Troubled Asset Relief Program
Status of Efforts to Address Transparency and Accountability Issues Gao ID: GAO-09-920T July 22, 2009This testimony discusses our work on the Troubled Asset Relief Program (TARP), under which the Department of the Treasury (Treasury), through the Office of Financial Stability (OFS), has the authority to purchase and insure almost $700 billion in troubled assets held by financial institutions. Treasury was granted this authority in response to the financial crisis that has threatened the stability of the U.S. banking system and the solvency of numerous financial institutions. The Emergency Economic Stabilization Act (the act) that authorized TARP on October 3, 2008, requires GAO to report at least every 60 days on findings resulting from our oversight of the status of actions taken under the program. This statement today is based on our fifth mandated report, issued on June 17, 2009, which follows up on the previous recommendations and covers the actions taken as part of TARP through June 12, 2009. Our oversight work under the act is ongoing, and our next report will be issued later this month, and will focus on TARP's loan modification program. Specifically, this statement focuses on (1) the nature and purpose of activities that have been initiated under TARP, including repurchases of preferred shares and warrants; (2) Treasury's efforts to establish a management structure for TARP; and (3) outcomes measured by indicators of TARP's performance.
As of July 10, 2009, Treasury had disbursed about $361 billion of the roughly $700 billion in TARP funds. Most of the funds (about $204 billion) went to purchase preferred shares and subordinated debentures of 651 financial institutions under the Capital Purchase Program (CPP), which continues to be OFS's primary vehicle for stabilizing financial markets. At the same time that Treasury continues to purchase preferred shares in institutions, other institutions have paid over $70 billion to repurchase shares. As of July 10, 2009, 12 of the 33 financial institutions that repurchased their preferred shares from Treasury had repurchased their warrants and 3 others had repurchased their warrant preferred stock from Treasury at an aggregate cost of about $80.3 million. As permitted by the act--as amended by the American Recovery and Reinvestment Act of 2009 (ARRA)--participants may repurchase or buy back their preferred stock and warrants issued to Treasury under CPP at any time, subject to consultation with the primary federal banking regulator. While, OFS has made progress in establishing its management infrastructure, continued attention to hiring remains important, however, because some offices within OFS, including the Office of the Chief Risk and Compliance Officer, still have a number of vacancies that will need to be filled as TARP programs are fully implemented. Treasury has continued to make progress in establishing its management infrastructure and internal controls and has responded to our two most recent contracting recommendations and continued to respond to the others. In the hiring area, Treasury has continued to establish its management infrastructure, including hiring more staff. In the internal controls area, consistent with our previous report recommendation that Treasury update the guidance that is available to the public on determining warrant exercise prices so that it is consistent with OFS's actual practices, Treasury updated its frequently asked questions on its Web site to clarify the process it follows for determining the prices. Treasury has continued to build a network of contractors and financial agents to support TARP administration and operations and has an opportunity to enhance transparency through its existing reporting mechanisms. Treasury issues a number of reports and uses other mechanisms, such as public announcements and its Web site, to provide information to the public. GAO again notes the difficulty of measuring the effect of TARP's activities. While isolating and estimating the effect of TARP programs continues to present a number of challenges, indicators of the cost of credit and perceptions of risk in credit markets suggest broad improvement since the announcement of CPP in October 2008. Nevertheless, credit market indicators we have been monitoring suggest there has been broad improvement in interbank, mortgage, and corporate debt markets in terms of the cost of credit and perceptions of risk (as measured by premiums over Treasury securities).
GAO-09-920T, Troubled Asset Relief Program: Status of Efforts to Address Transparency and Accountability Issues
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Testimony:
Before the Subcommittee on Oversight and Investigations, Committee on
Financial Services, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:00 p.m. EDT:
Wednesday, July 22, 2009:
Troubled Asset Relief Program:
Status of Efforts to Address Transparency and Accountability Issues:
Statement of Thomas J. McCool, Director:
Center for Economics, Applied Research and Methods:
GAO-09-920T:
[End of section]
Chairman Moore, Ranking Member Biggert, and Members of the
Subcommittee:
I am pleased to be here today to discuss our work on the Troubled Asset
Relief Program (TARP), under which the Department of the Treasury
(Treasury), through the Office of Financial Stability (OFS), has the
authority to purchase and insure almost $700 billion in troubled assets
held by financial institutions. [Footnote 1] As you know, Treasury was
granted this authority in response to the financial crisis that has
threatened the stability of the U.S. banking system and the solvency of
numerous financial institutions. The Emergency Economic Stabilization
Act (the act) that authorized TARP on October 3, 2008, requires GAO to
report at least every 60 days on findings resulting from our oversight
of the status of actions taken under the program.[Footnote 2] My
statement today is based on our fifth mandated report, issued on June
17, 2009, which follows up on the previous recommendations and covers
the actions taken as part of TARP through June 12, 2009.[Footnote 3]
Our oversight work under the act is ongoing, and our next report will
be issued later this month, and will focus on TARP's loan modification
program.
