P. 1
TARP Congressional Oversight Panel - Full Decommissioning Report for April 2011 Expiration

TARP Congressional Oversight Panel - Full Decommissioning Report for April 2011 Expiration

|Views: 263|Likes:
Published by gonzodave
This Decommissioning Report states loudly that the anticipated costs of the 2008 TARP were NOT incurred because of the failure to provide aide to Main Street foreclosures.

This unspent money was compounded by the removal of another bill recently by H.R. 830: FHA Refinance Program Termination Act which received only 245 applications from homeowners instead of the anticipated 1.5 million.

Vast billions intended for American homeowners were not spent.

I ask why the cut in social programs now underway in Congress?

~gonzodave
This Decommissioning Report states loudly that the anticipated costs of the 2008 TARP were NOT incurred because of the failure to provide aide to Main Street foreclosures.

This unspent money was compounded by the removal of another bill recently by H.R. 830: FHA Refinance Program Termination Act which received only 245 applications from homeowners instead of the anticipated 1.5 million.

Vast billions intended for American homeowners were not spent.

I ask why the cut in social programs now underway in Congress?

~gonzodave

More info:

Published by: gonzodave on Mar 19, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

03/19/2011

pdf

text

original

Capital infusions were not the only tool that Treasury employed under the TARP to
stabilize the banking sector. In fact, during the financial crisis of late 2008 and early 2009, the
federal government dramatically expanded its role as a guarantor.199

All told, the federal

government‘s guarantees have exceeded the total value of the TARP, making guarantees the
single largest element of the government‘s response to the financial crisis.

1. Background

As noted above, CPP infusions were not enough for some institutions. In a matter of
weeks, two of the first nine institutions to receive CPP funds – Citigroup and Bank of America –
needed additional support.200

Citigroup faced widening credit default swap spreads and losses
due to write-downs on leveraged finance investments and securities, particularly in residential
real estate. Citigroup‘s stock price, which had been volatile, fell below $4 per share on
November 21, 2008, from a high of over $14 per share just three weeks earlier. This constituted
a loss of more than two-thirds of Citigroup‘s market capitalization during those three weeks.201
Citigroup ultimately incurred a loss of $8.29 billion for the fourth quarter of 2008.202

For its

part, Bank of America incurred its first quarterly loss in more than 17 years in the fourth quarter
of 2008. These losses were largely due to escalating credit costs (including additions to
reserves), and significant write-downs and trading losses in the capital markets businesses.203

In

addition, the market feared Bank of America‘s liability from its purchases of Merrill Lynch and
Countrywide.204

199

Created by the FDIC less than two weeks after the enactment of EESA, the TLGP was intended to
promote liquidity in the interbank lending market and confidence in financial institutions. The U.S. government also
developed two other initiatives with guarantee-like aspects. First, through the TALF, FRBNY served as a quasi-
guarantor of the newly issued ABS by permitting participating ABS owners to default on their TALF loans without
further recourse from the lender (the government). Second, the PPIP provides a quasi-guarantee to the markets by

demonstrating the U.S. government‘s willingness to subsidize private investments and implement measures to

encourage market liquidity.

200

2009 November Oversight Report, supra note 60, at 13-14.

201

2009 November Oversight Report, supra note 60, at 43-44.

202

2009 November Oversight Report, supra note 60, at 43.

203

2009 November Oversight Report, supra note 60, at 43.

204

See Section II.A.1.a, supra. As noted above, in FDIC board minutes from the time, the FDIC board
acknowledged that the market was sensitive to Bank of America‘s losses and liabilities from Countrywide and

66

Treasury, the Federal Reserve, and the FDIC stated that providing additional assistance to
both institutions was necessary not only to keep them afloat, but also ―to strengthen the financial
system and protect U.S. taxpayers and the U.S. economy.‖ Noting that at the end of 2008 no one
knew what might happen to the economy next, Treasury stated that a driving force behind the
decision to provide additional assistance was a fear that either institution‘s failure would cause
the same deep, systemic damage as had Lehman Brothers‘ collapse.205

Part of the government‘s additional assistance to Citigroup and Bank of America was

provided through the Asset Guarantee Program (AGP), which Treasury created pursuant to
Section 102 of EESA to guarantee certain distressed or illiquid assets that were held by
systemically significant financial institutions.206

In Treasury‘s view, asset guarantees would
―calm market fears about really large losses,‖ thereby encouraging investors to keep funds in
Citigroup and Bank of America.207

Citigroup‘s guarantee under the AGP ended in December

2009, following the partial repayment of its TARP assistance.

In addition to the AGP, on September 19, 2008, two weeks before EESA was signed into
law, Treasury announced the Temporary Guarantee Program for Money Market Funds
(TGPMMF), which was designed to alleviate investors‘ concerns that MMFs would drop below
a $1.00 net asset value, an occurrence known as ―breaking the buck.‖208

At the program‘s

height, it guaranteed $3.2174 trillion in MMFs.209

The TGPMMF ended in September 2009.
Similarly, the FDIC‘s DGP, part of the TLGP, discussed in greater detail in Section I, placed the
FDIC‘s guarantee behind the debt that banks issued in order to raise funds that they could use to
lend to customers. The DGP closed to new issuances of debt on October 31, 2009. The FDIC
will continue to guarantee debt issued prior to that date until the earlier of its maturity or June 30,
2012.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->