Troubled Asset Relief Program (TARP):
Implementation and Status
Baird Webel
Specialist in Financial Economics
June 27, 2013
Congressional Research Service
7-5700
www.crs.gov
R41427
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Troubled Asset Relief Program (TARP): Implementation and Status
Summary
The Troubled Asset Relief Program (TARP) was created by the Emergency Economic
Stabilization Act (EESA; P.L. 110-343) in October 2008. EESA was enacted to address an
ongoing financial crisis that reached near-panic proportions in September 2008. The act granted
the Secretary of the Treasury authority to either purchase or insure up to $700 billion in troubled
assets owned by financial institutions. This authority was granted for up to two years from the
date of enactment and was very broad. In particular, the definitions of both “troubled asset” and
“financial institution” allowed the Secretary wide leeway in deciding what assets might be
purchased or guaranteed and what might qualify as a financial firm.
The financial crisis grew out of an unprecedented housing boom that turned into a housing bust.
Much of the lending for housing during the boom was based on asset-backed securities that used
the repayment of housing loans as the basis of these securities. As housing prices fell and
mortgage defaults increased, these securities became illiquid and fell sharply in value, causing
capital losses for firms holding them. Uncertainty about future losses reduced many firms’ access
to private liquidity, with the loss in liquidity being catastrophic in some cases. September 2008
saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman
Brothers, and the near collapse of AIG, which was saved only by an $85 billion loan from the
Federal Reserve. There was widespread lack of trust in the financial markets as participants were
unsure which firms might be holding so-called toxic assets that might now be worth much less
than previously estimated, and thus making these firms unreliable counterparties in financial
transactions. This prevented firms from accessing credit markets to meet their liquidity needs.
As EESA moved through Congress, most attention was focused on the idea of the government
purchasing mortgage-related toxic assets, thus alleviating the widespread uncertainty and
suspicion by cleaning up bank balance sheets. The initial TARP Capital Purchase Program,
however, directly added capital onto banks’ balance sheets through preferred share purchases,
rather than removing assets that had become liabilities through purchasing mortgage-related
assets. Several other TARP programs followed, including an asset guarantee program; programs
designed to spur consumer and business lending; financial support for companies such as AIG,
GM, and Chrysler; and programs to aid homeowners at risk of foreclosure. Eventually, the
Public-Private Investment Program resulted in the purchase of some mortgage-related assets, but
this has remained a relatively small part of TARP. Most of the TARP programs are now closed.
With the immediate crisis subsiding through 2009, congressional attention to financial services
turned largely to consider broad regulatory changes. The resulting Dodd-Frank Act (P.L. 111-
203) amended the TARP authority, including (1) reduction of the overall amount to $475 billion;
(2) removal of the ability to reuse TARP funds that had been repaid; and (3) removal of the
authority to create new TARP programs or initiatives. The original TARP authority to purchase
new assets or enter into new contracts expired on October 3, 2010. Outlays under the existing
contracts, however, may continue through the life of these contracts. Overall budget-cost
estimates for TARP have decreased significantly since the passage of EESA, with the latest
Congressional Budget Office estimates foreseeing $21 billion in costs and the latest Office of
Management and Budget estimates foreseeing $47 billion in costs. Most of these costs are from
aid for homeowners, for the insurer AIG, and for U.S. automakers. The assistance to banks is
generally showing a gain for the government. In the 113th Congress, oversight of TARP has
continued, including a hearing held by a subcommittee of the House Committee on Oversight and
Government Reform.
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Troubled Asset Relief Program (TARP): Implementation and Status
Contents
Introduction ...................................................................................................................................... 1
TARP Programs ............................................................................................................................... 2
Bank Support Programs ............................................................................................................. 2
Credit Market Programs ............................................................................................................ 2
Other Programs .......................................................................................................................... 3
Housing Programs ..................................................................................................................... 4
Current Status and Future of TARP ................................................................................................. 4
The Costs of TARP .......................................................................................................................... 7
The 113th Congress and TARP ......................................................................................................... 8
Ownership of Private Companies .................................................................................................... 8
TARP and the Dodd-Frank Act ........................................................................................................ 9
Tables
Table 1. Outlay of TARP Funds ....................................................................................................... 5
Table 2. Incoming TARP Funds ....................................................................................................... 6
Table 3. TARP Funds Outstanding or Lost ...................................................................................... 6
Table 4. Detailed Cost/Gain Estimates for TARP ............................................................................ 8
Table 5. Companies with Large Government Common Ownership Stakes ..................................... 9
Table 6. TARP Changes Following the Dodd-Frank Act ............................................................... 11
Table A-1. Capital Purchase Program ............................................................................................ 13
Table A-2. Community Development Capital Initiative ................................................................ 14
Table A-3. Citigroup Support (CPP/TIP/AGP) .............................................................................. 15
Table A-4. Bank of America Support (CPP/TIP/AGP) .................................................................. 17
Table A-5. Public Private Investment Program .............................................................................. 19
Table A-6. Term Asset-Backed Securities Loan Facility ............................................................... 19
Table A-7. Section 7(a) Securities Purchase Program ................................................................... 20
Table A-8. Government Support for the Auto Industry ................................................................. 22
Table A-9. AIG Support ................................................................................................................. 24
Appendixes
Appendix. Details of TARP Programs ........................................................................................... 12
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Troubled Asset Relief Program (TARP): Implementation and Status
Contacts
Author Contact Information........................................................................................................... 26
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Troubled Asset Relief Program (TARP): Implementation and Status
Introduction
The Troubled Asset Relief Program (TARP) was created by the Emergency Economic
Stabilization Act1 (EESA) enacted on October 3, 2008. EESA was passed by Congress and signed
by President Bush to address an ongoing financial crisis that reached near-panic proportions in
September 2008.
Financial turmoil began in August 2007 when asset-backed securities, particularly those backed
by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented
housing boom turned to a housing bust. The Federal Reserve (Fed) stepped in with emergency
measures to restore liquidity, temporarily calming markets. Losses in mortgage markets, however,
continued and spilled into other markets. Financial firms eventually wrote down many of these
losses, depleting their capital. Uncertainty about future losses on illiquid and complex assets led
to some firms having reduced access to private liquidity, with the loss in liquidity being
catastrophic in some cases.
September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of
Lehman Brothers, and the near collapse of AIG, which was averted with an $85 billion loan from
the Fed. There was widespread unwillingness to lend in the financial markets as participants were
unsure which firms might be holding so-called toxic assets now worth much less than previously
estimated, and thus making these firms unreliable counterparties in financial transactions.
EESA authorized the Secretary of the Treasury (hereinafter “the Secretary”) to either purchase or
insure up to $700 billion in troubled assets owned by financial firms. This authority was granted
for a maximum of two years from the date of enactment and expired on October 3, 2010. The
general concept was that by removing such assets from the financial system, confidence in
counterparties could be restored and the system could resume functioning. This authority granted
in EESA was very broad. In particular, the definitions of both “troubled assets” and “financial
institutions” allowed the Secretary wide latitude in deciding what assets might be purchased or
guaranteed and what might qualify as a financial institution.2 EESA also included a number of
oversight mechanisms3 and reporting requirements.4 EESA was later amended to strengthen its
executive compensation requirements5 and to reduce the authorized amount to $475 billion.6
1 P.L. 110-343, 12 U.S.C. 5311 et seq.
2 The definition for financial institution gives examples, such as banks and credit unions, but specifically does not limit
the definition to the types of firms named. The definition of troubled asset includes “any financial instrument”
determined by the Secretary, in consultation with the Chairman of the Fed, the purchase of which would promote
financial stability.
3 See CRS Report R40099, The Special Inspector General for the Troubled Asset Relief Program (SIGTARP), by
Vanessa K. Burrows.
4 Treasury publishes their TARP reports at http://www.treasury.gov/initiatives/financial-stability/reports/Pages/
default.aspx. This report will make use of many of these TARP reports. Monthly overall reports are required under
Section 105(a) of EESA and will be referenced hereinafter as, for example, the “December 2010 TARP 105(a) Report.”
Monthly reports on dividends and interest accrued to TARP will be referenced hereinafter as, for example, the
“December 2010 TARP Dividends and Interest Report.” These reports are typically published 10 days after the month
in question. Treasury also is required to publish a “TARP Transactions Report” detailing TARP transactions shortly
after they occur. In 2011, Treasury began to publish a “Daily TARP Update” as well.
5 P.L. 111-5; see CRS Report R40540, Executive Compensation Limits in Selected Federal Laws, by Michael V.
Seitzinger and Carol A. Pettit.
6 P.L. 111-203.
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This report provides a brief outline of the programs created under TARP, changes made by
Congress, and a summary of the current status and estimated costs of the program. It also
provides an Appendix that contains detailed discussions of the individual TARP programs. This
report will be updated as warranted by market and legislative events.
