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SIGTARP
 
S
URVEY
D
EMONSTRATESTHAT
B
ANKS
C
AN
P
ROVIDE
M
EANINGFUL
I
NFORMATION ON
T
HEIR
U
SE OF
TARP
 
F
UNDS
SIGTARP-09-001J
ULY
20,
 
2009
 
 
SIGTARP
Office of the Special Inspector Generalfor the Troubled Asset Relief Pro
July 20, 2009
 
Survey Demonstrates that Banks Can Provide MeaningfulInformation on Their Use of TARP FundsWhat SIGTARP Found
Although most banks reported that they did not segregate or track TARP fundusage on a dollar-for-dollar basis, most banks were able to provide insights intotheir actual or planned use of TARP funds. Over 98% of survey recipientsreported their actual uses of TARP funds. Many banks reported that TARP funds allowed them to increase lending forresidential and commercial loans, small business loans, credit card loans, andother types of lending. Most firms reported multiple and sometimes interrelateduses; a majority of respondents’ reported that they used the funds primarily forlending, building capital reserves and investing, as highlighted below.
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More than 80 percent of the respondents cited the use of funds forlending or how it helped them avoid reduced lending. Many banksreported that lending would have been lower without TARP fundsor would have come to a standstill.
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More than 40 percent of the respondents reported that they usedsome TARP funds to help maintain the capital cushions andreserves required by their banking regulators to be able to absorbunanticipated losses.
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Nearly a third of the respondents reported that they used someTARP funds to invest in agency-mortgage backed securities. Theseactions provided immediate support of the lending and borrowingactivities of other banks and positioned the banks for increasedlending later.
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A smaller number reported using some TARP funds to repayoutstanding loans–some because the TARP funds were a morecost-effective source of funds than their outstanding debt, andsome because of pressure from a creditor to use the funds for thatpurpose.
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Several banks reported using some TARP funds to buy otherbanks. One reported that this was a cost-effective way to acquireadditional deposits that, in turn, would facilitate an even greateramount of lending.
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Some banks reported that they had not yet allocated funds forlending and other activities due to the short time elapsed since thereceipt of funds, the weak demand for credit, and the uncertaineconomic environment.
Although the respondents reported that lending was an important use of funds,their responses generally did not quantify the amount of new lending or theincremental difference in lending based on use of TARP funds. Moreover, theirresponses represented their use or planned use at a single point in time andcould be subject to change depending on economic conditions.
gram
Summary of Report: SIGTARP-09-001
Why SIGTARP Did This Study
The Troubled Asset Relief Program (“TARP”)was created by the Emergency EconomicStabilization Act (“EESA”) of 2008, whichwas enacted on October 3, 2008. TARPprovided the Secretary of the Treasury withvarious authorities to restore the liquidity andstability of the United States financialsystem and stimulate lending. As of June 15,2009, the Department of Treasury(“Treasury”) has provided about $330 billionof TARP funds to more than 600 financialinstitutions.The Congress and the public frequently ask questions about how TARP funds have beenused. Accordingly, the objective of this reportwas to address how TARP recipients haveused the funds received.In February 2009, SIGTARP sent surveyletters to more than 360 financial and otherinstitutions that had completed TARP fundingagreements through January 2009. The surveyinstrument provided for open-endedresponses. The goal was to elicit as muchinformation as possible while allowing fordifferent conditions at each bank. This reportis limited to survey recipients that participatedin the Capital Purchase Program. The reviewand analysis were confined to the surveyresponses which included supportingdocumentation as provided, reported, andcertified by the TARP recipients.
 
SIGTARPplans additional work to further assess theactual use of funds
.
SIGTARP’s work wasperformed in accordance with generallyaccepted government auditing standards.
What SIGTARP Recommends
SIGTARP is renewing and expanding on arecommendation previously made thatTreasury require TARP recipients to submitperiodic reports to Treasury on the uses of TARP funds, including what actions theywere able to take that they would not havetaken otherwise. The full text of therecommendation is included in the body of thereport.In commenting on a draft of this report,
 
Treasury did not agree with the
 
recommendation. SIGTARP’s response toTreasury’s position is included in themanagement comments section of this report.
Special Inspector General for the Troubled Asset Relief Program
 
 
Table of Contents
Introduction 1Banks Were Able To Provide Information on Their Use of TARP Funds 5Conclusions and Recommendations 14Management Comments and Audit Response 14AppendicesA. Scope and Methodology 17B. How Banks Use Capital 19C. Survey Letter 22D. CPP Survey Recipients 24E. Reported Actual Use of Funds by Month of Disbursement,Asset Size, and Amount of Funding 34F. Broad Impact of Receiving TARP Funds 36G. Audit Team Members 37H. Management Comments 38i
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