on certifications
and formal training for OFS’s roster of Contracting Officers’ Technical
Representatives (COTR). OFS has now replaced all the executive-level
COTRs who earlier had been assigned COTR responsibilities without
receiving requisite formal training and certifications in their acquisitionrelated responsibilities. Consistent with Treasury’s internal guidance and
our prior recommendation, OFS ensured that the replacement COTRs
received the appropriate formal training and certification.

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Given the constantly evolving and financially complex TARP program
requirements, we reviewed OFS’s technical oversight of contractors’
performance. We found that OFS exercises oversight consistent with good
practices we have identified when using contractors for more complex
professional services.49 Specifically, information discussed with COTRs,
OFS program officials, and senior contractor officials responsible for three
key TARP areas demonstrated that an interactive working environment
exists between OFS and its TARP contractors and financial agents. For
example, OFS officials, as well as Bank of New York Mellon managers,
told us that they talk daily, and often many times a day, regarding the
execution of the end-of-week closings on capital investments through
CPP—a complex undertaking that involves many transactions that can
total in the billions of dollars.50 According to Treasury officials, this level of
interaction provides frequent opportunities for oversight and helps them
to ensure that their needs are met.
Since January 2009, the Office of the Chief Operating Officer has hired an
executive-level contract administration manager, another action
responsive to and consistent with our prior recommendation.51 His job, in
part, is to apply contract management best practices to TARP contracts
and financial agency agreements, and provide leadership and guidance to
COTRs and financial agent managers. Based on information we reviewed
from the contract administration manager, as well as COTRs and financial
agent managers in three program offices, these efforts should better

49

GAO-07-990 and GAO, Highlights of a GAO Forum: Federal Acquisition Challenges and
Opportunities in the 21st Century, GAO-07-45SP (Washington, D.C.: Oct. 6, 2006).
50

Other examples concern OFS’s investment advisory contractor and a legal services
contractor. According to the Office of the Chief Investment Officer’s COTR and Ennis
Knupp’s Chief Executive Officer, communications is primarily by phone two to three times
per week and sometimes several times per day. These frequent phone conferences are to
discuss upcoming contract support tasks to follow up questions on completed assignments,
or to review and resolve matters concerning emerging organizational or personal conflicts
of interest. On Cadwalader, Wickersham, and Taft’s legal services contract to support OFS,
the Chief Counsel’s COTR and the law firm’s leading partner for the contract interact
frequently with each other through document sharing, e-mail exchange, teleconferences,
and in-person meetings in order to submit the contracted legal advice concerning the
structure of the TARP automotive industry program.
51

A mid-March update to OFS’s organization chart indicates additional staffing to support
the contract administration manager position, including government positions for
procurement, program, and reports analysts and an acquisition program manager.

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GAO-09-504 Troubled Asset Relief Program

position OFS to strengthen contract management.52 Other OFS actions to
facilitate the oversight of TARP contractor and financial agent
performance are listed in table 7.
Table 7: OFS Actions Since January 2009 to Enhance Oversight of TARP Contractors’ and Financial Agents’ Performance
Action

Purpose

Status

Contracting Agreement Review
Board

Treasury and OFS executive-level group meets monthly and as needed to
review TARP contractors’ and financial agents’ performance and to
examine issues with planned TARP acquisitions.

Implemented

COTR online filing system

Standardizes and centralizes in a data repository key COTR recordkeeping In development
requirements, including contractors’ and financial agents’ invoices;
correspondence with contractors; and documentation of TARP contractors’
and financial agents’ conflict-of-interest issues. This system is intended to
enhance collaboration across OFS offices and assist in the transfer of
records between COTR appointment transitions.

COTR roundtable

Weekly discussions with all TARP COTRs led by OFS and Treasury
contract and procurement services managers. The roundtable provides an
opportunity for COTRs to discuss oversight issues they experience across
all TARP contracts and financial agency agreements.

Implemented

Supplemental COTR training

Annual refresher training program intended to supplement the formal
training and certification required prior to COTR appointment. OFS Office
of the Chief Operating Officer plans to initiate this annual training to further
enhance skills development for COTRs assigned to TARP contracts and
financial agency agreements.

Planned

Outside expert speaker series

Planned
OFS’s Contract Administration Manager plans to bring in outside,
executive-level experts from government, the private sector, and academia
to discuss lessons learned working in high-profile environments with
COTRs and other OFS staff responsible for TARP programs.
Source: GAO analysis of Treasury information.

Finally, in response to and consistent with our recommendation, Treasury
has made further progress in using fixed-price contracting arrangements
when the parties possess sufficient knowledge of the requirements.
Although Treasury has awarded new time-and-materials contracts since
January, it also converted work under two time-and-materials task orders
for legal services to fixed-price arrangements after determining that there
were clearly defined requirements (i.e., transactional legal services for
which the parties could estimate accurately the level of performance

52

These latest actions build on earlier practices put in place as of January, such as the biweekly Contract Management Reporting Forms submitted by COTRs to track cost,
schedule, and performance of contracts and financial agency agreements awarded under
TARP.

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GAO-09-504 Troubled Asset Relief Program

required).53 In addition, in response to GAO’s recommendation, Treasury
negotiated a firm fixed price for two workstreams making up about 20
percent of the new $5 million task order for internal control services
performed by a contractor. Treasury and OFS officials have worked
closely to analyze the use of time-and-materials arrangements for followon requirements to ensure such arrangements are only used when other
contract types are not suitable. Treasury officials said that their reviews
indicate that, given the nature of the services OFS is procuring,
opportunities may be limited for the foreseeable future to use fixed-price
mechanisms when placing orders for follow-on work or awarding future
contracts.54 According to these officials, fixed-price arrangements may not
be appropriate for many TARP contracts. Considering the still-evolving
nature of TARP’s requirements, the ability of the parties to accurately
anticipate the performance requirements and estimate costs, as required
for fixed-price arrangements, is limited. This limitation places Treasury at
risk of paying a higher fixed price for the services than it might otherwise
pay under a time-and-materials contract. Treasury is gathering cost data
from existing time-and-materials and labor-hour contracts to identify costs
of recurring transactions to support the future negotiation of reasonable
fixed pricing for follow-on work where appropriate. In our view,
Treasury’s actions since January in response to our recommendation
generally indicate it is placing a high priority on making individualized
assessments of the nature of each requirement in order to identify those
requirements that may effectively utilize a fixed-price contract.

53
This type of fixed price arrangement is called a firm fixed-price, level of effort term
contract. These contracts require the contractor to provide a certain level of effort, over a
stated period of time, on work that can be stated only in general terms. Under these
contract types, the government pays the contractor a fixed dollar amount. 48 C.F.R. §
16.207-1.
54

According to TARP contract managers, other services being procured through time-andmaterials contracts that are unlikely to be suitable for conversion to fixed pricing are the
contracts with law firms and accounting firms. According to these officials, it is standard
practice for such firms to bill commercial and government customers on an hourly basis
for each attorney and accountant involved in the work, consistent with their time-andmaterials pricing arrangements for TARP.