TARP Programs
Treasury reacted quickly after the enactment of EESA, announcing the TARP Capital Purchase
Program on October 14, 2008, and several other programs followed. These programs can be
broadly broken down into Bank Support Programs, Credit Market Programs, Other Investment
Programs, and Housing Programs with several programs under each of these headings:
Bank Support Programs
• Capital Purchase Program (CPP). The CPP did not purchase the mortgage-
backed securities that were seen as toxic to the system, but instead purchased
preferred shares in banks.7 The resulting addition of capital, it was hoped, would
allow banks to overcome the effect of the toxic assets while the assets remained
on bank balance sheets. The CPP is now closed with no additional disbursements
possible under the current program. Of the approximately $205 billion disbursed,
$6.1 billion remains outstanding, and $3.4 billion has been written off or
recognized as a loss.
• Targeted Investment Program (TIP). This program provided for exceptional
preferred share purchases and was used only for Citigroup and Bank of America.
This program is closed, with all $40 billion in disbursed funds repaid.
• Asset Guarantee Program (AGP). The AGP, required by Section 102 of EESA,
provided guarantees that were also part of the exceptional assistance to Citigroup
and Bank of America. This program is closed, with the $5 billion in extended
guarantees cancelled and no funds having been actually disbursed.
• Community Development Capital Initiative (CDCI ). The CDCI provided for
lower dividend rates on preferred share purchases from banks that target their
lending to low-income, underserved communities and small businesses. Many of
the participants in the CDCI converted into the program from the CPP. This
program is closed with no additional disbursements possible under the current
program. Of the $0.57 billion disbursed, $0.51 billion is still outstanding.
Credit Market Programs
• Public-Private Investment Program (PPIP). This program provides funds and
guarantees for purchases of mortgage-related securities from bank balance sheets.
Purchases and management of the securities is done by private investors who
7 Preferred stock is an equity instrument, but it does not confer any control over the company and typically has a set
dividend rate to be paid by the company; it is similar economically to debt, but accounted for as equity.
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have provided capital to invest along with the TARP funds. The PPIP is closed
with all of the $18.6 billion in disbursed funds having been repaid.
• Term Asset-Backed Securities Loan Facility (TALF). The program was
operated by the Federal Reserve to support the asset-backed security market,8
with TARP funds committed to support the program and absorb initial losses.
$0.1 billion in funds were disbursed to cover expenses but no funds were
disbursed to cover losses. While TALF loans extend to 2015, the earnings from
the program were deemed sufficient to cover any possible losses in January 2013.
Thus, the TARP commitment was cancelled and the disbursement of $0.1 billion
was repaid.
• Section 7(a) Securities Purchase Program. This program supported the Small
Business Administration’s (SBA’s) Section 7(a) loan program through purchases
of pooled SBA guaranteed securities to increase credit availability for small
businesses. It is now closed with none of the $0.37 billion in disbursed funds
outstanding.
Other Programs
• AIG Assistance (Systemically Significant Failing Institution Program).9
TARP preferred share purchases supplemented and ultimately supplanted
assistance to AIG previously provided by the Federal Reserve. The AIG
assistance was restructured in January 2011 with the Treasury’s peak
disbursement equaling $67.84 billion and the government’s ownership totaling
92% of AIG’s common equity. The Treasury sold its equity over time, with the
final equity sold in December 2012. In total, Treasury recognized $13.5 billion in
losses from the TARP equity sales.10
• Automobile Industry Support.11 This program initially provided loans to
support General Motors (GM) and Chrysler and later included preferred share
purchases from the auto financing company GMAC (now renamed Ally
Financial) and a loan for Chrysler Financial. The program ultimately resulted in
majority government ownership of GM (60.8%) and GMAC/Ally Financial
(74%), and minority government ownership of Chrysler (9.9%).
The ownership in GM was reduced to 33.3% in a public share offering in
December 2010 and has been reduced through further equity sales since. It
currently stands at 13.8%, with additional dilution possible due to the exercise of
private options. The U.S. government’s ownership stake in Chrysler was sold to
8 For more information, see CRS Report RL34427, Financial Turmoil: Federal Reserve Policy Responses, by Marc
Labonte.
9 For more detailed information on AIG, see CRS Report R42953, Government Assistance for AIG: Summary and Cost,
by Baird Webel.
10 Approximately one third of the government equity holdings resulted from the Federal Reserve, not from TARP, so
the proceeds from sales of this equity are not recognized as accruing to TARP.
11 For more information, see CRS Report R41978, The Role of TARP Assistance in the Restructuring of General
Motors, by Bill Canis and Baird Webel, CRS Report R41940, TARP Assistance for Chrysler: Restructuring and
Repayment Issues, by Baird Webel and Bill Canis, and CRS Report R41846, TARP Assistance for the U.S. Motor
Vehicle Industry: Unwinding the Government Stake in GMAC, by Baird Webel and Bill Canis.
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Fiat in May 2011. A public share offering of GMAC/Ally Financial shares was
planned in the middle of 2011, but was postponed. No date for sale of the
government’s equity in GMAC/Ally Financial has been announced. The current
total outstanding is $23.6 billion of the $79.7 billion in disbursed funds, with
$11.9 billion in recognized losses today. No new disbursements are possible
under the current program.
Housing Programs12
These programs are unlike the other TARP programs in that they do not result in valuable assets
or income in return for the TARP funding. All of these programs remain open under the contracts
previously agreed to and substantial funds remain to be disbursed:
• Home Affordable Modification Program (HAMP). HAMP pays mortgage
servicers if they modify mortgages to reduce the financial burden on
homeowners. A total of $29.9 billion in disbursements is possible under the
program, with $5.6 billion disbursed.
• Hardest Hit Fund (HHF). HHF provides aid to state housing finance agency
programs in states that have high unemployment rates or experienced the steepest
declines in home prices. Eighteen states and the District of Columbia are
participating in HHF. Of a possible $7.6 billion, $2.6 billion has been disbursed.
• FHA Short Refinance. This program promotes refinancing of mortgages on
“underwater” properties, those on which the mortgage balance is greater than the
current value of the house, if lenders agree to forgive some of the principal
balance owed on the mortgages. Of a possible $1.0 billion, $0.06 billion has been
disbursed.
Current Status and Future of TARP
As detailed above, until October 3, 2010, the Secretary had the authority to purchase or insure
nearly any financial asset under the programs in place on June 25, 2010. This authority has
expired. The legal contracts entered into under the previous authority, however, are still in force.
Thus, TARP funds may still flow out from the Treasury in the future. The programs with the
largest gap between legal commitments and the actual amount disbursed, and thus the largest
potential to grow in the future, are the housing support programs. Table 1 presents figures
reported by the Treasury for obligated and actually disbursed TARP funds.
12 For more information, see CRS Report R40210, Preserving Homeownership: Foreclosure Prevention Initiatives, by
Katie Jones.
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Table 1. Outlay of TARP Funds
($ in billions)
TARP Program
Obligated Amount
Actual Disbursements
Bank Support Programs
$250.46
$245.10
Credit Market Programs
$20.08
$19.09
AIG $67.84
$67.84
Auto Industry Financing Program
$79.69
$79.69
Housing Support
$38.49
$8.25
Totals $456.56
$419.97
Source: June 21 2013 Daily TARP Update.
Note: Figures may not sum due to rounding.
Although the total amount of assets held or insured under TARP was initially capped at $700
billion, and the program was widely reported as a “$700 billion bailout,”13 the actual net cost of
TARP was never likely to approach $700 billion. Unlike most government programs, where funds
are simply expended, TARP funds were generally used in ways that resulted in either the holding
of assets by the government or in some form of income accruing to the government. The
incoming receipts from TARP outlays have taken several forms, including
• funds from the sale of previously purchased assets,
• repayment of principal from loans,
• premium payments for insured assets,
• dividend and interest payments from assets and loans, and
• proceeds from the sale of warrants issued by companies who sold assets to TARP.
Table 2 summarizes these incoming revenues from TARP. According to EESA, revenues and
proceeds from the sale of troubled assets, or from warrants and senior debt instruments, “shall be
paid into the general fund of the Treasury for reduction of the public debt.”14 This statutory
language does not specifically address the dividends paid on the preferred stock held by the
Treasury. Legislation (H.R. 678) to require that dividends fall under the EESA requirements was
introduced, but not enacted, in the 112th Congress.
13 See, for example, “7 Questions about the $700 Billion Bailout,” Time, September 24, 2008, http://www.time.com/
time/politics/article/0,8599,1843941,00.html and “Administration Is Seeking $700 Billion for Wall Street,” New York
Times, September 20, 2008, p. A1.
14 P.L. 110-343, Section 106 (d).
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Table 2. Incoming TARP Funds
($ in billions)
Asset
Capital
Sales/Repayment
Dividends
Warrant
Gains/Other
TARP Program
of Loan Principal
and Interest
Proceeds
Income Total
Bank Support
$235.65 $15.67 $9.34
$10.26
$270.93
Programs
Credit Market
$19.09 $1.24 $0 $2.93
$23.25
Programs
AIG $54.35
$0.64
$0.03
$0.29
$55.31
Auto Industry
$44.17 $5.36 $0 $0.62
$50.15
Financing Program
Housing Support
Not applicable
Not applicable
Not applicable Not applicable Not applicable
Totals $355.26
$22.91
$9.36
$14.11
$399.64
Source: June 21 2013 Daily TARP Update.
