Treasury established the Targeted Investment Program (TIP) in December 2008. The program gave the Treasury the necessary flexibility to provide additional or new funding to financial institutions that were critical to the functioning of the financial system.
Through the Targeted Investment Program, Treasury sought to prevent a loss of confidence in critical financial institutions, which could result in significant financial market disruptions during the crisis, threaten the financial strength of similarly situated financial institutions, impair broader financial markets, and undermine the overall economy.
Treasury invested $20 billion in two institutions – Bank of America and Citigroup – under the Targeted Investment Program. These investments were in addition to those that the banks received under the CPP. Like the Capital Purchase Program, Treasury invested in preferred stock, and received warrants to purchase common stock in each institution.
The TIP investments provided for annual dividends of eight percent, which was higher than the CPP rate, and also imposed greater reporting requirements and more onerous terms on the companies than under the CPP terms, including restricting dividends to $0.01 per share per quarter, restrictions on executive compensation, restrictions on corporate expenses, and other measures.
Program Status
In December 2009, both Bank of America and Citigroup repaid their TIP investments in full.
Dividends received under the program totaled $3 billion. Treasury also received warrants from each bank which provided the taxpayer with additional gain on the investments.
The program is now closed and resulted in a positive return of $4 billion for taxpayers.