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OFS Has Made Further
Progress Implementing a
Compliance System for
Potential Conflicts of Interest
Among Contractors and
Financial Agents

Since issuing an interim conflicts-of-interest rule in January 2009, and
consistent with our prior recommendation, OFS continued to make
progress implementing a system of compliance for conflicts of interest
that may arise with vendors seeking or performing work under TARP. 55
Consistent with the framework the interim rule provides, OFS is
formalizing its process for reviewing and addressing potential or actual
organizational and personal conflicts of interest disclosed by contractors
and financial agents.56 Specifically, OFS is making progress (1) developing
and applying its compliance system under the interim rule, and (2)
reviewing existing contracts that predate the interim rule to determine
what changes may be needed.
Regarding OFS’s progress in further developing and applying its conflictsof-interest compliance system, discussions with OFS program and
compliance officials, two TARP contractors, and a financial agent’s senior
contracts manager indicate that a mutual environment for sustained
attention and control is taking root. Specifically, our discussions with OFS
and TARP contractor officials indicate that all parties have a range of
formal and informal processes in place, under which TARP contractors are
expected to detect potential conflicts of interest. Once detected, the
interim rule requires that potential conflicts be disclosed to Treasury
within 5 business days. A disclosure can trigger a formal review by the
OFS compliance officer, who is responsible for making a final
determination.57 The processes include an ongoing dialogue among OFS
officials and officials from TARP contractors and financial agents about
new potential conflicts and, as needed, discussions about changes to

55

74 Fed. Reg. 3431-3436 (Jan. 21, 2009). Public comments on the TARP conflicts-of-interest
interim rule were due March 23, 2009.
56
Under the interim rule, for some administrative service providers (e.g. temporary services
for document production), OFS has decided that those contractors are unlikely to have
conflicts of interest and do not warrant the burden imposed by the requirements.
57

Under the interim rule, in making the required determination there are three
possibilities—i.e., OFS must conclude that (1) no conflict exists; (2) no conflict exists that
has not been adequately mitigated; or (3) if a conflict exists that cannot be adequately
mitigated, OFS has expressly waived it.

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GAO-09-504 Troubled Asset Relief Program

contractors’ mitigation plans to increase their effectiveness and conform
with the interim rule.58
We note, however, that OFS does not have fully developed procedures for
capturing its decisions on potential conflicts of interest. For example,
concerning the regular discussions of new potential conflicts that may
arise and require OFS’s compliance review, it is not clear that all
discussions are documented, or that all information is captured, such as
information supporting OFS’s determination that a conflict does not exist
or has been satisfactorily mitigated. TARP contractors told us that they did
not routinely retain records from their discussions with OFS officials
about potential conflict disclosures and mitigations. These discussions
frequently entail phone conferences but do not always result in formal
correspondence addressing the matter. In the absence of documentation,
there is no record of how issues were addressed and resolved, should the
need to revisit those issues arise in the future. OFS compliance officials
acknowledged that they needed to enhance the procedures for
documenting conflicts discussions in order to better demonstrate
compliance with the interim rule. OFS officials stated they were drafting
new policy and procedure instructions to do so. As conflict disclosures
and proposed mitigations involving TARP contractors and financial agents
continue to emerge, we will need to revisit OFS procedures to ensure that
it maintains appropriate documentation.
OFS has made progress since January, in response to our recommendation
that it review its existing contracts to determine whether changes are
needed in light of the interim rule.59 Specifically, OFS has reviewed six
contracts that predate the interim rule. As of March 13, 2009, this process
has resulted in the renegotiation of two contractors’ mitigation plans. OFS
compliance officials expect to finish reviewing the remaining four
mitigation plans within the next several months. We plan to continue

58
For example, consistent with the interim rule’s personal conflicts-of-interest disclosure
procedures, one TARP contractor told us about recently disclosing to the TARP program
manager a potential personal conflict of interest involving a new employee. Rather than
disqualifying this person from being hired, the contractor discussed the matter with OFS
officials who were satisfied that the contractor’s mitigation measures (which involved
establishing an ethical screen to prevent the employee from speaking with staff engaged on
the TARP work or accessing related files) had neutralized the conflict.
59

According to Treasury and OFS procurement and compliance officials, three existing
legal services contracts that predate the TARP conflicts-of-interest rule are not in need of
mitigation plan reviews and renegotiation to conform, because their performance periods
are to end in April 2009.

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monitoring OFS’s progress to ensure that it fully implements our prior
recommendation.
Although the above efforts indicate that progress is being made related to
potential conflicts of interest, there may be an opportunity, going forward,
for streamlining OFS oversight in this area. For example, the portion of the
interim rule focusing on personal conflicts of interest requires that certain
contractors obtain financial disclosures in writing from management
officials and key individuals working on TARP that are no less extensive
than those that are required of new high-level federal government
officials.60 Specifically, the interim rule requires that before working on a
TARP matter, management officials and key individuals at firms involved
with the acquisition, valuation, management, or disposition of troubled
assets must disclose information, in writing, on their and their family’s
personal, business, and financial relationships.61 We recognize the
importance of collecting such information to detect and deter conflicts of
interest. However, the selected use of a more streamlined approach, in
appropriate circumstances, could reduce the burden of providing this
information and promote compliance.62 Treasury officials acknowledged
that an alternative financial disclosure process could offer a less
burdensome way for TARP contractors to obtain required written
disclosures from employees but said that any consideration of an
alternative would occur only in the context of evaluating public comments
on the interim conflicts rule. In finalizing the TARP conflicts-of-interest
rule, OFS officials told us that they would be reviewing various options to
the current requirement in the interest of striking a balance between

60

Section 31.212(b) requires that the information to be obtained in writing be no less
extensive than that required under Office of Government Ethics (OGE) Form 278,
Executive Branch Personnel Public Financial Disclosure Report. Among the very highlevel federal officials required to annually file this report are the President, vice president,
presidential nominees to positions requiring Senate confirmation, military general and flag
officers, and senior executives.
61

According to OGE Form 278, the basic premise of the financial disclosure requirement is
that those having responsibility for review of the reports must be given sufficient
information by reporting individuals concerning the nature of any outside interests and
activities so that an informed judgment can be made with respect to compliance with
applicable conflicts-of-interest requirements.
62
For example, there is an alternative financial disclosure report currently required of
certain other federal employees: OGE Form 450, Confidential Financial Disclosure Report
(Executive Branch). Unlike the longer Form 278 required of very high-level officials, the
Form 450 does not require a detailed breakout of the valuation of listed assets and sources
of investment or other income by dollar amount and type.

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Treasury’s need to protect the government’s interests and the burden the
requirement placed on TARP contractors and financial agents.