Specifically, this statement focuses on (1) the nature and purpose of
activities that have been initiated under TARP, including repurchases
of preferred shares and warrants; (2) Treasury's efforts to establish a
management structure for TARP; and (3) outcomes measured by indicators
of TARP's performance. To do this work, we reviewed documents provided
by OFS and conducted interviews with OFS officials. In addition, we
have updated the disbursements and repurchases through July 10, 2009.
We plan to continue to monitor the issues highlighted in the report, as
well as future and ongoing capital purchases and ongoing repurchases.
We conducted this performance audit between April 2009 and June 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Summary:
As of July 10, 2009, Treasury had disbursed about $361 billion of the
roughly $700 billion in TARP funds (see table 1). Most of the funds
(about $204 billion) went to purchase preferred shares and subordinated
debentures of 651 financial institutions under the Capital Purchase
Program (CPP), which continues to be OFS's primary vehicle for
stabilizing financial markets. At the same time that Treasury continues
to purchase preferred shares in institutions, other institutions have
paid over $70 billion to repurchase shares. As of July 10, 2009, 12 of
the 33 financial institutions that repurchased their preferred shares
from Treasury had repurchased their warrants and 3 others had
repurchased their warrant preferred stock from Treasury at an aggregate
cost of about $80.3 million. Although OFS and the regulators have
established criteria for accepting and approving CPP applications, the
regulator's criteria for determining when institutions can repurchase
preferred stock from Treasury lack adequate transparency. While
Treasury has provided some limited information about the warrant
valuation process, it has yet to provide the level of transparency at
the transaction level that would address questions about whether the
department is getting the best price for taxpayers. Treasury continued
to operationalize its more recent programs, including the Capital
Assistance Program (CAP). As part of this program, the Federal Reserve
led the stress tests of the largest 19 U.S. bank holding companies,
which revealed that 10 needed to raise additional capital to keep them
strongly capitalized and lending even if economic conditions worsen.
Whether any of the institutions will choose to participate in CAP has
yet to be determined. While the Federal Reserve disclosed the stress
test results, it had no plans to disclose information about the 19
institutions going forward. What information, if any, is disclosed will
be left to the discretion of the affected institutions raising a number
of concerns, including that the institutions could disclose
inconsistent or only selected information. Moreover, the Federal
Reserve had not developed a mechanism to share information with OFS
about the ongoing condition of the 19 bank holding companies that
continue to participate in TARP programs. According to Treasury, its
Financial Stability Plan has provided a basis for its communication
strategy and Treasury plans to more regularly communicate with
congressional committees of jurisdiction about TARP. However, this
strategy is not fully implemented and all congressional stakeholders
are not receiving information in a consistent or timely manner. A key
component of the communication strategy is the new Web site,
[hyperlink, www.financialstability.gov] which is designed to provide
the public with a more user friendly format for accessing information
about TARP. But, Treasury has not yet measured the public's
satisfaction with the site.
While, OFS has made progress in establishing its management
infrastructure, continued attention to hiring remains important,
however, because some offices within OFS, including the Office of the
Chief Risk and Compliance Officer, still have a number of vacancies
that will need to be filled as TARP programs are fully implemented.
Treasury has also continued to build the network of contractors and
financial agents to support TARP administration and operations that
have been key to OFS's efforts to develop and administer its TARP
programs. Treasury has provided information to the public on
procurement contracts and financial agency agreements, but has not
included a breakdown of cost data by each entity. As a result, Treasury
has missed an opportunity to provide additional transparency to its
TARP operations.
GAO again notes the difficulty of measuring the effect of TARP's
activities. As shown in table 3, credit market indicators suggest
general improvements in various markets since October 2008.
