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GAO-15-367R 1 (2015-03-06)

handle is hein.gao/gaobaairt0001 and id is 1 raw text is: GAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 March 6, 2015 Congressional Committees Troubled Asset Relief Program: Winding Down the Capital Purchase Program From October 2008 through December 2009, the Department of the Treasury (Treasury) invested almost $205 billion in 707 financial institutions as part of federal efforts to help stabilize U.S. financial markets. The investments were made through the Capital Purchase Program (CPP), the first and largest initiative under the Troubled Asset Relief Program (TARP).1 TARP gave Treasury the authority to buy or guarantee up to $700 billion of the troubled assets that were believed to be at the heart of the financial crisis, including mortgages, mortgage-backed securities, and any other financial instruments deemed appropriate, such as equity investments.2 Under this authority, in October 2008 Treasury created CPP to provide capital to viable financial institutions by purchasing preferred shares and subordinated debt. In return for its investments, Treasury received dividend or interest payments and warrants.3 The program was closed to new investments on December 31, 2009, and since then Treasury has continued to oversee and divest its CPP investments, collect dividend and interest payments, and sell warrants. As of December 31, 2014, 673 CPP participants had exited the program, many by repurchasing their preferred shares or subordinated debt after consulting with their primary bank regulators. This report is based on our continuing analysis and monitoring of Treasury's activities in implementing the Emergency Economic Stabilization Act of 2008 (EESA), which provided us with broad oversight authorities for actions taken under TARP and required that we report at least every 60 days on TARP activities and performance.4 To fulfill our statutorily mandated responsibilities, we have been monitoring and providing updates on TARP programs, including CPP.5 This report examines (1) the status of CPP, including repayments and other proceeds, as 1As authorized by the Emergency Economic Stabilization Act of 2008 (EESA), Pub. L. No. 110-343, 122 Stat. 3765 (2008), codified at 12 U.S.C. §§ 5201 et seq. EESA, which was signed into law on October 3, 2008, established the Office of Financial Stability within Treasury and provided it with broad, flexible authorities to buy or guarantee troubled mortgage-related assets or any other financial instruments necessary to stabilize the financial markets. 2Section 3(9) of EESA, 12 U.S.C. § 5202(9). EESA required that the appropriate committees of Congress be notified in writing that the Secretary of the Treasury, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, had determined that it was necessary to purchase other financial instruments to promote financial market stability. EESA originally authorized Treasury to purchase or guarantee up to $700 billion in troubled assets. The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), reduced Treasury's authority to purchase or insure troubled assets to a maximum of $475 billion. 3A warrant is an option to buy shares of common stock or preferred stock at a predetermined price on or before a specified date. 4Section 116 of EESA, 122 Stat. at 3783 (codified at 12 U.S.C. § 5226). 5See, GAO, Troubled Asset Relief Program: Opportunities Exist to Apply Lessons Learned from the Capital Purchase Program to Similarly Designed Programs and to Improve the Repayment Process, GAO-i 1-47 (Washington, D.C.: Oct. 4, 2010); Capital Purchase Program: Revenues Have Exceeded Investments, but Concerns about Outstanding Investments Remain, GAO-12-301 (Washington, D.C.: Mar. 8, 2012); Troubled Asset Relief Program: Treasury's Use GAO-15-367R Capital Purchase Program Page 1

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