Notes: Totals may not sum due to rounding. Housing support programs results in no assets to be sold, nor
other income.
Table 3 summarizes TARP funds that have been disbursed but have not been repaid. Most of
these funds are classified by the Treasury as “outstanding.” This does not mean, however, that the
recipient of these funds is obligated to repay these funds, as is typically the case with, for
example, a loan that is outstanding from a bank to a borrower. Most of the outstanding TARP
funds are embodied in assets, such as common stock, that recipients are not obligated to repay,
instead, the Treasury is expected to sell these assets at a future date and hopefully recoup the
funds that were disbursed. The TARP funds that are classified as a recognized loss, or as written
off, are typically cases where either the asset sales were not sufficient to repay the initial TARP
disbursement or a TARP recipient has failed, and thus is unable repay the funds.
Table 3. TARP Funds Outstanding or Lost
($ in billions)
Recognized Loss/
TARP Program
Amount Outstanding
Written Off
Bank Support Programs
$6.06
$3.39
Credit Market Programs
$0
$0.00
AIG $0
$13.48
Auto Industry Financing
Program
$23.62 $11.90
Housing Support
Not applicable
Not applicable
Totals $29.69
$28.78
Source: June 21 2013 Daily TARP Update.
Notes: Totals may not sum due to rounding. Housing support programs results in no assets to be sold, nor
other income.
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The Costs of TARP
In arriving at an overall cost to the government of TARP, or any similar program, it is important
to account for the difference in time between initial outlay of funds and the receipt of any income.
Some TARP contracts run for five years or more, and the difference in value between a dollar in
2008 and 2013, for example, could be significant. To compare dollar values over time,
economists use present value calculations that reduce costs or income in the future relative to the
present by a discount rate. Present value calculations can be very sensitive to the rate used if the
amount of time involved is large. In preparing the budget cost estimates for TARP, the Office of
Management and Budget (OMB) and the Congressional Budget Office (CBO) are directed by
Section 123 of EESA to adjust their estimates by current market borrowing rates, as opposed to
the borrowing rate paid by Treasury. Using market rates instead of government borrowing rates
increases the net calculated cost of these investments and is meant to better represent the true
economic costs of the programs. The cost estimates for TARP have fallen dramatically since the
program was started. For example, in March 2009, CBO estimated a $356 billion budgetary cost
for TARP. This number fell to $109 billion in March 2010, and the latest CBO estimate is for a
total budgetary cost of $21 billion.15
The various programs under TARP have very different estimated costs at the current time. In
general, the bank support programs and credit market support programs are estimated to produce
a gain for the government. The losses in TARP are primarily estimated to accrue from the support
for AIG, the automakers, and housing.
Table 4 below summarizes recent detailed estimates of TARP’s cost from CBO and the
Administration. The largest difference between the OMB and CBO estimates are in the amounts
expected to be disbursed for the housing support programs.
The cost estimates of TARP are sensitive to financial markets and the state of the economy. The
ultimate cost of the program will depend largely on recouping value from the financial assets held
in TARP. The assets resulting from bank support programs, including warrants and both preferred
and common shares, have turned out to be relatively valuable, thus the estimates show an overall
gain from these programs as the increases in asset values outweigh any losses from defaults. In
the case of the automaker support, however, the estimates are that the assets held by the
government through TARP ultimately will not return enough to recoup the TARP funds put into
the companies, as was the case with the assistance for AIG.
15 Congressional Budget Office, Director’s Blog, April 17, 2009, http://cbo.gov/publication/24884; Report on the
Troubled Asset Relief Program, March 17, 2010, and May 23, 2013, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/
112xx/doc11227/03-17-tarp.pdf and http://cbo.gov/sites/default/files/cbofiles/attachments/44256_TARP.pdf.
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Table 4. Detailed Cost/Gain Estimates for TARP
($ in billions; gain(+)/loss(-))
OMB
CBO
TARP Program
(Data from Dec. 2012) (Data from April 2013
Capital Purchase Program
$15
$17
Targeted Investment Program/Asset
Guarantee Program
$8 $8
Community Development Capital Initiative
$0
$0
Term Asset-backed Lending Facility
$0
$1
Public-Private Investment Program
$2
$2
SBA 7(a) Securities
$0
$0
AIG -$15
-$15
Auto Industry Financing Program
-$20
-$17
Housing Support
-$38
-$16
Totals -$47
-21
Sources: CBO, Report on the Troubled Asset Relief Program—May 2013; OMB, Budget of the United States
Government, Fiscal Year 2014: Analytical Perspectives, April 10, 2013.
Notes: Totals may not sum due to rounding. Figures marked “$0” are rounded from between -$500 million and
+$500 million. AIG also received assistance through the Federal Reserve, which resulted in substantial asset
holdings and income. These cost estimates do not include gains resulting from this assistance.
The 113th Congress and TARP
In addition to the numerous oversight mechanisms in the original statute, Congress has continued
to directly oversee various aspects of TARP through committee hearings, with the House
Committee on Oversight and Government Reform creating a subcommittee specifically focused
on “TARP and Financial Services” during the 112th Congress. In the 113th Congress, the House
Committee on Oversight and Government Reform’s Subcommittee on Economic Growth, Job
Creation, and Regulatory Affairs held a hearing on February 26, 2013, entitled “Bailout Rewards:
The Treasury Department’s Continued Approval of Excessive Pay for Executives at Taxpayer-
Funded Companies.”
Ownership of Private Companies
Government ownership of common equity in private companies was not a general goal of EESA
although it was expected that the government would be compensated for the assistance given to
companies under TARP. In some cases, this compensation for TARP assistance has resulted in
government holdings of common stock in amounts that typically would result in the government
having a controlling interest in these companies. The government, however, has generally
exercised little of the ownership control inherent in these large stakes. Common equity in
companies has typically been accepted in return for TARP assistance in order to strengthen the
companies’ capital positions going forward. Such equity also provides a potential financial upside
to the taxpayers if firms have a strong recovery, but has potential downside if firms do not recover
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strongly. Outstanding outlays, such as loans, that have been converted to common equity are no
longer directly owed by the company to the government.
In the case of Citigroup, which converted $25 billion of preferred shares into common shares, the
outcome for the government was positive as the share price rose after the conversion, resulting in
approximately $6.85 billion in capital gains for taxpayers. Ownership of Chrysler equity,
however, turned out less positively for the government with the government realizing a $1.33
billion loss after the sale to Fiat. The ownership of AIG equity through TARP resulted in the
government realizing a $13.48 billion loss, though this TARP equity loss was offset by a $17.55
billion gain from AIG equity holdings originating with the Federal Reserve. The outcome for GM
remains uncertain, although stock prices would have to rise substantially from current levels to
result in an overall gain for TARP. No sales of the common ownership stake in GMAC/Ally
Financial have taken place.
Table 5 summarizes the current status of government ownership in large financial institutions.
Table 5. Companies with Large Government Common Ownership Stakes
($ in billions)
Current
Amount
Government Total TARP
Recouped
Losses
Total
Ownership
Assistance
by the
Written Off Outstanding
Company
Share
Receiveda
Treasuryb
or Realized
Outlaysc
AIG
0%
$67.8 $55.3 $13.5 $0
GM 13.8%
$50.2
$33.0
$9.0
$9.0
GMAC/Ally
73.8% $17.2 $6.1 $0 $14.6
Financial
Chrysler 0% $10.9 $9.6 $2.9 $0
Citigroup 0% $45 cash;
$57.0 $0 $0
$5 guarantee
Sources: June 21, 2013, TARP Daily Update, Various TARP 105(a) Reports, TARP Dividend and Interest
Reports, and U.S. Treasury press releases.
a. Some of these companies received commitments for funds greater than the reported amounts, or other
TARP assistance. These figures are actual dollars received by, or spent on behalf of, companies. In the case
of GM and Chrysler, this includes before, during, and after their bankruptcies, and also includes amounts
that went to support third party suppliers to GM and Chrysler.
b. Includes recoupment through bankruptcy proceeds, repayments, interest, dividends, and fees.
c. Includes outlays converted to common equity and thus not currently owed by the company to the
government.
TARP and the Dodd-Frank Act16
Unlike EESA, which was a temporary response to the immediate financial crisis, the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was a broad bill that
16 P.L. 111-203, see CRS Report R41350, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Issues
and Summary, coordinated by Baird Webel.
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permanently changed many parts of the U.S. financial regulatory system. The act included a
relatively short amendment to EESA in Title XIII, entitled the Pay It Back Act. Section 1302 of
Dodd-Frank made three primary changes to EESA:
• reduced the overall authorization to purchase from nearly $700 billion17 to $475
billion;
• removed the implicit authority for the Secretary to reuse TARP funds when TARP
assets are sold;18 and
• limited the authorities under the act to programs or initiatives initiated prior to
June 25, 2010.
