Treasury Notes

 Winding Down TARP: A Progress Report

By: Timothy G. Massad

TARP played a critical role in stopping an historic financial panic and stabilizing an economy in freefall. And once we broke the back of the crisis, we moved swiftly to replace temporary government support with private capital.

Overall, to date, we’ve recovered nearly 93 percent ($387 billion) of the funds disbursed for TARP ($418 billion). And we expect further income for taxpayers from the program moving forward.

In 2012, Treasury continued making significant progress winding down TARP – collecting nearly $70 billion in additional repayments and other income. Indeed, during the last year, we saw a number of important milestones, including the sale of our final shares of AIG common stock, Treasury’s announcement that it intends to exit its remaining investment in General Motors within the next 12-15 months (subject to market conditions), and other key transactions. 

As we begin 2013, we thought it would be good opportunity to provide an update on our exit strategy for our remaining TARP investments[1] – program-by-program.

There’s more work to be done, but we’re moving toward the finish line as we continue winding down TARP.

TARP’s Bank Programs

TARP’s five bank investment programs have earned a significant profit for taxpayers. To date, we’ve recovered $268 billion through repayments and other income, which represents a positive return of more than $23 billion compared to the amount ($245 billion) initially invested.

In May 2012, Treasury outlined its exit strategy for the remaining investments in TARP’s largest bank program, the Capital Purchase Program (CPP). Treasury is winding down its remaining stakes through a combination of repayments, restructurings, and sales.

In December 2012, we provided an update on Treasury’s CPP wind down – which detailed how we had reduced our portfolio by more than 140 institutions and $8 billion through the means we outlined in May 2012.[2] In that same update, we also announced our intention to auction approximately two-thirds of our remaining CPP investments during 2013. Those auctions, together with additional repayments and a limited number of restructurings, should enable us to continue to make substantial progress in winding down the program. 

Treasury has already closed three bank programs. Taxpayers realized profits on both the Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP). No funding was ever disbursed under the Capital Assistance Program (CAP), which was part of the successful stress test process federal banking regulators conducted in 2009.  

The final bank investment program is the Community Development Capital Initiative (CDCI), under which Treasury holds investments of approximately $533 million, which represents less than one percent of the overall funds provided through TARP's bank programs.  These investments are in 77 community development financial institutions which serve lower and moderate-income communities that are underserved by traditional financial institutions.  As we previously stated, Treasury will announce its wind down plans for this program at a later date.

Credit Market Programs

Treasury has already recovered more than 90 percent of the funds disbursed through TARP’s credit market programs and expects to realize a gain on these programs.

Last week, Treasury announced the full repayment with interest of its loans under the Term Asset-backed Securities Lending Facility (TALF) – a joint program with the Federal Reserve that helped support the markets for auto loans, student loans, credit cards, small business loans and other types of consumer lending. Treasury’s remaining credit support for the program was also eliminated.   The amount of fees collected ($856 million) through the program exceed the remaining loans outstanding ($556 million), which means that there is no risk of taxpayer losses. At this point, each additional dollar recovered represents an additional dollar of profit for taxpayers on TALF.

In January 2012, Treasury completed the wind down of its SBA 7(a) Securities Purchase Program. Treasury recovered $376 million over the life of the program, representing a gain of approximately $8 million to taxpayers on Treasury’s original investment of $368 million.

As of December 31, 2012, Public Private Investment Program (PPIP) fund managers cannot make any new investments under the program. To date, Treasury has recovered 93 percent of the funds disbursed though PPIP – and taxpayers are currently expected to earn an overall lifetime gain on the program. Five of the nine PPIP funds have already been wound down at a profit for taxpayers. The total investments outstanding for the remaining four PPIP funds also continue to decline. Consistent with the terms of the program, individual fund managers will make independent determinations about how quickly those remaining four funds are wound down.

Auto Industry Programs

To date, we’ve recovered more than half of the TARP funds invested to prevent the collapse of the American auto industry. According to independent estimates, those investments saved more than one million jobs. And since the rescue, the auto industry has added more than a quarter of a million new jobs.

In July 2012, Treasury fully exited its investment in Chrysler Group LLC. Treasury recovered more than 90 percent of the funds committed to stabilize Chrysler.

By the end of 2012, Treasury had sold more than two-thirds (612 million shares) of the shares of General Motors common stock it originally held (912 million shares). In December 2012, Treasury announced its intention to fully exit its remaining investment (300 million shares) in GM within 12-15 months, subject to market conditions. In January 2013, Treasury entered into a prearranged written trading plan to proceed with that December 2012 announcement. 

Our only other outstanding auto-related investment is in Ally Financial. We outlined our exit strategy for that investment in May 2012. Treasury has already recovered about one-third of the total $17 billion invested, and it expects to begin to monetize its remaining investment as the company completes two critical strategic initiatives; the chapter 11 proceeding for its mortgage subsidiary, Residential Capital, and the sale of its international auto finance operations. Indeed, in November 2012, Ally announced that it had reached an agreement to sell its remaining international operations and that it expected total proceeds from those transactions of $9.2 billion.


In December 2012, Treasury announced the sale of its final shares of AIG common stock. Overall, Treasury and the Federal Reserve fully recovered the combined $182 billion committed to stabilize the company during the financial crisis – plus an additional $22.7 billion positive return for taxpayers.


During 2013, we expect to make significant additional progress winding down TARP’s investment programs and recovering taxpayer dollars.[3] We also continue to expect that the financial stability programs that Treasury, the Federal Reserve, and the FDIC put in place during the crisis are likely to result in an overall positive financial return for taxpayers.

Timothy G. Massad is the Assistant Secretary for Financial Stability at the U.S. Department of the Treasury. 

[1]Unlike TARP’s investment programs, funds disbursed through TARP's housing programs to assist struggling homeowners at risk of foreclosure are not intended to be recovered. Eligible individuals can apply to participate in the Making Home Affordable Program through December 31, 2013, or to certain state foreclosure prevention programs in participating states through the Hardest-Hit Fund.

[2] As of December 18, 2012, that included 49 repayments for $6.9 billion and 91 auctions for proceeds of $1.5 billion, as well as a limited number of restructurings.

[3] For more details on Treasury’s lifetime cost estimates for TARP programs, please visit Treasury’s Monthly 105(a) Report to Congress on TARP at this link.​

Posted in:  Financial Stability
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