OFS Is in the Process of
Building TARP’s Financial
Reporting Structure

Treasury must annually prepare and submit to Congress and the public
audited fiscal year financial statements for TARP that are prepared in
accordance with generally accepted accounting principles.63 Moreover, the
act requires Treasury to establish and maintain an effective system of
internal control over TARP that includes providing reasonable assurance
of the reliability of its financial reporting64 and compliance with applicable
laws and regulations.65 It further, requires Treasury to annually report on
its assessment of the effectiveness of internal control over financial
reporting. The act also requires GAO to audit TARP’s financial statements
annually in accordance with generally accepted auditing standards.66
The fiscal year ending September 30, 2009, will be the first year for which
Treasury prepares financial statements for TARP. OFS has begun to build
a financial reporting structure for preparing the financial statements. OFS
officials told us that they were continuing to address key accounting and
reporting topics, such as defining the reporting entity; determining the
types of revenues and expenses to be included in TARP; determining the
appropriate valuation methods for assets and liabilities; determining the
accounting for administrative expenses, dividends, and interest; and
defining the form and content of TARP’s financial statements. In addition,
OFS continues to refine, develop, and document its internal control

63

Section 116(b) of the act, 12 U.S.C. §5226(b).

64

Section 116(c) of the act, 12 U.S.C. § 5226(c). An entity’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and
disposition of the assets of the entity; (2) provide reasonable assurance that transactions
are recorded, as necessary, to permit preparation of financial statements in accordance
with generally accepted accounting principles and that receipts and expenditures of the
entity are being made only in accordance with authorizations of management and those
charged with governance; and (3) provide reasonable assurance regarding prevention or
timely detection and correction of unauthorized acquisition, use, or disposition of the
entity’s assets that could have a material effect on the financial statements.
65

Internal controls over compliance with laws and regulations should provide reasonable
assurance that transactions are executed in accordance with laws governing the use of
budget authority and with other laws and regulations that could have a direct and material
effect on the financial statements, and, as applicable, other laws and regulations identified
in OMB’s audit guidance.
66

Section 116(b) of the act, 12 U.S.C. § 5226(b).

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framework over financial reporting and compliance, including its risk
assessment activities. The implementation of a well-defined internal
control framework and the decisions involving key accounting and
reporting issues are critical to enabling OFS to prepare its fiscal year-end
financial statements and to OFS’s reporting on its assessment of the
effectiveness of TARP’s system of internal control.
As part of GAO’s responsibilities under the act, we have begun our audit of
TARP’s financial statements and the related internal controls. Our
objectives will be to render opinions on (1) the financial statements as of
and for the period ending September 30, 2009, and (2) internal control over
financial reporting and compliance with applicable laws and regulations as
of September 30, 2009. We will also be reporting on the results of our test
of TARP’s compliance with selected provisions of laws and regulations
related to financial reporting.

Documentation of Certain
Internal Control
Procedures and Guidance
Is Not Consistent With
Actual Practice

We noted two areas in which OFS’s documentation of certain internal
control procedures and guidance pertaining to determining warrant
exercise prices were not updated to be consistent with actual practice.
While these issues do not significantly affect OFS’s financial reporting,
they, nevertheless, merit the attention of OFS management to decrease the
risk that the transactions will not be recorded completely, properly, or
consistently and that guidance available to the public on determining
warrant exercise prices will create confusion about the actual terms and
conditions executed by Treasury for its investments.

Documentation of Certain
Internal Control Processes Is
Not Consistent with the
Controls Applied

As part of its internal control framework, OFS plans to develop formal
written policies and procedures governing OFS’s operations and expects
to have these policies and procedures finalized by September 30, 2009. In
the interim, OFS has developed and documented process flows and
narratives describing internal control processes for TARP transactions.
Our audit of selected control activities for CPP and SSFI transactions
found that OFS had applied adequate financial reporting controls over the
transactions we tested. However, we found that the actual control
processes and procedures performed for some of the transactions we
tested were inconsistent with the documented flows and descriptions.
Inconsistencies in the application of a control procedure complicate the
review of the transactions and increase the risk that the transactions will
not be recorded completely, properly, or consistently. According to
Treasury officials, these inconsistencies arose from the removal of certain
control activities that were no longer relevant and the implementation of
more effective controls without the simultaneous updating of the
documented process flows or narratives to reflect these changes. The

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GAO-09-504 Troubled Asset Relief Program

officials told us that TARP control processes were continually evolving as
management gained more experience with processing TARP transactions.

Guidance for Determining CPP
Warrant Exercise Prices Is Not
Consistent with the Procedures
Applied

Under CPP, Treasury receives warrants to purchase shares of stock of
qualified financial institutions. The date selected as the basis for
determining the warrant exercise price impacts the exercise price and the
number of shares included in the warrants. Treasury consistently applied
its preliminary approval date as the basis for determining the warrant
exercise prices. However, Treasury has not established guidance,
consistent with its procedures, regarding the date to be used as a basis for
determining the warrant exercise prices. We found four Treasury
documents that each had a different description of the date to use as the
basis for determining the warrant exercise prices. For example, the
announced CPP terms and conditions specify, among other things, the use
of the investment date as the basis for determining the warrant exercise
price, but the term “investment date” is not specifically defined. The CPP
program description on Treasury’s Web site, the CPP Application
Guidelines, and the Security Purchase Agreement each provide different
guidance on which date to use as a basis for determining the warrant
exercise prices. Inconsistencies in guidance available to the public for
warrant exercise price determinations may create confusion about the
actual terms and conditions executed by Treasury for its investments.
The eight institutions comprising the first group of CPP transactions,
amounting to $115 billion, signed Participation Commitment documents
stating that the financial institutions are to issue preferred shares to the
Treasury under the terms and conditions announced for CPP.67 Treasury
used October 13, 2008, the date the institutions signed the Participation
Commitment documents, as the basis for determining the warrant exercise
prices. OFS officials told us they considered the date the institutions
signed the Participation Commitment documents to be Treasury’s
preliminary approval date.
According to OFS, for the second and subsequent group of CPP
transactions, Treasury’s preliminary approval date is the date the
Investment Committee recommends that the Assistant Secretary for

67

In addition to the eight institutions funded in the first group, Merrill Lynch & Co., Inc.
(Merrill Lynch) signed a participation commitment on October 13, 2008. Following Merrill
Lynch’s merger with Bank of America, on January 9, 2009, Bank of America received the
$10 billion specified in Merrill Lynch’s Participation Commitment with Treasury.

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Financial Stability approve the application.68 Our tests of selected CPP
transactions beyond the first group showed that Treasury consistently
utilized the Investment Committee’s recommendation date as the basis for
determining the warrant exercise prices. In addition, the executed
agreements between the financial institutions and Treasury detail, for each
warrant, the number of shares of stock Treasury may purchase at the
specific exercise price. As such, these parties are aware of and consent to
the specific terms of the warrants.

Indicators Suggest
Mixed Recent
Developments in
Credit Markets, but
Isolating the Impact
of TARP Continues to
Present Challenges

Although indicators of the cost of credit and perceptions of risk in credit
markets suggest mixed developments since our last report, TARP’s
activities could improve market confidence in participating banks and
have other beneficial effects on credit markets. However, several factors
will complicate efforts to measure any impact, including contemporaneous
changes in monetary and fiscal policy; other programs introduced by
Treasury, the Federal Reserve, FDIC, and FHFA, and general market
forces. As a result, any changes in credit markets cannot be attributed
solely to TARP. Similarly, slow recovery does not necessarily reflect its
failure. However, if TARP is having its intended effect, a number of
developments might be observed in credit and other markets over time,
such as reduced risk spreads, declining borrowing costs, and more lending
activity than there would have been in the absence of TARP. Credit market
indicators we have been monitoring suggest the cost of nonmortgage
credit has risen, and perceptions of risk (as measured by premiums over
Treasury securities) have declined in mortgage and interbank markets,
while rising in corporate debt markets. While lending standards remained
tight, according to Federal Reserve data, the largest CPP recipients
continued to extend loans to consumers and businesses of at least $200
billion a month since October, based on our analysis of Treasury’s new
loan survey. As TARP has evolved, we have also initiated tracking of
foreclosure data and consumer credit measures, such as auto loan and
credit card rates, to provide indicators relevant to the new programs.