As of June 30, 2010, the Treasury reported that it planned to spend approximately $537 billion on
the various programs, with $491 billion committed under signed contracts and $385 billion
actually disbursed.19 The July 21, 2010, enactment of the $475 billion limit in the Dodd-Frank
Act thus required Treasury to reduce the amounts planned for TARP by more than $60 billion and
the legal commitments under TARP by more than $16 billion. CBO scored the TARP changes in
the Dodd-Frank Act as resulting in a decrease in direct spending of $11 billion in 2010.20 The
TARP changes reported by Treasury following the Dodd-Frank Act appear below in Table 6.
Under the broad authorities granted by EESA, Treasury could unilaterally change the planned
program allocations. Following the Dodd-Frank Act, this authority was limited to the difference
between the total of Treasury’s plans and the total of the signed contracts, approximately $21
billion as of July 31, 2010.
17 The initial $700 billion had been reduced by $1.26 billion in P.L. 111-22.
18 Section 115(a)(3) of EESA limits the Secretary’s authority to purchase or guarantee assets to $700 billion
“outstanding at any one time.” While the interpretation was never subject to determination by the courts, this language
can be read to allow total purchase of assets beyond $700 billion if assets are sold before additional purchases are
made. Section 1302 of Dodd-Frank removed the phrase “outstanding at any one time.”
19 June 2010 TARP 105(a) Report.
20 Congressional Budget Office, CBO Estimate of the Net Deficit Effects of H.R. 4173, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, June 29, 2010.
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Table 6. TARP Changes Following the Dodd-Frank Act
($ in billions)
Planned
Change
Planned
Legal
Allocation Prior
Following
Allocation
Commitments
TARP Program
to Dodd-Frank
Dodd-Frank
July 31, 2010
July 31, 2010
Capital Purchase Program
$204.9
$0.0
$204.9
$204.9
Targeted Investment Program
$40.0
$0.0
$40.0
$40
Asset Guarantee Program
$5.0
$0.0
$5.0
$5.0
AIG (Systemically Significant Failing
Institutions)
$69.8 $0.0
$69.8
$69.8
Term Asset-Backed Securities Program
$20.0
-$15.7
$4.3
$4.3
SBA Section 7(a)
$1.0
-$0.6
$0.4
$1.0a
Community Development Capital
Initiative
$0.8 $0.0
$0.8
Smal Business Lending Fund
$30
-$30.0b $0.0 $0.0
Public Private Investment Program
$30.4
-$7.9
$22.4
$22.4
Automotive Industry Financing
Program
$84.8 -$3.1
$81.8
$81.8
Housing/HAMP $48.7
-$3.1
$45.6
$30.25
Totals $535.5
-60.5
$475.0
$454
Source: July 2010 TARP 105(a) Report.
Notes: Figures may not add due to rounding.
a. Treasury’s reporting did not separate the legal commitments for the two programs.
b. The Administration proposed creating a similar fund outside of TARP. See CRS Report R41385, Small
Business Legislation During the 111th Congress, by Robert Jay Dilger and Gary Guenther.
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Appendix. Details of TARP Programs
Bank Support Programs
Capital Purchase Program and Capital Assistance Program
Under the Capital Purchase Program (CPP), $125 billion in capital was immediately provided to
the nine largest banks (which became eight after a merger), with up to another $125 billion
reserved for smaller banks that might wish to apply for funds through their primary federal
banking regulator. This capital was provided in the form of preferred share purchases by TARP
under contracts between the Treasury and banks. The initial contracts with the largest banks
prevented these banks from exiting the program for three years. The contracts included dividend
payments to be made on the preferred shares outstanding and the granting of warrants to the
government. By the end of 2008, the CPP had 214 participating banks with approximately $172.5
billion in share purchases outstanding.
The Obama Administration and the 111th Congress implemented changes to the CPP. EESA was
amended, placing additional restrictions on participating banks in the existing CPP contracts, but
also allowing for early repayment and withdrawal from the program without financial penalty.21
With the advent of more stringent executive compensation restrictions for TARP recipients, many
banks began to repay, or attempt to repay, TARP funds. According to Treasury reports, by June
30, 2009, $70.1 billion of $203.2 billion CPP funds had been repaid; by December 31, 2009,
$121.9 billion of $204.9 billion had been repaid; and by December 31, 2010, $167.93 billion of
$204.9 billion had been repaid.
The new Administration also announced a review of the banking system, in which the largest
participants were subject to stress tests to assess the adequacy of their capital levels. Satisfactory
performance in the stress test was one regulatory requirement for large firms that wished to repay
TARP funds. Large firms that appear too fragile in the stress test would be required to raise
additional capital, and the firms would have the option of raising that capital privately or from the
government through a new Capital Assistance Program. No funding was provided through the
Capital Assistance Program, although GMAC, formerly General Motors’ financing arm, received
funding to meet stress test requirements through the Automotive Industry Financing Program
(discussed below). In addition, Citigroup, one of the initial eight large banks receiving TARP
funds, agreed with the government to convert its TARP preferred shares into common equity to
meet stress test requirements (see discussion of Citigroup below).
CPP profits stem from dividend payments and warrants received from recipients, and capital
gains in limited cases when shares are sold for more than face value (the standard CPP shares are
resold at face value). Losses stem from failure to repay in part or full. The ultimate profitability of
the program will be determined by the balance between the two.
Another source of CPP profits are the proceeds from the warrants received from the companies.
Treasury has not generally exercised warrants to take common stock in CPP recipients. Following
the contracts initially agreed upon, Treasury has allowed institutions to purchase their warrants
21 Title VII of the American Recovery and Reinvestment Act of 2009 (P.L. 111-5,123 Stat. 115).
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directly upon repayment of preferred shares, as long as both sides can reach an acceptable price.
To reach an initial offering price, Treasury is using complex option pricing models to price the
warrants that require assumptions to be made about future prices and interest rates. Since these
pricing models are by their nature uncertain, some critics urge Treasury to auction the warrants on
the open market (allowing the issuing firm to bid as well) to ensure that Treasury receives a fair
price for them. Open auctions have been used, but only when an agreement between the Treasury
and the firms cannot be reached.
CPP also earns income from dividends with a rate of 5% for the first five years, and 9%
thereafter. (For S-Corp banks, the dividend rate is 7.7% for the first five years and 13.8%
thereafter.)
Realized losses to date on the CPP preferred shares have been relatively small. As of June 21,
2013, Treasury reported $3.39 billion in write-offs and realized losses from the CPP. The majority
of this amount was due to the failure of CIT Group, which had $2.3 billion in TARP shares
outstanding when it failed.
Table A-1 below summarizes the CPP, including current and peak asset holdings, losses or gains,
and conditions of the program.
Table A-1. Capital Purchase Program
Federal Government
Terms and Conditions
Latest
Asset
Expected
Asset
Holdings
Total
Gains(+)/
Dividend
Holdings
at Peak
Income Losses(-)
Rate
Warrants Expiration
Date
$5.56
$198.8
$26.68
+$17
5% for
15% of
Preferred Shares
billion
billion
billion
billion
first 5
preferred
outstanding until repaid.
(March
(less
(CBO)
years, 9%
shares (5%
No new
30, 2009)
$3.01
thereaftera immediately
contracts/modifications
billion in
exercised for
after October 3, 2010.
losses)
privately held
banks)
Source: June 21, 2013, Daily TARP Update; September 2012 TARP 105(a) Report; CBO, Report on the Troubled
Asset Relief Program—May 2013; Various TARP Transactions Reports.
Notes: Data includes preferred shares to Citigroup and Bank of America under CPP, which are also detailed in
sections on assistance to those companies below. The amount disbursed, approximately $205 billion, is greater
than the $198.8 billion of peak asset holdings because some repayments occurred prior to disbursement of the
full amount.
a. For S-Corp banks, the dividend rate is 7.7% for the first five years and 13.8% thereafter.
Community Development Capital Initiative
The Community Development Capital Initiative (CDCI) operated somewhat like the CPP in that
it purchased preferred shares from financial institutions; in some cases institutions were permitted
to convert previous CPP preferred shares to CDCI preferred shares. The program was specifically
focused on institutions that serve low-income, underserved communities and small businesses.
Treasury purchased preferred shares from institutions that qualified for the CDCI up to an amount
equal to 5% of the institutions’ risk-weighted assets for banks and thrifts or 3.5% of total assets
for credit unions. These preferred shares pay an initial dividend rate of 2%, which will increase to
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9% after eight years. Unlike the CPP, no warrants in the financial institutions were included.
Purchases under the program were completed in September of 2010 with approximately $210
million new shares purchased. In addition, approximately $360 million of shares were converted
from CPP shares.
Table A-2. Community Development Capital Initiative
Federal Government
Terms and Conditions
Current or
Funds
Expected
Interest/
TARP Funds
Disbursed at
TARP
Gains(+)/
Dividend
Expiration
Outstanding
Peak
Income
Losses(-)
Rate Warrants Date
$570 million
$570 million
$30 million
-$140 million
2% (9% after
none No
new
(Treasury)
8 years)
purchases
after October
2010.
