Tuesday, January 10, 2012

GAO Report on Troubled Asset Relief Program

The GAO released the Troubled Asset Relief Program report this week, which examines the condition and status of TARP programs; management of TARP operations; and the direct and indirect costs of TARP.

The report focused on Treasury’s TARP exit plan, noting Treasury’s exit goals are at times conflicting.

When exiting TARP programs, Treasury stated it will strive to promote stability; bolster markets’ confidence; protect taxpayers’ investment and maximize overall returns; and exit the program as soon as possible. The GAO reports noted in some cases Treasury will be conflicted between maximizing taxpayer returns and exiting as soon as practicable.
Treasury’s ability to exercise control over the timing of its exit from TARP programs is limited in some cases. For example, Treasury will likely decide when to exit AIG based on market conditions but Treasury has less control over its exit from PPIP because the program’s exit depends on the timing of each public-private investment fund selling its investments.
Financial Institutions Remaining in TARP

Financial strength will determine when remaining institutions will be able to exit TARP.

Treasury disbursed $204.9 billion to 707 institutions nationwide. As of September 30, 2011, Treasury has received $208.1 billion in repayment and income, exceeding the amount originally disbursed. Treasury estimates lifetime income of $13 billion from its investment in financial institutions.

As of September 30, 2011, 317 institutions have exited the program. Of the 317 institutions, about 40%, fully exited by repaying their investments, another 52% exited by exchanging their securities under other federal programs – CDCI and the Small Business Lending Fund.

As of September 30, 2011, 390 financial institutions remain in TARP accounting for only 8.4% of the original investments, concentrated in a relatively small number of institutions. The financial strength of these institutions will largely determine the speed they are able to make repayments and exit TARP.

Read the GAO report.

See other TARP related material.

TARP's Bank Programs Profitable

Banks Remain Committed to Repaying TARP

ABA's TARP Homepage

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