Specifically, the cost of credit and perceptions of risk in credit
markets (as measured by premiums over Treasury securities) have
decreased in interbank, mortgage, and corporate bond markets. Empirical
analysis of the interbank market, which showed signs of significant
stress in 2008, suggests that the CPP and programs outside of the TARP
announced in October of 2008 resulted in a statistically significant
improvement in risk spreads even when other important factors were
considered. In addition, although Federal Reserve survey data suggest
that lending standards remained tight, collectively the largest CPP
recipients extended roughly $260 billion on average each month in new
loans to consumers and businesses in the first quarter of 2009, up from
$240 billion a month during the fourth quarter of 2008, according to
the Treasury's loan survey. Similarly, total mortgage originations have
increased from the third quarter of 2008, although foreclosures have
increased to unprecedented highs. However, attributing any of these
changes directly to TARP continues to be problematic because of the
range of actions that have been and are being taken to address the
current crisis. While these indicators may be suggestive of TARP's
ongoing impact, no single indicator or set of indicators can provide a
definitive determination of the program's impact.
We have continued to identify areas that warrant ongoing attention and
focus in our most recent reports. Specifically, we recommended in our
June report that Treasury take the following five actions as it
continues to improve TARP and make it more accountable and transparent:
* Ensure that the warrant valuation process maximizes benefits to
taxpayers and consider publicly disclosing additional details regarding
the warrant repurchase process, such as the initial price offered by
the issuing entity and Treasury's independent valuations, to
demonstrate Treasury's attempts to maximize the benefit received for
the warrants on behalf of the taxpayer.
* In consultation with the Chairmen of the Federal Deposit Insurance
Corporation (FDIC) and the Federal Reserve, the Comptroller of the
Currency, and the Acting Director of the Office of Thrift Supervision,
ensure consideration of generally consistent criteria by the primary
federal regulators when considering repurchase decisions under TARP.
* Fully implement a communication strategy that ensures that all key
congressional stakeholders are adequately informed and kept up to date
about TARP.
* Expedite efforts to conduct usability testing to measure the quality
of users' experiences with the financial stability Web site and measure
customer satisfaction with the site, using appropriate tools such as
online surveys, focus groups, and e-mail feedback forms.
* Explore options for providing to the public more detailed information
on the costs of TARP contracts and agreements, such as a dollar
breakdown of each vendor's obligations, expenses, or both.
Finally, to help improve the transparency of CAP--in particular the
stress tests results--we recommended that the Director of Supervision
and Regulation of the Federal Reserve consider periodically disclosing
to the public information on the aggregate performance of the 19 bank
holding companies against the more adverse scenario forecast numbers
for the duration of the 2-year forecast period and whether or not the
scenario needs to be revised. At a minimum, we recommended that the
Federal Reserve provide the aggregate performance data to OFS program
staff for any of the 19 institutions participating in CAP or CPP.
Treasury Has Established Its Core Programs under TARP but Continues to
Finalize Some Details:
Table 1 highlights disbursements under the various TARP programs, as of
July 10, 2009.
Table 1: TARP Disbursements as of July 10, 2009:
Program: Capital Purchase Program;
Disbursed: $204.2 billion.
Program: Targeted Investment Program;
Disbursed: $40.0 billion.
Program: Capital Assistance Program;
Disbursed: TBD.
Program: Systemically Significant Failing Institutions;
Disbursed: $41.2 billion.
Program: Asset Guarantee Program;
Disbursed: 0.0.
Program: Automotive Industry Financing Program;
Disbursed: $75.9 billion.
Program: Making Home Affordable;
Disbursed: 0.0.
Program: Consumer and Business Lending Initiative[A];
Disbursed: $0.1 billion.
Program: Public Private Investment Program;
Disbursed: 0.0.
Program: Total;
Disbursed: $361.3 billion.
Source: Treasury OFS, unaudited.
Note: Numbers do not add due to rounding.
[A] The Consumer and Business Lending Initiative now includes the Term
Asset-Backed Securities Loan Facility and the Small Business and
Community Lending Initiative.
[End of table]
Key activities include:
* CPP continues to be one of OFS's most active programs with OFS
continuing to deploy funds and other participants beginning to repay
investments. As of July 10, 2009, Treasury had disbursed 94 percent of
the $218 billion (revised from the original $250 billion) it had
allocated to this program and had purchased almost $204.2 billion in
preferred shares and subordinated debt from 651 qualified financial
institutions. These purchases ranged from $301,000 to $25 billion.