Source: June 21, 2013, TARP Daily Update; May 2013 TARP 105(a) Report.
Note: Of the disbursed funds, $210 million are new shares and $360 million are shares transferred from CPP.
Targeted Investment Program and Asset Guarantee Program
The Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP) were only used
as part of a package to aid two large banks, Citigroup and Bank of America, which were also
large recipients of CPP funds. The combined assistance for these banks is addressed below, rather
than treat the TIP and AGP as separate programs.
Citigroup (CPP/TIP/AGP)
On November, 23, 2008, the Treasury, Federal Reserve, and FDIC announced a joint intervention
in Citigroup, which had previously been a recipient of $25 billion in TARP Capital Purchase
Program funding, to “[support] financial stability.”22 This exceptional intervention consisted of an
additional $20 billion purchase of preferred shares through the TARP Targeted Investment
Program and a government guarantee for a pool of $306 billion in Citigroup assets (reduced to
$301 billion when the guarantee was finalized on January 16, 2009) through the TARP Asset
Guarantee Program, the FDIC, and the Federal Reserve. Citigroup paid the federal government a
fee for the guarantee in the form of $4 billion in trust preferred securities paying an 8% dividend
rate. The Treasury also received warrants in both of these transactions.
On February 27, 2009, Citigroup and Treasury officials agreed that the Treasury Department
would convert $25 billion of its TARP CPP investment in Citigroup preferred stock into Citigroup
common stock and cancel the warrants taken by Treasury under the CPP. After this conversion,
the U.S. government owned approximately 33.6% (7.7 million shares) of Citigroup common
stock. The conversion of preferred shares to common stock worsened the government’s priority
on Citigroup’s assets in the event of liquidation, but improved certain capital ratios for the
company and relieved it of the obligation to pay dividends to the government, as it had previously
22 U.S. Treasury, “Joint Statement by Treasury, Federal Reserve, and FDIC on Citigroup,” press release hp-1287,
November 23, 2008.
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with the preferred shares. The conversion exposed the government to more potential risk as well
as to potential upside reward. The government’s preferred shares could only be redeemed at par
value, regardless of the performance of the company, while the government’s holdings of
common stock rose and fell in value based on the market valuation of the company.
In December 2009, Citigroup and the Treasury reached an agreement to repay the outstanding
$20 billion in preferred securities and to cancel the asset guarantee. As part of this agreement,
Treasury agreed to cancel $1.8 billion worth of the $4 billion in trust preferred securities
originally paid as a fee for the guarantee. Citigroup repurchased the outstanding AGP trust
preferred securities on September 30, 2009. While the asset guarantee was in place, no losses
were claimed and no federal funds were paid out.
In April 2010, the Treasury began selling its common share holdings in Citigroup. The shares
were sold in tranches through 2010, with a total of 4.1 million shares being sold by the end of
September 2010. Treasury announced the completion of the sales early in December 2010. The
average sales price for the Treasury shares was $4.14 per share compared with an initial
conversion price of $3.25 per share. The gain from the common stock sales was approximately
$6.9 billion, along with approximately $2.2 billion from the sales of the remaining trust preferred
securities granted as a fee from the AGP, $2.9 billion in interest and dividends, and $54 million
from the sale of warrants for a total nominal gain (i.e., not discounted for market risk) from the
Citigroup intervention of $12.1 billion.23
Table A-3 summarizes the assistance for Citigroup through the CPP, TIP, and AGP, including
current and peak asset holdings, losses or gains, and conditions of the program.
Table A-3. Citigroup Support (CPP/TIP/AGP)
Federal Government
Terms and Conditions
Current
Asset
Realized
Subsequent
Asset
Holdings/
Capital
Conversion/
Holdings/
Guarantees
Total
Gains(+)/
Warrants Amendment
Expiration
Program
Guarantees
at Peak
Income
Losses(-) Dividend/Fee
Issued
Date
Capital
$0 $25
billion
$0.9
billion $6.9
preferred: 5%
210 million Converted
None,
Purchase
(dividends);
billion
dividend for
with a
preferred
shares
Program
$.05 billion
first 5 years,
strike
shares to
outstanding
(warrants)
9% thereafter;
price of
common
until sold or
common: none $17.85 per stock,
repurchased.
share
subsequently
sold for $31.9
billion.
Targeted
$0
$20 billion
$1.6 billion
$0 8%
dividend 188,5 Converted
None,
Investment
trust
(dividends);
million
preferred
shares or
Program
preferred
$0.19
with a
shares to trust securities
securities
billion
strike
preferred
outstanding
(until Dec.
(warrants)
price of
securities.
until sold or
2009)
$10.61
repurchased.
23 U.S. Treasury, “Taxpayers Receive $10.5 Billion in Proceeds Today From Final Sale of Treasury Department
Citigroup Common Stock,” press release, December 10, 2010, http://www.financialstability.gov/latest/
pr_12102010.html, and TARP Transactions Report, January 26, 2011.
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Federal Government
Terms and Conditions
Current
Asset
Realized
Subsequent
Asset
Holdings/
Capital
Conversion/
Holdings/
Guarantees
Total
Gains(+)/
Warrants Amendment
Expiration
Program
Guarantees
at Peak
Income
Losses(-) Dividend/Fee
Issued
Date
Asset
$0
$301 billion
$0.44
$2.2
following
66,5
$1.8 billion
Nov. 2018
Guarantee
(up to
billion
billion
termination,
million
canceled upon (residential
Program
$244.8
(dividends);
$2.2 billion in
with a
termination of assets)/Nov.
billion of
$0.07
trust preferred strike
Asset
2013 (non-
losses borne
billion
securities with
price of
Guarantee.
residential
by Fed,
(warrants);
8% dividend
$10.61 per
assets)
Treasury and $50 million
share
FDIC) (until
termination
Dec. 2009)
fee to Fed
Sources: June 21, 2013, Daily TARP Update; October 2011 TARP 105(a) Report; October 2011 TARP
Dividends and Interest Report; SIGTARP, Extraordinary Financial Assistance Provided to Citigroup, Inc., January 13,
2011; U.S. Treasury press release, December 10, 2010.
Note: Assistance to Citigroup through CPP is also included in the CPP Table.
Bank of America (CPP/TIP/AGP)
On January 16, 2009, the Treasury, the Federal Reserve, and the FDIC announced a joint
intervention in Bank of America, which had previously been a recipient of $25 billion in TARP
Capital Purchase Program funds,24 “as part of its commitment to support financial market
stability.”25 This exceptional assistance included the purchase of an additional $20 billion of Bank
of America preferred shares through the TARP Targeted Investment Program26 and a joint
guarantee on a pool of up to $118 billion of Bank of America’s assets (largely acquired through
its merger with Merrill Lynch) through the TARP Asset Guarantee Program, the FDIC, and the
Federal Reserve. Bank of America was to pay the federal government a fee for the guarantee in
the form of $4 billion in preferred stock with an 8% dividend rate and warrants to purchase
common stock worth $2.4 billion at the time of the agreement.
Although the asset guarantee was announced in January 2009, a final agreement was never
signed. On September 21, 2009, Bank of America announced that it had negotiated a $425 million
termination fee that allowed it to withdraw from the AGP, canceling the warrants and preferred
shares issued for the program.
On December 9, 2009, Treasury announced that Bank of America had repurchased the $45 billion
in preferred stock previously purchased under TARP. The warrants issued under the CPP and the
TIP were sold at auction by the government in March 2010 for approximately $1.6 billion. No
government assistance to Bank of America remains outstanding.
Table A-4 summarizes the support for Bank of America through the CPP, TIP, and AGP,
including current and peak asset holdings, losses or gains, and conditions of the support.
24 As part of this transaction, the government received warrants for 121,792,790 shares with a strike price of $30.79.
25 U.S. Treasury, “Treasury, Federal Reserve, and the FDIC Provide Assistance to Bank of America,” press release
hp1356, January 16, 2009.
26 As part of this transaction, the government received warrants for 150,375,940 shares with a strike price of $13.30.
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Table A-4. Bank of America Support (CPP/TIP/AGP)
Federal Government
Terms and Conditions
Current
Asset
Realized
Asset
Holdings/
Capital
Holdings/
Guarantees
Total
Gains(+)/
Dividend
Expiration
Program
Guarantees
at Peak
Income
Losses(-) Rate/Fee Warrants
Date
Capital
$0 $25
billion
$1.3 billion
$0 5%
for 121,792,790 None,
Purchase
(until Dec.
(dividends);
first 5
warrants
shares
Program
2009)a
$0.3 billion
years, 9%
sold for
outstanding
(warrants)
thereafter
$0.3 billion.
until
repurchased.
Targeted
$0 $20
billion
$1.4 billion
$0 8%
150,375,940
None,
Investment
(until Dec.
(dividends):
warrants
shares
Program
2009)
$1.25
sold for
outstanding
billion
$1.25
until
(warrants)
billion
repurchased.
Asset
$0 $118
billion
$425
n/a n/a n/a
Jan.