68

As part of the process of determining eligibility in CPP, Treasury established an
investment committee to evaluate each financial institution’s application. The investment
committee either recommends that the Assistant Secretary for Financial Stability approve
the application or requests additional analysis or information. According to Treasury, the
investment committee was created after October 13, 2008.

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TARP Programs Could
Have a Number of Effects
on Credit Markets and the
Economy

TARP’s activities could improve market confidence in participating banks
and have other beneficial effects on credit markets, but several factors will
complicate efforts to measure any impact. In our previous reports we
focused on CPP, detailing the expected effects, as well as the tension
between promoting lending and improving the capital position of banks.
As indicated above, CAP, as proposed by the new administration, aims to
eliminate uncertainty about the solvency of financial institutions through
stress tests and by infusing capital into the financial system to the point
where participating banks can absorb losses even worse than expected
scenarios. The intent is to improve confidence in financial institutions,
allowing the banks to borrow on more favorable terms, attract private
capital and continue lending to creditworthy businesses and households.
Like CPP, if CAP is effective we should also see improvement in credit
market conditions, including declining risk premiums (the difference
between risky and risk-free interest rates, such as rates on U.S. Treasury
securities) for interbank lending and bank debt and lower borrowing costs
for business and consumers. Improved market conditions may permit
some borrowers to avoid foreclosures by enhancing the capacity and
willingness of banks to refinance loans or modify others. HAMP is
intended to reduce foreclosures by directly modifying and refinancing
mortgages and, therefore, may also indirectly improve the balance sheets
of banks by restoring value to mortgage-related securities. However, as we
discussed in our December 2008 and January 2009 reports, to the extent
that credit quality in the economy is deteriorating, confidence remains low
and the economy continues to experience a downturn, during which
lending and borrowing levels normally drop. Low interest rates and lower
premiums may not translate into increased lending immediately.
Nevertheless, lending may still be higher than it would have been if the
equity injections had not taken place. Similarly, market forces may
continue to force a correction in housing prices and result in additional
foreclosures, albeit fewer than would have occurred in the absence of
TARP.
Similarly, TARP activities could improve credit market conditions by
supporting securitization markets through the expansion of TALF. As
indicated above, TALF will provide funding to certain holders of Aaa-rated
ABS backed by newly and recently originated small business, student,
automobile, and credit card loans. By increasing demand and prices for
these securities, TALF should reduce the rates faced by borrowers in the
associated loan categories and increase the availability of new credit to

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consumers and businesses.69 Moreover, by providing support to
securitization markets, TALF may encourage private investors to return to
asset-backed securities, thereby increasing liquidity and improving general
market conditions. However, as we discussed in our previous reports,
other important policies and interventions by government agencies (some
collaborative efforts) that are undertaken to restore financial stability, as
well as general market forces, will complicate a determination of TARP’s
specific effectiveness. TALF, as a joint program with the bulk of the
funding provided by the Federal Reserve, highlights the difficulty of
attributing changes in credit market conditions exclusively to TARP.

Changes in Select
Indicators Suggest Mixed
Recent Development in
Credit Markets, although
These Changes Are Not
Necessarily Attributable to
TARP

While it is difficult to isolate one program’s effects, given the numerous
actions being undertaken, we considered a number of indicators that,
although imperfect, may be suggestive of TARP’s impact on credit and
other markets. Improvements in these measures would indicate improving
conditions, even though those changes cannot be exclusively linked to any
one program. Table 8 lists the indicators we have reported on in previous
reports, as well as the changes since the last report and the changes since
the announcement of CPP, the first TARP program. In general, the
indicators illustrate that the cost of nonmortgage credit has risen and that
perceptions of risk have declined in mortgage and interbank markets,
while rising in corporate debt markets since January 2009. For example,
while the cost of interbank credit (LIBOR) has risen slightly since our
January 2009 report, the TED spread, which captures the risk perceived in
interbank markets, has declined. Since the announcement of CPP, the TED
spread has fallen 350 basis points.70 Since the announcement of CPP,
corporate bond spreads are up, and there have been increases of 38 and 27
basis points for high quality (Aaa) and moderate quality (Baa) corporate
spreads, respectively, since our January 2009 report, indicating heightened
risk perceptions. Like the LIBOR, Aaa and Baa bond rates have increased,
indicating an increase in the cost of credit for businesses. However, the
improvement in the mortgage market is consistent across rates and
spreads. Mortgage rates were down 9 basis points, and the mortgage

69

The Federal Reserve Bank of New York will initially provide $200 billion in funding for
TALF, while Treasury’s initial $20 billion will fund, in part, a special purpose vehicle that
will manage the collateral taken by the Federal Reserve Bank of New York if a borrower
defaults. TALF is similar in many ways to the Federal Reserve program to buy Fannie Mae
and Freddie Mac mortgage-backed securities (MBS).
70
A basis point is a common measure used in quoting yield on bills, notes, and bonds and
represents 1/100 of a percent of yield. An increase from 4.35 percent to 4.45 would be an
increase of 10 basis points.

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spread is down 45 basis points. (See our December and January reports
for a more detailed description and motivation for the indicators.) As
discussed above, changes in credit market conditions may not provide
conclusive evidence of TARP’s effectiveness, as other important policies,
interventions, and changes in underlying economic conditions can
influence these markets. Recently, the Federal Reserve announced—in
addition to further interventions in the GSE mortgage-backed security and
debt market—that it intended to improve conditions in private credit
markets by purchasing up to $300 billion of longer-term Treasury
securities over the next 6 months. This activity could result in lower costs
for borrowing activities whose rates tend to move with the Treasury
yield.71
Table 8: Changes in Selected Credit Market Indicators, January 22, 2008, and March 25, 2009
Credit market rates and spreads
Change since January
report

Change since October 13,
2008

Indicator

Description

LIBOR

3-month London interbank offered rate Up 6 basis points
(an average of interest rates offered
dollar-denominated loans)

Down 353 basis points

TED Spread

Spread between 3-month LIBOR and
3-month Treasury yield

Down 6 basis points

Down 350 basis points

Aaa bond rate

Rate on highest quality corporate
bonds

Up 38 basis points

Down 84 basis points

Aaa bond spread

Spread between Aaa bond rate and
10-year Treasury yield

Up 35 basis points

Up 40 basis points

Baa bond rate

Rate on corporate bonds subject to
moderate credit risk

Up 27 basis points

Down 24 basis points

Baa bond spread

Spread between Baa bond rate and
10-year Treasury yield

Up 24 basis points

Up 100 basis points

Mortgage rates

30-year conforming loans rate

Down 9 basis points

Down 143 basis points

Mortgage spread

Spread between 30-year conforming
loans rate and 10-year Treasury yield

Down 45 basis points

Down 33 basis points

71

As we noted in our last report, mortgage rates fell by 90 basis points shortly after the
Federal Reserve announced it would intervene in the GSE MBS and debt markets.