While OFS has hired asset managers, it has yet to clearly identify what
role the asset managers will have in monitoring compliance with program
requirements. According to Treasury officials, the asset managers'
primary role will be to provide Treasury with market advice about its
portfolio of investments in financial institutions and corporations
participating in various TARP programs. The managers will also help OFS
monitor compliance with limitations on compensation, dividend payments,
and stock repurchases.
* As permitted by the act--as amended by the American Recovery and
Reinvestment Act of 2009 (ARRA)--participants may repurchase or buy
back their preferred stock and warrants issued to Treasury under CPP at
any time, subject to consultation with the primary federal banking
regulator.[Footnote 4] According to Treasury documentation, as of July
10, 2009, 33 institutions (including 10 of the largest bank holding
companies participating in CPP) had repurchased their preferred stock
from Treasury for a total of about $70.2 billion (table 2). After
repurchasing all of their preferred stock, financial institutions may
repurchase all or part of the warrants held by Treasury. As of July 10,
2009, 12 of the 33 financial institutions that had repurchased their
preferred shares from Treasury had also repurchased their warrants and
3 others had repurchased their warrant preferred stock from Treasury at
an aggregate cost of about $80.3 million. One of the 10 largest bank
holding companies that repurchased their preferred stock had
repurchased its warrants at a cost of $60 million. In addition, certain
financial institutions told Treasury that they did not plan to
repurchase their warrants and Treasury may attempt to sell those
warrants in the financial markets. According to a Treasury official, as
of July 17, 2009, Treasury has not yet liquidated any CPP warrants in
the financial markets.
Table 2: Capital Purchase Program Repurchases, as of July 10, 2009
(Dollars in thousands):
Institution type: Private Institutions;
Repurchase amount for preferred stock initially issued to Treasury:
$31,900;
Repurchase amount for preferred stock issued through exercise of
warrants: $1,595;
Repurchase amount for warrants: N/A.
Institution type: Public Institutions;
Repurchase amount for preferred stock initially issued to Treasury:
$70,134,189;
Repurchase amount for preferred stock issued through exercise of
warrants: N/A;
Repurchase amount for warrants: $78,690.
Total;
Repurchase amount for preferred stock initially issued to Treasury:
$70,166,189;
Repurchase amount for preferred stock issued through exercise of
warrants: $1,595;
Repurchase amount for warrants: $78,690.
Source: Treasury, OFS, unaudited.
[End of table]
Although institutions have repurchased their preferred stock, the
regulators' repurchase approval criteria have lacked adequate
transparency. Clearly articulated and consistently applied criteria are
indicative of a robust decision-making process, and without them,
Treasury will face an increased risk that institutions requesting
repurchase of their stock may not be treated equitably. The Federal
Reserve has provided criteria for the largest 19 bank holding
companies, but the other regulators have not consistently provided
details about how they will make future determinations. In this regard,
we recommended in our June 17, 2009 report that Treasury, in
consultation with the banking regulators, ensure consideration of
generally consistent criteria by the primary federal regulators when
considering repurchase decisions under TARP. We have begun to receive
the criteria from the federal banking regulators and will evaluate
their consistency as part of our ongoing TARP work.
As we noted in our June 17, 2009 report, while Treasury has provided
some limited information about the warrant repurchase process, it had
yet to provide the level of transparency at the transaction level that
would begin to address questions about the warrant valuation process
and whether the resulting prices paid by the institutions reflect the
taxpayers' best interests. We recommended that Treasury consider
publicly disclosing additional details regarding the warrant repurchase
process, such as the initial price offered by the issuing entity and
Treasury's independent valuations, to demonstrate Treasury's attempts
to maximize the benefit received for the warrants on behalf of the
taxpayer. On June 26, 2009, Treasury issued a press release indicating
that Treasury plans to begin publishing additional information on each
warrant that is repurchased, including a bank's initial and subsequent
determinations of fair market value, if applicable. Following the
completion of each repurchase, Treasury plans to publish the
independent valuation inputs used to assess the bank's determination of
fair market value.
We will evaluate Treasury's disclosure of warrant information as part
of our ongoing TARP work.
