Summary
GAO's fifth report on the Troubled Asset Relief Program (TARP) follows up on prior recommendations. It also reviews (1) activities that had been initiated or completed under TARP as of June 12, 2009; (2) the Department of the Treasury's Office of Financial Stability's (OFS) hiring efforts and use of contractors; and (3) TARP performance indicators. To do this, GAO reviewed signed agreements and other relevant documentation and met with officials from OFS, contractors, and financial regulators.
Treasury continued to operationalize its more recent programs, including the Capital Assistance Program (CAP). As part of this program, the Federal Reserve led the stress tests of the largest 19 U.S. bank holding companies, which revealed that about half needed to raise additional capital to keep them strongly capitalized and lending even if economic conditions worsen. Whether any of the institutions will have to participate in CAP has yet to be determined. While the Federal Reserve disclosed the stress test results, it has no plans to disclose information about the 19 institutions going forward. What information, if any, is disclosed will be left to the discretion of the affected institutions raising a number of concerns including potentially inconsistent or only selected information being disclosed. Moreover, the Federal Reserve had not developed a mechanism to share information with OFS about the ongoing condition of the 19 bank holding companies that continue to participate in TARP programs. According to Treasury, its Financial Stability Plan has provided a basis for its communication strategy. Treasury plans to more regularly communicate with congressional committees of jurisdiction about TARP. However, until this strategy is fully implemented, all congressional stakeholders will not be receiving information in a consistent or timely manner. A key component of the communication strategy is the new www.financialstability.gov Web site. While a goal of the new site is to provide the public with a more user friendly format, Treasury has not yet measured the public's satisfaction with the site. OFS has made progress in establishing its management infrastructure. Continued attention to hiring remains important because some offices within OFS, including the Office of the Chief Risk and Compliance Officer, continue to have a number of vacancies that will need to be filled as TARP programs are fully implemented. Treasury has also continued to build a network of contractors and financial agents to support TARP administration and operations. These contracts and agreements are key tools OFS has used to help develop and administer its TARP programs. Treasury has provided information to the public on procurement contracts and financial agency agreements, but has not included a breakdown of cost data by each entity. As a result, Treasury is missing an opportunity to provide additional transparency about TARP operations.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Recommendations for Executive Action
Recommendation: While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should ensure that the warrant valuation process maximizes benefits to taxpayers and consider publicly disclosing additional details regarding the warrant repurchase process, such as the initial price offered by the issuing entity and Treasury's independent valuations, to demonstrate Treasury's attempts to maximize the benefit received for the warrants on behalf of the taxpayer.
Agency Affected: Department of the Treasury
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should, in consultation with the Chairmen of the Federal Deposit Insurance Corporation and the Federal Reserve, the Comptroller of the Currency, and the Acting Director of the Office of Thrift Supervision, ensure consideration of generally consistent criteria by the primary federal regulators when considering repurchase decisions under TARP.
Agency Affected: Department of the Treasury
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should fully implement a communication strategy that ensures that all key congressional stakeholders are adequately informed and kept up to date about TARP.
Agency Affected: Department of the Treasury
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should expedite efforts to conduct usability testing to measure the quality of users' experiences with the financial stability Web site and measure customer satisfaction with the site, using appropriate tools such as online surveys, focus groups, and e-mail feedback forms.
Agency Affected: Department of the Treasury
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should explore options for providing to the public more detailed information on the costs of TARP contracts and agreements, such as a dollar breakdown of obligations and/or expenses.
Agency Affected: Department of the Treasury
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help improve the transparency of CAP--in particular the stress tests results, the Director of Supervision and Regulation of the Federal Reserve should consider periodically disclosing to the public the aggregate performance of the 19 bank holding companies against the more adverse scenario forecast numbers for the duration of the 2-year forecast period and whether or not the scenario needs to be revised. At a minimum, the Federal Reserve should provide the aggregate performance data to OFS program staff for any of the 19 institutions participating in CAP or CPP.
Agency Affected: Federal Reserve System: Division of Banking Supervision and Regulation
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