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Credit market rates and spreads
Indicator

Description

Change since January
report

Change since October 13,
2008

Quarterly mortgage volume and defaults
Indicator

Description

Change since January
report

Change from September 30,
to December 31, 2008

Foreclosure rate

Percentage of homes in foreclosure

-

Up 0.33 percentage points to
3.3%

Mortgage originations

New mortgage loans

-

Down $50 billion to $250
billion

Source: GAO analysis of data from Global Insight, Federal Reserve Bank of St. Louis, and Inside Mortgage Finance. (Daily and weekly
data will be updated 4-5 days before the release of March report.)

Note: Rates and yields are daily except mortgage rates, which are weekly. Higher spreads (measured
as premiums over Treasury securities of comparable maturity) represent higher perceived risk in
lending to certain borrowers. Higher rates represent increases in the cost of borrowing for relevant
borrowers. As a result, “down” suggests improvement in market conditions for credit market rates and
spreads. Foreclosure rate and mortgage origination data are quarterly. See previous TARP reports
for a more detailed discussion.

Other indicators that may become better measures of TARP’s
effectiveness over time are mortgage originations and foreclosures. While
the volume of new mortgage lending may reflect changes in credit risk or
the demand for credit, it may also indicate the availability of credit as
well.72 As table 9 indicates, mortgage originations fell from $300 billion in
the third quarter to $250 billion in the fourth quarter of 2008. To the extent
that credit and economic conditions improve over time, we would expect
mortgage originations to stop declining and eventually rise, although it is
not clear that this measure would or should return to the level seen in the
period leading up to the credit market turmoil. Similarly, foreclosure data
should provide an indication of the effectiveness of the recently
implemented HAMP program going forward. The percentage of loans in
foreclosure had reached an unprecedented high of 3.3 percent at the end
of the fourth quarter of 2008, up from 2.97 percent the previous quarter. As
stated above, general market forces, including falling housing prices, rising
unemployment, and other programs outside of TARP that are being
undertaken to address the rising foreclosure rate will complicate efforts to
determine the effectiveness of HAMP.

New Lending at the 20 Largest
Participants in CPP

The largest CPP recipients continued to extend loans to consumers and
businesses, over $200 billion a month since October, based on our analysis

72

Like other bank interest rates, mortgage rates may reflect the customers to whom banks
choose to lend, rather than the cost of credit for all potential customers.

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GAO-09-504 Troubled Asset Relief Program

of Treasury’s new loan survey. Because these data are unique, we were not
able to benchmark the origination levels against historical lending or
seasonal patterns at these institutions. As illustrated in figure 4, while total
mortgage originations fell in the fourth quarter of 2008, these data suggest
that new lending at the 20 largest institutions participating in CPP (as of
December 31, 2008), after dropping by about 21 percent from October to
November, rose roughly 18 percent from November to December.73
Figure 4: New Lending at 20 Largest Recipients of CPP, between October 1, 2008,
and January 31, 2009
Dollars in billions
300

250

200

150

100

50

0
October

November

2008

December

January
2009

Source: GAO analysis of Treasury loan survey data.

Although lending normally drops during a recession, according to our
analysis of the survey, aggregate new lending by these institutions in
December amounted to roughly $245 billion (table 9). Total new lending in
January increased slightly. The reporting institutions generally received
CPP funds on October 28, 2008, or November 14, 2008, with a few
institutions receiving funds on December 31, 2008. In figure 4, we present
new lending by month. Although we recognize the limitations inherent in

73
New lending includes new mortgage, home equity lines of credit, credit card and other
consumer originations, and new or renewed commercial and industrial, and commercial
real estate loans.

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these data, the survey data will prove valuable for more thorough analyses
of lending activity in future reports.
Table 9: New Lending at 20 Largest Recipients of CPP, between October 1, 2008, and January 31, 2009
Dollars in millions
New Lending
Institution

Date of CPP

Size of CPP

October

November

December

January

Citigroup

10/28/2008

$25,000

$19,373

$17,854

$22,864

$18,814

JP Morgan Chase & Co.

10/28/2008

25,000

61,192

51,178

52,376

46,785

Wells Fargo Bank

10/28/2008

25,000

35,073

26,709

31,063

50,560

Bank of America

10/28/2008

15,000

70,569

48,864

61,427

60,624

Goldman Sachs & Co.

10/28/2008

10,000

1,490

1,666

2,551

6,487

Morgan Stanley

10/28/2008

10,000

1,787

6,302

3,170

3,551

Bank of New York Mellon Corp

10/28/2008

3,000

879

800

849

730

State Street

10/28/2008

2,000

1,404

749

1,403

289

U.S. Bancorp

11/14/2008

6,599

13,371

11,244

17,262

13,866

Capital One Financial Corporation

11/14/2008

3,555

3,477

2,825

3,024

2,531

SunTrust Banks, Inc.

11/14/2008

3,500

7,612

4,827

6,514

6,511

Regions

11/14/2008

3,500

5,994

4,664

5,832

4,983

BB&T Corp.

11/14/2008

3,134

5,929

4,901

6,197

5,976

KeyCorp

11/14/2008

2,500

3,238

2,671

4,518

3,065

Comerica Inc.

11/14/2008

2,250

3,830

2,300

3,242

1,425

Marshall & Ilsley

11/14/2008

1,715

1,331

1,181

1,206

960

Northern Trust

11/14/2008

1,576

1,985

1,364

1,810

1,270

PNC Financial Services Group Inc.

12/31/2008

7,579

11,273

6,313

8,076

8,170

Fifth Third Bancorp

12/31/2008

3,408

7,025

6,414

7,119

5,070

CIT Group Inc.

12/31/2008

2,330

5,317

4,232

4,182

3,429

$156, 646

$262,149

$207,059

$244,686

$245,095

Total

Source: GAO analysis of Treasury loan survey data.

Note: The table features the 20 largest recipients of CPP funds who had received funds, as of
December 31, 2008, and does not include American Express, which received CPP funds in January.
New lending includes new mortgage, home equity lines of credit, credit card and other consumer
originations, new or renewed commercial and industrial loans, and commercial real estate loans.
However, new lending does not include other important activities that these institutions may
undertake to facilitate credit intermediation, including underwriting and purchasing MBS and ABS.
Date and size of CPP refers to the initial infusion of CPP funds. Citigroup and Bank of America have
received additional TARP funds.