* The Federal Reserve announced the results of the Supervisory Capital
Assessment Program (SCAP) or stress test under CAP, for which Treasury
extended the deadline for applications through November 9, 2009. As of
July 17, 2009, no applications had been submitted to Treasury. SCAP
encompassed the 19 largest U.S. bank holding companies (those with risk-
weighted assets of at least $100 billion). The federal banking
regulators designed it as a forward-looking exercise to help them gauge
the extent of the additional capital buffer necessary to keep the
institutions strongly capitalized and lending even if economic
conditions are worse than had been expected between December 2008 and
December 2010. SCAP results showed that 10 of the institutions needed
to raise additional capital.
* Treasury and other agencies have continued to take actions under
other TARP programs. The Federal Reserve announced modifications to the
Term Asset-Backed Securities Loan Facility (TALF) and has completed a
number of fundings since March 2009. As of July 16, 2009, the total
amount of loans requested on TALF-eligible collateral since the
program's first activity was nearly $35 billion. OFS took additional
steps to implement the Public-Private Investment Program's (PPIP)
Legacy Securities Program. On July 8, 2009, Treasury, FDIC and the
Federal Reserve jointly announced the selection of fund managers for
the program and the selection of 10 small-, veteran-, and women-owned
business partnerships that will work with the fund managers. Treasury,
in conjunction with the Federal Reserve and the Small Business
Administration, announced additional efforts to provide more accessible
and affordable credit to small businesses. Citigroup, Inc. (Citigroup)
expanded its request to Treasury to convert preferred securities and
trust preferred securities for common stock from $27.5 billion to $33
billion and finalized the exchange agreement on June 9, 2009, but the
conversion had not been completed as of July 20, 2009. In addition, OFS
finalized an equity facility of almost $30 billion with AIG under
Systemically Significant Failing Institutions (SSFI) and restructured
AIG's existing preferred stock from cumulative to noncumulative shares
but did not require additional concessions from AIG counterparties.
Treasury has committed to providing $81.1 billion to the auto industry
under Automotive Industry Financing Program (AIFP). Of this amount,
Treasury has provided Chrysler and GM $12.5 billion and $49.5 billion,
respectively, to support the companies before, during, and after their
reorganizations under Chapter 11 of the U.S. Bankruptcy Code.
Finally, consistent with our recommendations, Treasury has continued to
take steps to develop an integrated communication strategy for TARP,
but we continue to identify areas that warrant ongoing attention and
consideration.
Treasury Has Made Progress in Developing OFS's Management
Infrastructure:
Treasury has continued to make progress in establishing its management
infrastructure and internal controls and has responded to our two most
recent contracting recommendations and continued to respond to the
others.
* In the hiring area, Treasury has continued to establish its
management infrastructure, including hiring more staff. In accordance
with our prior recommendation that it expeditiously hire personnel to
OFS, Treasury continued to use direct-hire and various other
appointments to bring a number of career staff on board quickly. Since
our March 2009 report, Treasury has continued to increase the total
number of OFS staff overall, including the number of permanent staff.
However, continued attention to hiring remains important because some
offices within OFS, such as the offices of Homeownership and Risk and
Compliance, continue to have a number of vacancies that need to be
filled as TARP programs are fully implemented.
* In the internal controls area, consistent with our previous report
recommendation that Treasury update the guidance that is available to
the public on determining warrant exercise prices so that it is
consistent with OFS's actual practices, Treasury updated its frequently
asked questions on its Web site to clarify the process it follows for
determining the prices. However, the guidance available on the Web site
remains inconsistent. Treasury told us that any new CPP applicants
would most likely be non-public institutions to which these guidance
documents would not apply. Thus, Treasury does not believe the
inconsistent guidance is a significant issue and does not plan on
addressing it further. If some of the guidance on warrant exercise
pricing is no longer needed, then we believe that Treasury should
remove these guidance documents from its Web site to alleviate any
inconsistencies. If Treasury chooses to leave the documents on its Web
site, then, as we previously recommended, Treasury should make all the
documents pertaining to warrant exercise price calculations consistent.
* Treasury has continued to build a network of contractors and
financial agents to support TARP administration and operations and has
an opportunity to enhance transparency through its existing reporting
mechanisms. Treasury issues a number of reports and uses other
mechanisms, such as public announcements and its Web site, to provide
information to the public. Useful details are still lacking, however,
on the costs of procurement contracts and financial agency agreements,
such as a breakdown of obligations and expenses for each entity. These
contracts and agreements are key tools OFS has used to help develop and
administer its TARP programs. By not providing this information,
Treasury is missing an opportunity to provide additional transparency
about the cost of TARP operations.
