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  • 8/14/2019 G.A.O. Status Report on TARP Program

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    Report to Congressional Committees

    United States Government Accountability Office

    GAO

    TROUBLED ASSETRELIEF PROGRAM

    Status of Efforts toAddress Transparencyand AccountabilityIssues

    January 2009

    GAO-09-296

  • 8/14/2019 G.A.O. Status Report on TARP Program

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    What GAO Found

    United States Government Accountability Of

    Why GAO Did This Study

    HighlightsAccountability Integrity Reliability

    January 2009

    TROUBLED ASSET RELIEF PROGRAM

    Status of Efforts to Address Transparency andAccountability Issues

    Highlights of GAO-09-296, a report tocongressional committees

    This is the second GAO report onthe Troubled Asset Relief Program(TARP). It follows up on the ninerecommendations from theDecember 2, 2008, report (GAO-09-161). It also reviews (1) the natureand purpose of activities that hadbeen initiated under TARP as of

    January 23, 2009; (2) TreasurysOffice of Financial Stability (OFS)hiring and transition efforts, use ofcontractors, and progress indeveloping a system of internalcontrol; and (3) preliminaryindicators of TARPs performance.To do this work, GAO reviewedsigned agreements and otherrelevant documentation and metwith officials from OFS,contractors, federal agencies, andsome participating institutions.

    What GAO Recommends

    Treasury has taken important stepsto implement all nine previousrecommendations, but has yet tofully address eight. This reportincludes recommendations thatTreasury further expand its effortsto monitor how CPP recipients areusing program funds and moreclearly articulate and communicatea strategic vision for the program.

    Addressing these and otherrecommendations would helpensure greater accountability andtransparency and better enableTreasury to effectively manageTARP. Treasury generally agreedwith the contents of the report andnoted that while progress has beenmade in overseeing the program, itagreed that more work needs to bedone.

    As of January 23, 2009, Treasury had disbursed about $293.7 billion of the $7billion in program funds (see table). Most of the funds (about $194.2 billion)went to purchase preferred shares of 317 financial institutions under theCapital Purchase Program (CPP)Treasurys primary vehicle under TARP fstabilizing financial markets. GAOs previous report emphasized the lack ofmonitoring and reporting for CPP investments and recommended strongermeasures for ensuring that participating institutions use the funds to meet tprograms purpose and comply with CPP requirements on, for example,executive compensation and dividend payments. In response to our

    recommendation, Treasury developed plans to survey the largest twentyinstitutions monthly to monitor lending and other activities and analyzequarterly monitoring data (call reports) for all institutions. While the monthlsurvey is a step toward greater transparency and accountability for the largeinstitutions, we continue to believe that additional action is needed to betterensure that all participating institutions are accountable for their use ofprogram funds.

    Status of TARP Funds as of January 23, 2009 (dollars in billions)

    Program Disburs

    Capital Purchase Program $194

    Systemically Significant Failing Institutions 40

    Targeted Investment Program 40

    Term Asset-backed Securities Loan Facility 0

    Automotive Industry Financing Program 19

    Citigroup Asset Guarantee 0

    Bank of America Asset Guarantee 0

    Totals $293

    Source: Treasury OFS, unaudited.

    Treasury has continued to develop a system for detecting noncompliance wkey requirements of the program but has not yet finalized its plans. Further,Treasury has made limited progress in formatting articulating andcommunicating an overall strategy for TARP, continuing to respond to

    institution- and industry-specific needs by, for example, making further capipurchases and offering loans to the automobile industry. In addition, it has nyet developed a strategic approach to explain how its various programs wortogether to fulfill TARPs purposes or how it will use the remaining TARPfunds. While GAO does not question the need for swift responses in thecurrent economic environment, the lack of a clearly articulated vision hascomplicated Treasurys ability to effectively communicate to Congress, thefinancial markets, and the public on the benefits of TARP and has limited itsability to identify personnel needs.

    To view the full product, including the scopeand methodology, click on GAO-09-296.For more information, contact ThomasMcCool at (202) 512-2642 or

    mccoolt@gao.gov.

    http://www.gao.gov/cgi-bin/getrpt?GAO-09-269http://www.gao.gov/cgi-bin/getrpt?GAO-09-269mailto:mccoolt@gao.govhttp://www.gao.gov/cgi-bin/getrpt?GAO-09-269mailto:mccoolt@gao.govhttp://www.gao.gov/cgi-bin/getrpt?GAO-09-269
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    United States Government Accountability O

    Highlights of GAO-09-296 (continued)

    Timeline of Programs and Selected Actions under TARP, October 2008January 2009

    October November

    2009

    2008

    12/5: Treasurypurchasesabout $3.8billion inpreferred stockand warrantsfrom 35 financialinstitutionsunder CPP.