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Federal Reserve Senior Loan
Officer Opinion Survey

The Federal Reserve Loan Officer survey asks senior loan officers at U.S.
banks about changes in lending standards, lending terms, and the state of
business and household demand for loans.74 The most recent survey
suggests that although the percentage of banks tightening credit remains
above previous peaks, fewer banks have tightened credit standards in
approving applications for loans since the October 2008 survey.75 For
example, the net percentage of banks tightening credit standards for
commercial and industrial loans fell from roughly 84 percent in October
2008 to approximately 64 percent in January 2009 for large firms, although
the drop for small firms was somewhat less significant, 75 percent and 70
percent, respectively (fig. 5). Although not reported here, similar patterns
emerged for subprime and prime residential mortgage loans and other
consumer loans. However, lending standards in January remained as tight
as they were in October for credit card lending. As figure 5 shows, the
results of the survey also suggest weaker demand for commercial and
industrial loans by both smaller and larger firms and a slight decrease in
the percentage of banks indicating increased spreads (loan rate charged
firms over the cost of funds), although spreads remain well above previous
highs. However, the percentage of banks reporting stronger demand for
both prime and subprime loans has increased significantly since the
October survey, while the demand for other consumer loans has remained
roughly the same.

74
The results are based on a survey of approximately 60 banks, accounting for more than 75
percent of the real estate loans originated by banks in the U.S. The sample is selected from
among the largest banks in each Federal Reserve District. See
http://www.federalreserve.gov/boarddocs/snloansurvey/.
75
Respondent banks received the January survey on or after December 30, 2008, and their
responses were due January 13, 2009. Banks received the October survey on or after
October 2, and their responses were due on October 16.

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Figure 5: Net Percentages of Banks Tightening Lending Standards, Increasing Spreads, and Reporting Stronger Demand for
Loans, by firm size, between October 1997 and March 2009
Standards

Net percentage tightening lending standards for commercial and industrial loans
120
100

Large and medium firms

80

Small firms

60
40
20
0
-20
-40
-60
-80
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
1997 1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Net percentage reporting stronger demand for commercial and industrial loans
120

Demand

100
80
60
40
20
0
-20
-40
-60
-80
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
1997 1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Net percentage increasing spreads of loan rates over banks’ cost of funds for commercial and industrial loans
120

Spreads

100
80
60
40
20
0
-20
-40
-60
-80
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
1997 1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: GAO analysis of Federal Reserve data.

Note: Negative percentage implies, for example, that the percentage of firms loosening standards
exceeds the percentage tightening standards. Large and medium-size firms are those with annual
sales of $50 million or more.

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Automobile Lending and Credit
Card Rates

In addition to the indicators previously identified, we continue to evaluate
the potential usefulness of other indicators and expect to add new
indicators and modify or drop others. Among these are measures of
lending activity in consumer loan markets that may become more
appropriate indicators as time progresses, given the initiation of TALF. As
stated above, TALF support to securitization markets should result in
lower rates and increased availability of credit for the businesses and
households that receive the underlying loans. The primary consumer-ABS
markets include ABS backed by auto loans, credit card receivables and
student loans. Although the TALF program was initiated only recently,
figure 6 establishes the historical context for continued monitoring of auto
loan rates. As the figure shows, until recently, average finance company
auto rates were consistently below commercial bank auto rates. However,
from August to November of 2008, finance company rates increased
significantly (132 basis points), while bank rates increased just slightly (13
basis points). Finance company rates increased another 180 basis points
from November 2008 to January 2009.76 Because stand-alone auto finance
companies are more heavily reliant on securitization than commercial
banks, the difference in these trends (or the spread between the two rates)
could partially reflect the issues in securitization markets that TALF is
intended to address.77 We continue to monitor this spread, as well as other
measures of consumer loan activity.

76

January and February data were unavailable for commercial bank auto rates for inclusion
in this report.
77

However, differences in these trends could also reflect the success of CPP (or CAP) in
lowering, or preventing a rise, in bank auto rates.

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Figure 6: Average Finance Rate for New Cars at Auto Finance Companies and Banks, February 2006 and January 2009
Percent

9

8

7

6

5

4

0
Feb.

May

Aug.

2006

Nov.

Feb.

May

Aug.

Nov.

2007

Feb.
2008

May

Aug.

Nov.

Jan.
2009

Bank auto rate
Finance company auto rate
Source: GAO analysis of Federal Reserve data.

Conclusions

Treasury has continued to take significant steps to address all the
recommendations from our December 2008 and January 2009 reports. In
particular, Treasury has recently expanded the scope of the monthly CPP
surveys of the 20 largest institutions to include all institutions participating
in the program. This change should provide Treasury with the information
necessary to begin to track the effectiveness of the program and
effectively implement our recommendation. Treasury also has expedited
efforts to ensure that trained and certified personnel oversee the
performance of all contracts and moved toward fixed-price arrangements,
when appropriate. These actions were consistent with our
recommendations for improved contractor oversight in these areas.
Moreover, Treasury continued to make progress in several other areas,
including ensuring that future agreements entered into under its new
programs better enable it to determine what institutions plan to do with
any capital infusions and to track the resulting lending activity of
participating institutions on a regular basis. Appendix II provides our
assessment of Treasury’s implementation of our open recommendations
from our January 2009 report, and appendix III provides a high-level

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summary, prepared by Treasury, of the progress it has made on each
recommendation since our last report and some planned next steps.
During this period, Treasury has also continued to improve its monitoring
of compliance with the terms of its existing agreements. Treasury officials
told us that asset managers are to play a role in monitoring the
participating institutions’ compliance with the agreements. In the interim,
Treasury has taken some steps to help ensure that institutions are
complying with dividend, stock repurchase, and executive compensation
restrictions. Treasury relies on participants’ representations and
warranties in the agreements, and if it finds reason to believe that these
representations can not be relied upon, it can pursue the available
remedies for any false representations. At this point, Treasury has not
taken steps to verify the information or require the institutions to provide
any additional documentation. As recommended in our December 2008
report, we continue to believe that Treasury should develop a formal
system to help ensure compliance with the agreements. For example,
leverage the oversight activities of the bank regulators by having them
include compliance with the agreements as part of their ongoing
examinations. This type of compliance activity is generally consistent with
ensuring the safety and soundness of institutions. The regulators
previously told us that they were taking steps to build such oversight into
their examination procedures. However, without a consistent oversight
approach, Treasury runs the risk of receiving inconsistent or incomplete
information from the regulators.
Treasury has also continued to take steps to articulate a more clearly
defined vision for TARP, and in February 2009, provided its strategy for
using its remaining funds. This strategy defined the existing problems and
how the various programs would begin to address them. While the initial
plan provided a broad vision and strategy, in the subsequent weeks,
Treasury provided additional details for the various components of the
program. In particular, it announced its plans to participate in the
purchase of troubled assets through public-private partnerships and
launched a homeownership protection program, activities that are
consistent with the original plans for TARP. Given that only 60 days have
passed since our last report, we acknowledge the significance of these
accomplishments. Yet, Treasury continues to be hampered by questions
about its overall strategy and OFS’s activities, raising questions about the
effectiveness of its existing communication strategy. Treasury’s strategy
has largely been one of posting information to its Web site; issuing press
releases, speeches, and testimonies; and reaching out to Congress on an ad
hoc basis; and it continues to face ongoing communication challenges.