Indicators Generally Suggest Positive Developments in Credit Markets,
but Isolating TARP's Impact Continues to Present Challenges:
While isolating and estimating the effect of TARP programs continues to
present a number of challenges, indicators of the cost of credit and
perceptions of risk in credit markets suggest broad improvement since
the announcement of CPP in October 2008. As we have noted in prior
reports, if TARP is having its intended effect, a number of
developments might be observed in credit and other markets over time,
such as reduced risk spreads, declining borrowing costs, and more
lending activity than there would have been in the absence of TARP.
However, a slow recovery does not necessarily mean that TARP is
failing, because it is not clear what would have happened without the
programs. In particular, several market factors helping to explain slow
growth in lending include weaknesses in securitization markets and the
balance sheets of financial intermediaries, a decline in the demand for
credit, and the reduced creditworthiness among borrowers. Nevertheless,
credit market indicators we have been monitoring suggest there has been
broad improvement in interbank, mortgage, and corporate debt markets in
terms of the cost of credit and perceptions of risk (as measured by
premiums over Treasury securities). In addition, empirical analysis of
the interbank market, which showed signs of significant stress in 2008,
suggests that CPP and other programs outside TARP that were announced
in October of 2008 have resulted in a statistically significant
improvement in risk spreads even when other important factors were
considered. Although foreclosures continue to highlight the challenges
facing the U.S. economy, total mortgage originations in the first
quarter of 2009 rose roughly 46 percent since the third quarter of
2008. Similarly, while the Federal Reserve data show that lending
standards remain tight, our analysis of Treasury's new loan survey
indicate that the largest 21 CPP recipients extended roughly $240 and
$260 billion, on average, each month in new loans to consumers and
businesses in the fourth quarter of 2008 and first quarter of 2009
respectively.
Table 3: Select Market Indicators, as of July 16, 2009:
Credit market rates and spreads: Indicator: LIBOR;
Description: 3-month London interbank offered rate (an average of
interest rates offered on dollar-denominated loans);
Basis point change since October 13, 2008: Down 424.
Credit market rates and spreads: Indicator: TED spread;
Description: Spread between 3-month LIBOR and 3-month Treasury yield;
Basis point change since October 13, 2008: Down 418.
Credit market rates and spreads: Indicator: Aaa bond rate;
Description: Rate on highest quality corporate bonds;
Basis point change since October 13, 2008: Down 98.
Credit market rates and spreads: Indicator: Aaa bond spread;
Description: Spread between Aaa bond rate and 10-year Treasury yield;
Basis point change since October 13, 2008: Down 68.
Credit market rates and spreads: Indicator: Baa bond rate;
Description: Rate on corporate bonds subject to moderate credit risk;
Basis point change since October 13, 2008: Down 156.
Credit market rates and spreads: Indicator: Baa bond spread;
Description: Spread between Baa bond rate and 10-year Treasury yield;
Basis point change since October 13, 2008: Down 126.
Credit market rates and spreads: Indicator: Mortgage rates;
Description: 30-year conforming loans rate;
Basis point change since October 13, 2008: Down 126.
Credit market rates and spreads: Indicator: Mortgage spread;
Description: Spread between 30-year conforming loans rate and 10-year
Treasury yield;
Basis point change since October 13, 2008: Down 66.
Quarterly mortgage volume and defaults: Indicator: Mortgage
originations;
Description: New mortgage loans
Change from September 30, 2008 to March 31, 2009 (latest available
date): Up 140 billion to $445 billion.
Quarterly mortgage volume and defaults: Indicator: Foreclosure rate
Description: Percentage of homes in foreclosure
Change from September 30, 2008 to March 31, 2009 (latest available
date): Up 88 basis points to 3.85 percent.
Sources: GAO analysis of data from Global Insight, Inside Mortgage
Finance, and Thomson Reuters Datastream.
Note: Rates and yields are daily, except for mortgage rates, which are
weekly. Higher spreads (measured as premiums over Treasury securities
of comparable maturity) represent higher perceived risk in lending to
certain borrowers. Higher rates represent increases in the cost of
borrowing for relevant borrowers. As a result "down" suggests
improvement in market conditions for credit market rates and spreads.
Foreclosure rate and mortgage origination data are quarterly. See
previous TARP reports for a more detailed discussion (GAO-09-161 and
GAO-09-296).
[End of table]
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to discuss these critically important issues and would be
happy to answer any questions that you may have. Thank you.
Contact:
For further information on this testimony, please contact Thomas J.