2019
Guarantee
(up to $97.2
million
(residential
Program
billion of
termination
assets)/Jan.
losses borne
fee to
2014 (non-
by Fed,
government
residential
Treasury and ($57 million
assets).
FDIC) (never termination
finalized)
fee to Fed)
Source: October 12, 2012, Daily TARP Update; October 2011 TARP 105(a) Report; October 2011 TARP
Dividends and Interest Report; Congressional Budget Office, Budget and Economic Outlook, January 2010;
SIGTARP, Quarterly Report to Congress, January 30, 2010; OMB, Analytical Perspectives, FY2011 President’s Budget,
Table 4-7; February 2010.
Notes: Assistance to Bank of America through CPP is also included in the CPP Table.
a. Of the $25 billion of preferred shares, $10 billion were originally issued by Merrill Lynch, which
subsequently merged with Bank of America.
Credit Market Programs
Public Private Investment Program
On March 23, 2009, Treasury announced the Public Private Investment Program (PPIP). PPIP as
envisioned consisted of two asset purchase programs designed to leverage private funds with
government funds to remove troubled assets from bank balance sheets. Perhaps closer to the
original conception of TARP than other TARP programs, PPIP dedicated TARP resources as
equity to (1) acquire troubled loans in a fund partially guaranteed by the FDIC and (2) acquire
troubled securities in a fund designed to be used with loans from the Federal Reserve’s TALF
program or TARP. Both funds would match TARP money with private investment, and profits or
losses would be shared between the government and the private investors. Unlike the original
conception of TARP, private investors would choose the assets to purchase and manage the funds
and the day-to-day disposition of assets. Treasury originally envisioned assets purchases through
PPIP would be as high as $1 trillion (using as much as $200 billion in TARP funds), but a
maximum of $22.4 billion was committed to the program.
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Legacy Loan Program
A legacy loan is a problem loan that is already on a bank’s balance sheet, as opposed to a
potential new loan or refinance. The Legacy Loan Program was intended to reduce uncertainty
about bank balance sheets and draw private capital to the financial services sector by providing
FDIC debt guarantees and Treasury equity co-investment to fund private-public entities
purchasing problem loans from banks. The program, however, was not implemented beyond a
single pilot legacy loan sale reported by the FDIC on September 30, 2009. In this pilot sale, the
FDIC auctioned a portfolio of residential mortgages with unpaid principal of $1.3 billion from a
bank that the FDIC had taken into receivership. Residential Credit Solutions placed a winning bid
of $64 million to receive a 50% stake in this pool, and financed the purchase with $728 million of
debt guaranteed by the FDIC.27
Legacy Securities Program
The larger part of the PPIP, the Legacy Securities Program, was designed to deal with existing
mortgage-related securities on bank balance sheets. Private investment fund managers applied to
Treasury to pre-qualify to raise funds to participate in the program. Approved fund managers that
raised private equity capital received matching Treasury capital and an additional loan to the fund
that matched the private capital (thus, for example, a fund that raised $100 had a total of $300
available to invest). In addition to this basic transaction, Treasury had the discretion to allow
another matching loan so that a fund raising $100 could have made a total of $400 available for
investment. The funds are to be used to invest in non-agency MBS that were originally rated
AAA. (Agency MBS refer to loans issued by GSEs, such as Fannie Mae and Freddie Mac, and
non-agency MBS refers to mortgage-related securities issued by private financial institutions,
such as investment banks.)
Nine funds were pre-qualified by the Treasury in June 2009. In early January 2010, however, one
of the funds reached a liquidation agreement with Treasury and was wound down.28 By March 31,
2013, another five of the funds had been effectively wound down and all $18.6 billion of the
disbursed funds had been returned.29
27 Federal Deposit Insurance Corporation, “Legacy Loans Program – Winning Bidder Announced in Pilot Sale,” press
release, September 16, 2009, http://www.fdic.gov/news/news/press/2009/pr09172.html. FDIC reports seven other
public-private partnership transactions since 2008, but classifies only the September 2009 transaction as a PPIP
transaction.
28 December 2009 TARP 105(a) Report, pp. 15, 30-32.
29 U.S. Treasury, Legacy Securities Public-Private Investment Program Update, May 8, 2013, p. 3, available at
http://www.treasury.gov/initiatives/financial-stability/reports/Documents/PPIP%20Report%20033113%20Final.pdf.
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Table A-5. Public Private Investment Program
Federal Government
Terms and Conditions
Outstanding
Funds
Current or
Funds
Disbursed/
Expected
Interest/
Disbursed/
Guaranteed
Total
Gains(+)/
Dividend
Expiration
Program Guaranteed
at Peak
Income
Losses(-)a
Rate Warrants Date
Legacy
$0 $18.63
billion
$3.72
billion
LIBOR plus
yes (amount
10 years from
Securities
“applicable
unspecified)
creation of
margin”
fund.
$2 billion
Legacy
$728 million
$728 million
n/a
(CBO)
no contracts
yes (amount
No new
Loans
unspecified)
contracts/
modifications
after Oct. 3,
2010.
Sources: June 21, 2013, Daily TARP Update; May 2013 TARP 105(a) Report; U.S. Treasury, Legacy Securities
Public-Private Investment Program Update, May 8, 2013; Congressional Oversight Panel September 2009 Oversight
Report; SIGTARP, Quarterly Report to Congress, January 30, 2010; CBO, Report on the Troubled Asset Relief
Program—May 2013; Data on Structured Loan Sales from FDIC.
Notes: For legacy securities, funds disbursed to date (not committed). For legacy loans, loans guaranteed.
a. Expected losses for Legacy Securities and Legacy Loans combined.
Term Asset-Backed Securities Loan Facility
The Term Asset-Backed Securities Loan Facility (TALF) is a Fed program to assist the asset-
backed security market, with TARP acting as a backstop in case of any losses. TALF was
designed so that income accrues to the Fed with possible losses and some expenses accruing to
the Treasury. Initial obligation of TARP funds to support TALF was $4.0 billion, with $0.1 billion
disbursed. The TARP commitment was reduced to $1.4 billion in June 2012 and was cancelled in
January 2013 as the fees accrued from the program at this time were greater than the amount of
TALF loans still outstanding.30 The initial $0.1 billion in disbursements from TARP have been
repaid.
Table A-6. Term Asset-Backed Securities Loan Facility
Federal Government
Terms and Conditions
Funds
Current or
Funds
Disbursed/
Expected
Interest/
Disbursed/
Guaranteed
Total
Gains(+)/
Dividend
Expiration
Program Guaranteed
at Peak
Income
Losses(-)a
Rate
Warrants
Date
TALF
$0
$100 million
$0
$600 million
n/a none
No
new
(Treasury)
purchases
after June 30,
2010.
Sources: June 21, 2013, Daily TARP Update; May 2012 TARP 105(a) Report; Federal Reserve Bank of New
York.
30 See http://www.federalreserve.gov/newsevents/press/monetary/20130115b.htm.
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Section 7(a) Securities Purchase Program
This program supported the Small Business Administration’s (SBA) Section 7(a) loan program
through purchasing pooled SBA guaranteed securities backed by private loans to small
businesses.31 Beginning in March 2010, Treasury purchased a total of $368 million in securities
guaranteed by the SBA. Purchases ended in October 2010 with the expiration of the TARP
authority and all securities have been sold or matured.
Table A-7. Section 7(a) Securities Purchase Program
Federal Government
Terms and Conditions
Current
Funds
Current or
Funds
Disbursed/
Expected
Interest/
Disbursed/
Guaranteed
Total
Gains(+)/
Dividend
Expiration
Program Guaranteed
at Peak
Income
Losses(-)a
Rate Warrants Date
Section
$0
$368 million
$9 million
$0
floating none
No
new
7(a)
(Treasury)
purchases
Securities
after Oct.
2010.
Sources: October 12, 2012, Daily TARP Update; September 2012 TARP 105(a) Report; SIG TARP Quarterly
Report to Congress, April 25, 2012.
U.S. Automaker Assistance32
In addition to financial firms, non-financial firms also sought support under TARP, most notably
U.S. automobile manufacturers.33 While EESA specifically authorized the Secretary of the
Treasury to purchase troubled assets from “financial firms,” the legislative definition of this term
did not mention manufacturing companies.34 After specific legislation for the automakers failed to
clear Congress,35 the Bush Administration turned to TARP for funding.
31 For additional information on this program, see CRS Report R41146, Small Business Administration 7(a) Loan
Guaranty Program, by Robert Jay Dilger.
32 This section was prepared with the assistance of Bill Canis, CRS specialist in Industrial Organization and Business.
For a comprehensive analysis of federal financial assistance to U.S. automakers, see CRS Report R41940, TARP
Assistance for Chrysler: Restructuring and Repayment Issues, by Baird Webel and Bill Canis; CRS Report R41846,
TARP Assistance for the U.S. Motor Vehicle Industry: Unwinding the Government Stake in GMAC, by Baird Webel
and Bill Canis; and CRS Report R41978, The Role of TARP Assistance in the Restructuring of General Motors, by Bill
Canis and Baird Webel. Statistics in the section are taken from Congressional Oversight Panel, September Oversight
Report: The Use of TARP Funds in the Support and Reorganization of the Domestic Automotive Industry, September 9,
2009, available at http://cop.senate.gov/documents/cop-090909-report.pdf and from various reports and contracts
posted by the U.S. Treasury at http://www.treasury.gov/initiatives/financial-stability/investment-programs/aifp/Pages/
autoprogram.aspx.