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Given the complexity of the issues involved and the heightened public
scrutiny, an effective communication strategy continues to be critical, but
Treasury has yet to develop a means of regularly and routinely
communicating its activities to relevant congressional committees and
members, the public, and other critical stakeholders. For example, TARP
had received approximately $2.9 billion in dividend payments through
March 20, 2009, but this information has not been reported to the Congress
and the public. To improve transparency, Treasury should publicly
announce the amounts, such as dividends, it has received from TARP
participants. By not sharing this information, Treasury is missing an
important opportunity to provide information about the returns it is
receiving on its investments. An effective communication strategy should,
among other things, build understanding and support for the program
through regular and routine outreach, including confidential member
briefings; integrate communications and operations by making
communication integral to the program; and increase the impact of
communication tools such as electronic and print media and video. Given
that the President’s proposed budget contemplates additional funding, an
effective communication strategy is critical for ensuring the support
necessary to obtain such funding.
Treasury has taken appropriate actions to bolster the conditions or
requirements for assistance that is deemed exceptional, but certain
assistance may require that it go farther to repair damage caused to the
program. Controversies about the actions of some TARP participants
continue to surround the program, in general, and AIG, in particular. While
Treasury announced $70 billion dollars in assistance to AIG—more
assistance than has been provided to any other single institution to date—
it has yet to disperse the up to $30 billion of additional assistance
announced on March 2, 2009, or finalize the agreement. Therefore,
Treasury has an opportunity to further improve the integrity and
accountability associated with this additional assistance. Based on our
previous work on government assistance to the private sector, as well as
the Treasury Secretary’s position, as articulated in the Financial Stability
Plan that government support must come with strong conditions, Treasury
has an opportunity to take additional steps to strengthen its agreement
with AIG by requiring AIG seek to negotiate concessions from
management, employees, and counterparties, as appropriate, before the
agreement is finalized. For example, Treasury could require that AIG seek
to renegotiate contracts with its employees, such as existing contracts
similar to the contract for retention bonuses with AIG Financial Products’
employees, and with existing counterparties that would face substantial
losses were AIG to have its credit downgraded or fail. While we

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understand that Treasury is making an investment in AIG, Treasury’s
failure to act in this instance could cause additional harm to its reputation
and impair its ability to seek additional funding for TARP that might be
needed in the future.
Next, Treasury has also made progress in establishing its management
infrastructure and has responded to our five open recommendations that
are related to hiring, contracting, and establishing its internal controls.
•

In the hiring area, Treasury has continued to make progress in
establishing its management infrastructure, including hiring more staff.
In accordance with our prior recommendation that it expeditiously hire
personnel to OFS, Treasury continued to use direct-hire and various
other appointments to bring a number of career staff on board quickly.
Since our January 2009 report, Treasury has increased the total number
of OFS staff overall and the balance has shifted from mostly detailees
to more permanent staff, indicating that the workforce has become
more stable over time. In our last report, we recognized that the
changing nature of OFS had made it difficult for officials to determine
its long-term organizational needs but that such considerations
continued to be vital to retaining institutional knowledge within the
organization as programs evolved. Treasury has taken further steps to
align OFS’s human capital program with its current and emerging
mission and programmatic goals. For example, as outlined in its draft
workforce plan, Treasury has taken steps to identify the critical skills
and competencies needed to operate OFS and plans to develop
strategies to address gaps in these areas. These actions will be critical
to OFS’s ability to monitor its progress in building and developing the
OFS workforce.

•

Treasury has continued to build a network of contractors and financial
agents to support TARP administration and operations. At the same
time, Treasury has continued to build its capacity to manage these
vendors by putting into place the people and processes necessary to
enhance its oversight of contractor and financial agent performance.
Given the still-evolving nature of TARP requirements, we recognize that
opportunities for using fixed-price arrangements may be limited.
Nonetheless, Treasury has a process that should help it determine
where those opportunities exist. In developing this process, Treasury
has addressed our prior recommendation in this area, and we will
monitor continued progress. In addition, Treasury could enhance its
efforts to safeguard the TARP program from conflicts of interest
involving its contractors and financial agents by completing its review
of mitigation plans to ensure conformity with the new conflicts-of-

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interest rule and by requiring that decisions on potential conflicts be
documented.
•

OFS has begun to build a financial reporting structure, including
addressing the key accounting and financial reporting issues necessary
to enable it to prepare financial statements and to assess the
effectiveness of TARP’s system of internal control. Consistent with our
previous recommendations, OFS is continuing to develop a
comprehensive system of internal control and has established plans for
finalizing formal policies and procedures to govern TARP activities and
assess its risks. In the interim, OFS has developed and documented
process flows and narratives describing internal control procedures for
TARP transactions. While OFS applied adequate control procedures
over selected CPP and SSFI transactions we tested, it has not taken
steps to provide consistency between the documented descriptions and
the actual procedures for certain controls that were applied to the
transactions. Inconsistencies in the application of a control procedure
complicate review of the transactions and increase the risk that the
transactions may not be recorded completely, properly, or consistently.
Similarly, OFS needs to address inconsistencies in guidance pertaining
to determining warrant exercise prices. Inconsistencies in guidance
available to the public for these price determinations may create
confusion about the actual terms and conditions executed by Treasury
for its investments.

Finally, we again note that while isolating the effect of TARP’s activities
continues to be difficult, developments in the credit markets have
generally been mixed since our January 2009 report. Some indicators
demonstrate that the cost of credit has increased in interbank and
corporate bond markets and decreased in mortgage markets, while
perceptions of risk (as measured by premiums over Treasury securities)
have declined in interbank and mortgage markets and risen in corporate
debt markets. In addition, although Federal Reserve survey data suggest
that lending standards remained tight, the largest CPP recipients extended
over $240 billion in new loans to consumers and business in both
December 2008 and January 2009, according to the Treasury’s new loan
survey. Attributing any of these changes directly to TARP continues to be
problematic because of the range of actions that have been and are being
taken to address the current crisis. While these indicators may be
suggestive of TARP’s ongoing impact, no single indicator or set of
indicators will provide a definitive determination of the program’s impact.

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Recommendations for
Executive Action

While Treasury continues to take action to address our recommendations
and has begun to make progress in many areas, we identified new areas
that warrant ongoing attention and focus. Therefore, we recommend that
Treasury take the following actions as it continues to improve the
integrity, accountability, and transparency of the program.
We recommend that Treasury take the following six actions:
•

Develop a communication strategy that includes building an
understanding and support for the various components of the program.
Specific actions could include hiring a communications officer,
integrating communications into TARP operations, scheduling regular
and ongoing contact with congressional committees and members,
holding town hall meetings with the public across the country,
establishing a counsel of advisors, and leveraging available technology.

•

Require that AIG seek concessions from stakeholders, such as
management, employees, and counterparties, including seeking to
renegotiate existing contracts, as appropriate, as it finalizes the
agreement for additional assistance.

•

Update OFS documentation of certain internal control procedures and
the guidance available to the public on determining warrant exercise
prices to be consistent with actual practices applied by OFS.

•

Improve transparency pertaining to TARP program activities by
reporting publicly the monies, such as dividends, paid to Treasury by
TARP participants.

•

Complete the review of, and as necessary renegotiate, the four existing
vendor conflicts-of-interest mitigation plans to enhance specificity and
conformity with the new interim conflicts-of-interest rule.