McCool on (202) 512-2642 or mccoolt@gao.gov.
[End of section]
Related GAO Products:
Troubled Asset Relief Program: June 2009 Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-658]. Washington, D.C.: June 17,
2009.
Auto Industry: Summary of Government Efforts and Automakers'
Restructuring to Date. [hyperlink,
http://www.gao.gov/products/GAO-09-553]. Washington, D.C.: April 23,
2009.
Small Business Administration's Implementation of Administrative
Provisions in the American Recovery and Reinvesment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-507R]. Washington, D.C.: April 16,
2009.
Troubled Asset Relief Program: March 2009 Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-504]. Washington, D.C.: March 31,
2009.
Troubled Asset Relief Program: Capital Purchase Program Transactions
for the Period October 28, 2008 through March 20, 2009 and Information
on Financial Agency Agreements, Contracts, and Blanket Purchase
Agreements Awarded as of March 13, 2009. [hyperlink,
http://www.gao.gov/products/GAO-09-522SP]. Washington, D.C.: March 31,
2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-539T]. Washington, D.C.: March 31,
2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-484T]. Washington, D.C.: March 19,
2009.
Federal Financial Assistance: Preliminary Observations on Assistance
Provided to AIG. [hyperlink, http://www.gao.gov/products/GAO-09-490T].
Washington, D.C.: March 18, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
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http://www.gao.gov/products/GAO-09-474T]. Washington, D.C.: March, 11,
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Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-417T]. Washington, D.C.: February
24, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-359T]. Washington, D.C.: February 5,
2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. [hyperlink,
http://www.gao.gov/products/GAO-09-296]. Washington, D.C.: January 30,
2009.
High-Risk Series: An Update. [hyperlink,
http://www.gao.gov/products/GAO-09-271]. Washington, D.C.: January 22,
2009.
Troubled Asset Relief Program: Additional Actions Needed to Better
Ensure Integrity, Accountability, and Transparency. [hyperlink,
http://www.gao.gov/products/GAO-09-266T]. Washington, D.C.: December
10, 2008.
Auto Industry: A Framework for Considering Federal Financial
Assistance. [hyperlink, http://www.gao.gov/products/GAO-09-247T].
Washington, D.C.: December, 5, 2008.
Auto Industry: A Framework for Considering Federal Financial
Assistance. [hyperlink, http://www.gao.gov/products/GAO-09-242T].
Washington, D.C.: December 4, 2008.
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and Foreclosures on Home Mortgages. [hyperlink,
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[End of section]
Footnotes:
[1] The Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-
343, 122 Stat. 3765 (2008) originally authorized Treasury to buy or
guarantee up to $700 billion in troubled assets. The Helping Families
Save Their Homes Act of 2009, Pub. L. No. 111-22, Div. A,123 Stat. 1632
(2009), amended the act and reduced the maximum allowable amount of
outstanding troubled assets under the act by almost $1.3 billion, from
$700 billion to $698.741 billion.
[2] The Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-
343, 122 Stat. 3765 (2008). The act requires the U.S. Comptroller
General to report at least every 60 days, as appropriate, on findings
resulting from oversight of TARP's performance in meeting the act's
purposes; the financial condition and internal controls of TARP, its
representatives, and agents; the characteristics of asset purchases and
the disposition of acquired assets, including any related commitments
entered into; TARP's efficiency in using the funds appropriated for its
operations; its compliance with applicable laws and regulations; and
its efforts to prevent, identify, and minimize conflicts of interest
among those involved in its operations.
[3] GAO, Troubled Asset Relief Program: June 2009 Status of Efforts to
Address Transparency and Accountability Issues, [hyperlink,
http://www.gao.gov/products/GAO-09-658] (Washington, D.C.: June 17,
2009).
[4] Pub. L. No. 111-5, 123 Stat. 115 (2009). Section 7001 provides, in
part, that "Subject to consultation with the appropriate Federal
banking agency, if any,—.Treasury shall permit a TARP recipient to
repay any assistance previously provided under the TARP to such
financial institution, without regard to whether the financial
institution has replaced the funds from any other source or to any
waiting period." (Emphasis added.) ARRA also required that Treasury
liquidate the warrants when the assistance was repaid. This requirement
was amended by the Helping Families Save Their Homes Act of 2009, Pub.
L. No. 111-22, which removed the requirement that Treasury liquidate
the warrants when the assistance was repaid.
[End of section]
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