Troubled Asset Relief Program

Since the Troubled Asset Relief Program (TARP) was implemented, GAO has issued more than 40 reports containing more than 60 recommendations to the Department of the Treasury (Treasury). This report assesses the status of Treasury's implementation of GAO's recommendations and current condition of TARP. Specifically, this 60-day report provides information on (1) the condition and status of active TARP programs; (2) Treasury's progress in implementing an effective management structure, including staffing for the Office of Financial Stability (OFS), overseeing contractors, and establishing a comprehensive system of internal control; and (3) trends in the status of key relevant economic indicators. GAO reviewed relevant documentation from various TARP programs and met with OFS officials and financial regulators. GAO also used information from existing reports and ongoing work.

TARP programs implemented over the last 2 years covered a broad range of activities, including injecting capital into financial institutions; addressing issues in the securitization markets; providing assistance to the automobile industry and American International Group, Inc. (AIG); and offering incentives for modifying residential mortgages, among other things. While some programs have been terminated, others remain active, including those that focus on preserving homeownership and providing assistance to AIG, and require continued monitoring. Further, the Homeownership Preservation Office has not yet conducted a workforce assessment, despite the recent addition of several new programs. In prior work GAO has identified a number of weaknesses in Treasury's implementation of the Home Affordable Modification Program (HAMP), and a number of homeowner preservation initiatives have not yet reported activity. Other TARP programs have ended or are winding down. As of September 30, 2010, OFS reported $179.2 billion in gross outstanding direct loans and equity investments with a subsidy cost allowance of $36.7 billion resulting in a net balance of $142.5 billion. The reported net cost of TARP transactions from inception through September 30, 2010, was $18.5 billion; however, the ultimate cost of TARP will change as a result of (1) differences between the estimated values and the amounts that OFS will ultimately realize (as the assumptions and estimates underlying the valuation of direct loans and equity investments are inherently subject to substantial uncertainty); and (2) further disbursements, such as those relating to the housing programs which are not subject to repayment. For example, the proposed restructuring of AIG, if implemented, will likely affect TARP's ultimate cost. Although OFS staffing has become more stable over the past year, with more than200 employees, its stability remains fragile as it faces new challenges. For example, while it has filled key leadership positions, the Assistant Secretary of Financial Stability resigned in September 2010 and this key leadership position is temporarily filled. Staffing remains important as some programs are still being implemented, while others have closed or been terminated but have assets that must be managed, repaid, and divested. OFS has begun to take steps that will help to retain staff. But staff retention could be a challenge for OFS going forward, because more than half of OFS's employees, including key leaders, are term appointments (many with 4-year term limits). OFS has also begun to address succession planning for critical senior positions, but its workforce plan has not been updated since March 2009. Without a plan that considers various scenarios, OFS may find itself unprepared to adequately manage and oversee the remaining TARP investments and programs. OFS has strengthened its management and oversight of contractors and financial agents and its system of internal control for financial reporting and compliance with program requirements. Continued progress will depend on retaining qualified staff. As TARP enters its next phase and winds down, GAO recommends that OFS take action to further enhance its ongoing operations by finalizing a plan for addressing how it will manage its workforce, in particular term-appointed and key Senior Executive Service employees. While Treasury agreed with our recommendation, we have differing views on the status of prior recommendations. We will continue to update the status of recommendations as appropriate.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Orice Williams Brown Team: Government Accountability Office: Financial Markets and Community Investment Phone: (202) 512-5837