    12/12: Treasury purchasesabout $2.5 billion inpreferred stock and warrants from 28 financialinstitutionsunder CPP.

    12/23: Treasurypurchasesabout $1.9billion inpreferred stockand warrantsfrom 43financialinstitutionsunder CPP.

    10/3: Congresspasses P.L. 110-343,EmergencyEconomicStabilization Act (theact), whichauthorized TARP.

    10/14: Treasury announces that it will purchase up to $250billion in financial firms preferred stock under TARP via CPP.

    Nine major financial institutionsagree to participate in CPP.

    Treasury issues executive compensation guidelines forthree TARP program areas: CPP, Troubled Asset AuctionProgram, and Systemically Significant Failing Institutions(SSFI).

    10/20: Treasury, the Federal Reserve, the Office of the Comptrollerof the Currency, the Office of Thrift Supervision, and the FederalDeposit Insurance Corporation (FDIC) issue application guidelinesand other documents for all banks wishing to participate in CPP.

    10/28: Treasury disburses capital injections to 8 of the 9banksslated to participate in the first round of the CPP,resulting in the purchase of $115 billion in preferred stockand warrants from 8 national financial institutions.

    11/14: Treasurypurchasesabout$33.6 billion inpreferred stock andwarrants from 21financial institutionsunder CPP.

    11/25: Treasury announcesallocation of $20 billionback Term Asset-backed Securities Loan Facility(TALF), a $200 billion lending facility for the consumasset-backed securities market established by theFederal Reserve Bank of New York.

    Treasury purchases $40 billion in preferred stock awarrants from AIG under SSFI, asannounced onNovember 10, 2008.

    11/10: Treasury announcesthat it will purchase $40 billionin senior preferred stock fromthe American InternationalGroup (AIG) under SSFI.

    12/19: Treasury purchasesabout $2.8 billion in preferredstock and warrants from 49 financial institutionsunder CPP.

    Treasury announces plan for stabilizing the automotiveindustry under the Automotive Industry Financing Program(AIFP).

    12/31: Treasury purchasesabout $15 billion in preferred stockand warrants from seven financial institutionsunder CPP.

    Treasury purchases $20 billion in preferred stock and warrantsfrom Citigroup that it announced on November 23, 2008,under the newly created Targeted Investment Program (TIP).

    Treasury loans $4 billion to GM and commits to loan $5.4billion on January 16, 2009.

    Treasury provides Congress with report on AGP, a program toguarantee troubled assets mandated under Section 102 of theact.

    11/23: Treasury, FDIC, and the FederalReserve enter into an agreement withCitigroup to provide a package ofguarantees, liquidity access, andcapital, including equity investment of$20 billion in Citigroup.

    11/21: Treasurypurchasesabout$2.9 billion inpreferred stockand warrantsfrom 23 financialinstitutionsunderCPP.

    December January

    12/29: Treasury announces purchase of $5 billion in senior preferred equity from GMACLLC and agrees to loan $1 billion to support its reorganization asabank holding company

    1/2: Treasury providesprogram descriptionfor the TIP.

    Treasury completes $4billion loan transactionwith Chrysler HoldingLLC as part of AIFP.

    1/9: Treasurypurchasesabout$14.8 billion inpreferred stock andwarrants from 43financial institutionsunder CPP.

    1/16: Treasury announces that it will make a $1.5 billion loan to aspecial purpose entitcreated by Chrysler Financial to finance the extension of new consumer auto loansaspart of AIFP.

    Treasury, the Federal Reserve, and FDIC announce the terms of the guaranteeagreement with Citigroup announced on November 23, 2008, providing protection agathe possible losses on an asset pool of approximately $301 billion of loansand securiti

    Treasury, the Federal Reserve, and FDIC enter into an agreement today with Bank ofAmerica to provide guarantees, liquidity access, and capital, including protection againpossible losses on approximately $118 billion assetsand purchase of $20 billion inpreferred stock under TIP.

    Treasury purchasesabout $1.5 billion in preferred stock and warrants from 39 institutiounder CPP.

    1/21:Treasuryloansanadditional$5.4 billionto GM.

    1/23: Treasurypurchasesabout$386 million inpreferred stock anwarrants from 23institutionsunderCPP.

    Source: GAO.

    GAOs previous report also included recommendations about OFSs management infrastructure, including hiring,contract oversight, and internal controls. Treasury has taken steps