•

Issue guidance requiring that key communications and decisions
concerning potential or actual vendor-related conflicts of interest be
documented.

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Agency Comments
and Our Analysis

We provided a draft of this report to Treasury for review and comment. We
received written comments from Treasury that are reprinted in
Appendix I. We also received technical comments from Treasury, that we
incorporated, as appropriate. In its comments, Treasury described steps it
had taken in the last 60 days to address extraordinary economic
challenges and noted that recommendations in our latest report presented
a thoughtful way forward.

We are sending copies of this report to the Special Inspector General for
TARP and interested congressional committees and members, Treasury,
the federal banking regulators, and others. The report also is available at
no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact
Richard J. Hillman at (202) 512-8678 or hillmanr@gao.gov, Thomas J.
McCool at (202) 512-2642 or mccoolt@gao.gov, or Orice M. Williams at
(202) 512-8678 or williamso@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made major contributions to this report are
listed in appendix IV.

Gene L. Dodaro
Acting Comptroller General
of the United States

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List of Congressional Committees
The Honorable Daniel K. Inouye
Chairman
The Honorable Thad Cochran
Vice Chairman
Committee on Appropriations
United States Senate
The Honorable Christopher J. Dodd
Chairman
The Honorable Richard C. Shelby
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Kent Conrad
Chairman
The Honorable Judd Gregg
Ranking Member
Committee on the Budget
United States Senate
The Honorable Max Baucus
Chairman
The Honorable Charles E. Grassley
Ranking Member
Committee on Finance
United States Senate
The Honorable David R. Obey
Chairman
The Honorable Jerry Lewis
Ranking Member
Committee on Appropriations
House of Representatives
The Honorable John M. Spratt, Jr.
Chairman
The Honorable Paul Ryan
Ranking Member
Committee on the Budget
House of Representatives

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The Honorable Barney Frank
Chairman
The Honorable Spencer Bachus
Ranking Member
Committee on Financial Services
House of Representatives
The Honorable Charles B. Rangel
Chairman
The Honorable Dave Camp
Ranking Member
Committee on Ways and Means
House of Representatives

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Appendix I: Comments from the Department
of the Treasury

Appendix I: Comments from the Department
of the Treasury

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Appendix I: Comments from the Department
of the Treasury

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Appendix II: Status of GAO Recommendations
(January 2009 Report)

Appendix II: Status of GAO
Recommendations (January 2009 Report)

GAO Recommendation

Status

Expand the scope of planned monthly CPP surveys to include collecting at least some information
from all institutions participating in the program.

Implemented

Ensure that future CPP agreements include a mechanism that will better enable Treasury to track the Partially Implemented
use of the capital infusions and seek to obtain similar information from existing CPP participants.
Establish a process to ensure compliance with all CPP requirements, including those associated with Partially implemented
limitations on dividends and stock repurchase restrictions.
Communicate a clearly articulated vision for TARP and how all individual programs are intended to
work in concert to achieve that vision. This vision should incorporate actions to preserve
homeownership. Once this vision is clearly articulated, Treasury should document needed skills and
competencies.

Partially implemented

Continue to expeditiously hire personnel needed to carry out and oversee TARP.

Partially implemented

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, and
move toward fixed-price arrangements whenever possible as program requirements are better
defined over time.

Implemented

Develop a comprehensive system of internal control over TARP activities, including policies,
procedures, and guidance that are robust enough to ensure that the program’s objectives and
requirements are met.

Partially implemented

Develop and implement a well-defined and disciplined risk-assessment process, as such a process is Partially implemented
essential to monitoring program status and identifying any risks of potential inadequate funding of
announced programs.
Review and renegotiate existing conflicts-of-interest mitigation plans, as necessary, to enhance
specificity and conformity with the new interim conflicts-of-interest regulation, and take continued
steps to manage and monitor conflicts of interest and enforce mitigation plans.

Partially implemented

Source: GAO.

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix III: Treasury’s Actions in Response
to Our January 2009 Report
Recommendations

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Appendix IV: GAO Contact and Staff
Acknowledgments

Appendix IV: GAO Contact and Staff
Acknowledgments
GAO Contact

Richard J. Hillman at (202) 512-8678 or hillmanr@gao.gov
Thomas J. McCool at (202) 512-2642 or mccoolt@gao.gov
Orice M. Williams at (202) 512-8678 or williamso@gao.gov

Staff
Acknowledgments

In addition to the contacts named above; Gary Engel, Mathew Scire, and
William Woods (Lead Directors); Cheryl Clark, Lawrence Evans Jr., Daniel
Garcia-Diaz, Carolyn Kirby, Kay Kuhlman, and Harry Medina, (Lead
Assistant Directors); and Marianne Anderson, Kevin Averyt, Noah
Bleicher, Patrick Breiding, Emily Chalmers, Clayton Clark, Bob Dacey,
Rachel DeMarcus, Matt Drerup, Abe Dymond, Nancy Eibeck, Katherine
Eikel, Gena Evans, Karin Fangman, Jeanette Franzel, Ryan Gottschall,
Brenna Guarneros, Michael Hoffman, Chir-Jen Huang, Joe Hunter, Tyrone
Hutchins, Elizabeth Jimenez, Jason Kirwan, Christopher Klisch, Steven
Koons, John Krump, J. Andrew Long, John Lord, Lisa Mavrogianis,
Stephanie May, Marc Molino, Diane Monticchio, Susan Offutt, Akiko
Ohnuma, Joseph O’Neill, Rebecca Riklin, LaSonya Roberts, Susan
Sawtelle, Maria Soriano, Cynthia Taylor, John Treanor, Katherine Trimble,
Julie Trinder, James Vitarello, and Seyda Wentworth made contributions
to this report.

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Related GAO Products

Related GAO Products

Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-484T. Washington,
D.C.: March 19, 2009.
Federal Financial Assistance: Preliminary Observations on Assistance
Provided to AIG. GAO-09-490T. Washington, D.C.: March 18, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-474T. Washington,
D.C.: March, 11, 2009.
Troubled Asset Relief Program: Status of Efforts to Address Transparency
and Accountability Issues. GAO-09-417T. Washington, D.C.: February 24,
2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-359T. Washington,
D.C.: February 5, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-296. Washington, D.C.:
January 30, 2009.
High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 22,
2009.
Troubled Asset Relief Program: Additional Actions Needed to Better
Ensure Integrity, Accountability, and Transparency. GAO-09-266T.
Washington, D.C.: December 10, 2008.
Auto Industry: A Framework for Considering Federal Financial
Assistance. GAO-09-247T. Washington, D.C.: December, 5, 2008.
Auto Industry: A Framework for Considering Federal Financial
Assistance. GAO-09-242T. Washington, D.C.: December 4, 2008.
Troubled Asset Relief Program: Status of Efforts to Address Defaults and
Foreclosures on Home Mortgages. GAO-09-231T. Washington, D.C.:
December 4, 2008.
Troubled Asset Relief Program: Additional Actions Needed to Better
Ensure Integrity, Accountability, and Transparency. GAO-09-161.
Washington, D.C.: December 2, 2008.

(250431)

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