33 See, for example, Statement by Secretary of the Treasury Henry Paulson in U.S. Congress, House Committee on
Financial Services, Oversight of Implementation of the Emergency Economic Stabilization Act of 2008 and of
Government Lending and Insurance Facilities: Impact on the Economy and Credit Availability, 110th Cong., 2nd sess.,
November 18, 2008.
34 P.L. 110-343, Division A, Section 3.
35 In December 2008, the House of Representatives passed H.R. 7321, authorizing the use of certain Department of
Energy funds as bridge loans to GM and Chrysler. Passed by a vote of 237-170, the bill was not acted upon in the
Senate.
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Troubled Asset Relief Program (TARP): Implementation and Status
On December 19, 2008, the Bush Administration announced it was providing support through
TARP to General Motors and Chrysler under the Automotive Industry Financing Program (AIFP).
The initial package included up to $13.4 billion in a secured loan to GM and $4 billion in a
secured loan to Chrysler. In addition, $884 million was lent to GM for its participation in a rights
offering by GMAC as GM’s former financing arm was becoming a bank holding company. On
December 29, 2008, the Treasury announced that GMAC also was to receive a $5 billion capital
injection through preferred share purchases.
After January 21, 2009, the Obama Administration continued assistance for the automakers,
including support for the automaker warranties under the AIFP (so that consumers would not be
discouraged from purchasing cars during the restructuring), and for third-party suppliers to the
automakers (the Automotive Supplier Support Program). Additional loans for GM and Chrysler
were made before and during the two companies’ bankruptcies, and GMAC received additional
capital through preferred share purchases as well. At the end of 2009, GM had received
approximately $50.2 billion in direct loans and indirect support; Chrysler had received $10.9
billion in loans and indirect support; GMAC had received $17.2 billion in preferred equity
purchases and loans; and Chrysler Financial had received $1.5 billion in loans. Some of this
assistance is still owed by the companies, some has been repaid, and some has been converted
into common equity in the company receiving assistance.
As of June 21, 2013, TARP support for the auto industry totaled approximately $79.7 billion
disbursed, with $44.17 billion repaid and $5.98 billion in income. Approximately $11.9 billion
has been written off or taken as a realized loss and $23.62 billion of assistance is outstanding. The
assistance outstanding takes the form of (1) government ownership of 13.8% of post-bankruptcy
GM; and (2) government ownership of 73.8% government ownership of GMAC (which has
changed its name to Ally Financial), with $5.9 billion in preferred equity outstanding. In addition,
$849 million in loans to Old (pre-bankruptcy) GM and $1.8 billion in loans to Old (pre-
bankruptcy) Chrysler have not been repaid and neither amount appears likely to be repaid. The
loan to Chrysler Financial was completely repaid with interest.
For the outstanding assistance, the extent to which the government recoups its TARP funds will
depend substantially on how much is eventually received when the government sells its equity
interests.36 OMB estimates of assistance to the auto industry made with December 2012 data are
for a lifetime cost of $20 billion, whereas CBO estimated the subsidy cost to be $17 billion as of
April 2013.
Table A-8 summarizes the support for the automakers, including current and peak asset holdings
or loan amounts, losses or gains, and conditions of the assistance.
36 See CRS Report R41978, The Role of TARP Assistance in the Restructuring of General Motors, by Bill Canis and
Baird Webel.
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Troubled Asset Relief Program (TARP): Implementation and Status
Table A-8. Government Support for the Auto Industry
Federal Government
Terms and Conditions
Current or
Latest
Total
Expected
Dividend/
Beneficiary/
Balance
Assistance
Total
Gain(+)/
Interest
Subsequent Expiration
Program
Owed
at Peak
Income
Loss(-)
Rate
Conversion
Date
General
$0 (new GM); $50.2 billion
$0.76 billion
-$9.0 billion
LIBOR + 5% Loan
January
Motors
$838 million
combined
(actual capital
converted
2015 ( new
(old GM);
loans (not
loss due to
into 60.8 %
GM loan);
$9.0 billion
including
stock sale)
of common
December
outstanding,
$884 million
equity and
2011 (old
but not owed
loan for
preferred
GM loan)
by new GM.
GMAC rights
stock
offering)
GMAC/Ally
$5.9 billion
$16.3 billion
$3.53 billion
Not Reported
9%
Loan and
No
Financial
preferred
preferred
preferred
expiration
equity; $8.7
equity and
shares
billion
$884 million
converted
outstanding
loan through
into 73.8% of
but not owed
GM.
common
by Ally.
equity
Chrysler $0
$10.9
billion
$1.6 billion
-$2.9 billion
LIBOR +
9.9% of
June 2017
loan;
(actual loss)
7.9% ;
common
(new
($2.1 billion
LIBOR +
equity
Chrysler
never drawn)
3%;
loan);
LIBOR + 5%
January
2012 (old
Chrysler
loan)
Chrysler
$0 $1.5
billion
$7 million
n/a
None
January
Financial
loan
2014
Sources: June 21, 2013, Daily TARP Update; May 2013 TARP 105(a) Report; September 2012 TARP Dividends
and Interest Report; Congressional Oversight Panel, September 2009 Oversight Report; CBO, Report on the
Troubled Asset Relief Program—May 2013; SIGTARP, Quarterly Report to Congress, September 30, 2010.
Note: LIBOR = London Interbank Offered Rate.
American International Group
In the fall of 2008, American International Group (AIG) was a federally chartered thrift holding
company regulated by the Office of Thrift Supervision (OTS) at the holding company level, with
a broad range of businesses, primarily insurance subsidiaries, which are state-chartered and state-
regulated.37 Facing losses on various operations, AIG experienced a significant decline in its stock
price and downgrades from the major credit rating agencies. These downgrades led to immediate
demands for significant amounts of collateral (approximately $14 billion to $15 billion in
collateral payments, according to contemporary press reports).38 As financial demands on the
37 For a comprehensive analysis of federal assistance to AIG, see CRS Report R40438, Federal Government Assistance
for American International Group (AIG), by Baird Webel.
38 See, for example, “U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up,”
Wall Street Journal, September 17, 2008, pp. A1-A6.
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Troubled Asset Relief Program (TARP): Implementation and Status
company mounted, bankruptcy appeared a possibility, as had occurred with Lehman Brothers on
September 15, 2008. Many feared that AIG was “too big to fail” due to the potential for
widespread disruption to financial markets resulting from such a failure.
On September 16, 2008 (prior to the existence of TARP), the Fed announced that it was taking
action to support AIG in the form of a secured two-year line of credit with a value of up to $85
billion and a high interest rate. In addition, the government received warrants to purchase up to
79.9% of the equity in AIG. On October 8, 2008, the Fed announced that it would lend AIG up to
an additional $37.8 billion against securities held by its insurance subsidiaries. In October 2008,
AIG also announced that it had applied to the Fed’s general Commercial Paper Funding Facility
(CPFF) and was approved to borrow up to $20.9 billion at the facility’s standard terms.
In early November 2008 (following the creation of TARP), the financial support for AIG was
restructured. The restructured financial support consisted of (1) reducing the size of the Fed loan
to up to $60 billion, with the term lengthened to five years and the interest rate reduced by 5.5%;
(2) purchasing of $40 billion in preferred shares through TARP; and (3) replacing the $37.8
billion loan, with up to $52.5 billion total in asset purchases by the Fed through two Limited
Liability Corporations (LLCs) known as Maiden Lane II and Maiden Lane III. The 79.9% equity
position of the government in AIG remained essentially unchanged after the restructuring of the
intervention.
In March 2009, the assistance was restructured further through (1) a partial payback of the Fed
loan through a swap of debt for equity in two AIG subsidiaries worth approximately $25 billion,
reducing the maximum to $35 billion; and (2) commitments for additional future TARP purchases
of up to $29.8 billion in preferred shares at AIG’s discretion, and the conversion of existing shares
into shares with optional dividend payments.39 The Maiden Lane LLCs continued operating under
the previous terms, with the actual loans extended to the LLCs totaling $43.9 billion at their peak
of the possible $52.5 billion. AIG’s access to the CPFF had been reduced to $15.9 billion in
January 2009, due to a ratings agency downgrade. AIG continued to access this facility until it
expired in February 2010.
In September 2010, AIG and the government announced another restructuring of the
government’s assistance. This restructuring closed on January 14, 2011. The expressed goal was
to simplify the government’s interest in AIG and provide for a path for the divestment of the
government’s stake in AIG. The essence of the plan called for (1) ending the Fed’s involvement
with AIG through loan repayment and transfer of the Fed’s equity interests to the Treasury and (2)
converting the government’s $49.1 billion in existing preferred shares into common shares, which
can then be sold to the public over time. The specific steps involved several interlocking
transactions, including the initial public offering (IPO) of a large AIG subsidiary, the sale of
several other AIG subsidiaries, and the use of up to approximately $20 billion in TARP funds to
transfer equity interests from the Fed to the Treasury. Once these transactions closed, the Treasury
held 92% of AIG’s common equity (1.66 billion shares) and equity interests in AIG’s subsidiaries
worth approximately $20.3 billion.
39 AIG issued $1.6 billion of additional preferred shares to the government in recognition of accrued, unpaid dividends
on the initial $40 billion in assistance. AIG has not paid dividends since the conversion to optional dividends, with a
total of $6.7 billion in missed dividend payments as of September 30, 2010, according to the Special Inspector General
for TARP, http://www.sigtarp.gov/reports/congress/2010/October2010_Quarterly_Report_to_Congress.pdf. These
missed payments gave Treasury the right to appoint two directors to AIG’s board.
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Troubled Asset Relief Program (TARP): Implementation and Status
Treasury sold the AIG equity over time and completed the sales in December 2012. All of the
Federal Reserve loans have been repaid and the assets held in the Maiden Lane LLCs have been
sold. The last government-held assets relating to the AIG intervention were TARP warrants which
were sold in January 2013.
Table A-9 summarizes the support received by AIG from both TARP and the Fed, including
current and peak asset holdings, losses or gains, and conditions of the support.
Table A-9. AIG Support
Federal Government
Terms and Conditions
Outstanding
Actual
Dividend/
Warrants/
Outstanding
Amount
Total
Gain(+)
Interest
Equity
Subsequent Expiration
Program
Amount
at Peak
Income
/Loss(-)
Rate
Interests
Conversion
Date
TARP
$0 $67.8
billion
$0.96
-$13.48
10%
warrants
$49.1 billiona
Mar. 2014
Systemically
(Jan. 2011)
billion in
billion in
(dividends
for 2% of
converted to
Significant
dividends capital
paid at
common
AIG
Failing
paid and
losses
AIG’s
shares
common
Institutions
capital
discretion)
equity; $20.3
gains.
billion
converted
subsidiary
equity
Fed Loan to
$0 $90.3
billion
$8.2
3
month
warrants
Reduced
Sept. 2013
AIG
loan
billion in
LIBOR+3% for 79.9%
balance by
(Oct. 2008)
interest;
(later
$25 billion in
$17.55
reduced to
exchange for
billion in
77.9%) of
equity in life
equity
common
insurance
sales
shares
subsidiaries
Fed Loan
$0 $43.8
billion
$9.5
LIBOR+1% none
n/a None.
for
loans to
billion
Troubled
purchase
Asset
assets
Purchases
(Dec. 2008)
Fed
$0 $16.1
billion
$0.4
overnight none n/a
Feb.
2010
Commercial
(Jan. 2009)
billion
index
Paper
swap (OIS)
Funding
rate+1%;
Facility
OIS+3%
Sources: June 21, 2013, TARP Daily Update; May 2013 TARP 105(a) Report; Federal Reserve, statistical release
H.4.1, Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks,
various dates; Federal Reserve Bank of New York, “Actions Related to AIG,” http://www.newyorkfed.org/
aboutthefed/aig/index.html; CBO, Report on the Troubled Asset Relief Program—May 2013; SIGTARP, Quarterly
Report to Congress, September 30, 2010; U.S. Treasury Office of Financial Stability, Agency Financial Report Fiscal
Year 2010, November 2010; AIG website, “What AIG Owes the U.S. Government,” September 30, 2010; CRS
Calculations with Fed data.
Notes: LIBOR = London Interbank Offered Rate.
a. Includes $1.6 billion in additional preferred shares issued in return for previous conversion of shares paying
a mandatory dividend to shares paying an optional dividend.
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Troubled Asset Relief Program (TARP): Implementation and Status
TARP Housing Assistance Programs40
One criticism leveled in TARP’s early stages was its focus on assisting financial institutions, thus
providing only indirect assistance to individual homeowners facing foreclosure. Sections 103,
109, and 110 of the EESA specifically embody congressional intent that homeowners be aided
under TARP. Treasury ultimately created several programs addressing this criticism. Unlike other
TARP programs that have resulted in asset purchases that may eventually return some funds to
the government, the housing assistance programs have no mechanism for returning funds. Some
$50 billion of TARP funding was initially planned for housing assistance efforts. Expected
outlays under these programs have been counted as 100% spending with no expected financial
return to the government. The amount of spending on these programs, however, has been
relatively low, and the programs have been further criticized as ineffective at helping
homeowners.41
Home Affordable Modification Program
In March 2009, the TARP Home Affordable Modification Program (HAMP) was announced.42
Through HAMP, the government provides financial incentives to participating mortgage servicers
that provide loan modifications to eligible troubled borrowers to reduce the borrowers’ monthly
mortgage payments to no more than 31% of their monthly income. Servicers receive an upfront
incentive payment for each successful permanent loan modification and a “pay-for-success”
payment for up to three years if the borrower remains current after the modification. The
borrower can also receive a “pay-for-success” incentive payment (in the form of principal
reduction) for up to five years if he or she remains current after the modification is finalized.
Investors receive a payment cost-share incentive (that is, the government will pay half the cost of
reducing the monthly mortgage payment from 38% to 31% of monthly income), and can receive
incentive payments for loans modified before a borrower becomes delinquent. Mortgage
modifications can be made under HAMP until December 31, 2015.
The Administration originally estimated that HAMP would cost $75 billion. Of this amount, $50
billion was to come from TARP funds and $25 billion was to come from Fannie Mae and Freddie
Mac for the costs of modifying mortgages that those entities owned or guaranteed.43 Over time,
Treasury has revised downward its estimate of the amount of TARP funds that will be used for
HAMP with some of these funds used for the other TARP housing assistance programs. As of
June 21, 2013, a total of $29.9 billion is obligated for HAMP, with $5.60 billion disbursed.
40 For additional detail on these and other housing assistance efforts, see CRS Report R40210, Preserving
Homeownership: Foreclosure Prevention Initiatives, by Katie Jones; portions of this section are based on this report.
41 See, for example, testimony by Neil Barofsky, the Special Inspector General for TARP before the House Committee
on Oversight and Government Reform, January 26, 2011, available at http://oversight.house.gov/wp-content/uploads/
2012/01/Testimony.Barofsky.SIGTARP.012611.pdf.
42 HAMP is part of the Administration’s broader Making Home Affordable Program, which also includes a program to
encourage refinancing of underwater mortgages backed by Fannie Mae and Freddie Mac. Funding for that program is
not through TARP.
43 November 2010 TARP 105(a) Report.
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Hardest Hit Fund
On February 19, 2010, the Obama Administration announced that it would make funding
available to the housing finance agencies (HFAs) of five states that had experienced the greatest
declines in home prices. The states could use these funds to create their own foreclosure
prevention programs based on local conditions, as long as the programs they created met the
TARP objectives and were approved by Treasury.44 This program is known as the Hardest Hit
Fund (HHF), and several additional rounds of funding, with different criteria for choosing the
states, have been announced since its inception, bringing the total number of states receiving
funds to 18 plus the District of Columbia. The funding comes from the TARP funds that Treasury
initially set aside for HAMP. After all of the rounds of funding, the total amount of funding
allocated to HHF is $7.6 billion. Of this amount, $2.60 billion had been disbursed as of June 21,
2013.
FHA Short Refinance Program
On March 26, 2010, the Administration announced a new FHA Short Refinance Program for
homeowners who owe more than their homes are worth. Detailed program guidance was released
on August 6, 2010.45 Under the program, certain homeowners who owe more than their homes are
worth may be able to refinance into new, FHA-insured mortgages for an amount lower than the
home’s current value. The original lender will accept the proceeds of the new loan as payment in
full on the original mortgage; the new lender will have FHA insurance on the new loan; and the
homeowner will have a first mortgage balance that is below the current value of the home,
thereby providing some equity in the home. Homeowners must be current on their mortgages to
qualify for this program. Further, the balance on the first mortgage loan must be reduced by at
least 10%. This program is voluntary for lenders and borrowers, and borrowers with mortgages
already insured by FHA are not eligible.
The FHA Short Refinance Program began on September 7, 2010, and is to be available until
December 31, 2014. As of June 21, 2013, Treasury has obligated $1.03 billion of the TARP funds
originally set aside for HAMP to help pay for the cost of this program, a reduction from the
original amount of $8.1 billion. Of this $1.03 billion, $0.06 billion has been disbursed.
Author Contact Information
Baird Webel
Specialist in Financial Economics
bwebel@crs.loc.gov, 7-0652
44 Information on each state’s Hardest Hit Fund programs is available at http://www.treasury.gov/initiatives/financial-
stability/TARP-Programs/housing/hhf/Pages/default.aspx.
45 FHA Mortgagee Letter 2010-23, “FHA Refinance of Borrowers in Negative Equity Positions,” August 6, 2010,
available at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.
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