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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

November 2013: 

Government Support for Bank Holding Companies: 

Statutory Changes to Limit Future Support Are Not Yet Fully 
Implemented: 

GAO-14-18: 

GAO Highlights: 

Highlights of GAO-14-18, a report to congressional requesters. 

Why GAO Did This Study: 

The federal government extended unprecedented support to financial 
institutions to stabilize financial markets during the financial 
crisis. While these actions helped to avert a more severe crisis, they 
raised questions about the appropriate scope of government safety nets 
for financial institutions. GAO was asked to review the benefits that 
large bank holding companies (those with more than $500 billion in 
assets) have received from actual and implied government support. 

This is the first of two reports GAO will issue on this topic. This 
report examines (1) actual government support for banks and bank 
holding companies during the financial crisis, and (2) recent 
statutory and regulatory changes related to government support for 
banks and bank holding companies. GAO reviewed relevant statutes, 
regulations, and agency documents; analyzed program transaction data; 
and interviewed regulators, representatives of financial institutions, 
and academics. In a second report to be issued in 2014, GAO will 
examine any funding or other economic advantages the largest bank 
holding companies have received as a result of implied government 
support. 

What GAO Found: 

During the 2007-09 financial crisis, the federal government’s actions 
to stabilize the financial system provided funding support and other 
benefits to bank holding companies and their subsidiaries. Agencies 
introduced new programs with broad-based eligibility that provided 
funding support to eligible institutions, which included entities that 
were part of a bank holding company and others. Programs that provided 
the most significant support directly to bank holding companies or 
their subsidiaries included Department of the Treasury capital 
investment programs, Federal Reserve System lending programs, and 
Federal Deposit Insurance Corporation (FDIC) guarantee programs. 
Together these actions helped to stabilize financial conditions, while 
participating firms also accrued benefits specific to their own 
institutions, such as liquidity benefits from programs that allowed 
them to borrow at longer maturities and at interest rates that were 
below possible market alternatives. At the end of 2008, program use—
measured for each institution as the percentage of total assets 
supported by the programs—was higher on average for banks and bank 
holding companies with $50 billion or more in total assets than for 
smaller firms. The six largest bank holding companies were significant 
participants in several emergency programs but exited most by the end 
of 2009. Differences in program use were driven in part by how 
institutions funded themselves. For example, while smaller banks 
relied more on deposit funding, larger bank holding companies relied 
more on short-term funding markets and participated more in programs 
that assisted these markets. In addition to these programs, the Board 
of Governors of the Federal Reserve System (Federal Reserve Board) 
granted several regulatory exemptions to allow banks to provide 
liquidity support to their nonbank affiliates and for other purposes. 
Finally, government assistance to individual troubled firms benefited 
these firms, their counterparties, and the financial system. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) contains provisions that aim to modify the scope of federal 
safety nets, restrict future government support and strengthen 
regulatory oversight for the banking sector, but implementation is 
incomplete and the effectiveness of some provisions remains uncertain. 
Agencies have finalized certain changes to traditional safety nets for 
insured banks, but impacts of provisions to limit the scope of 
transactions that benefit from these safety nets will depend on how 
they are implemented. The act also places restrictions on emergency 
authorities used by regulators during the crisis to assist financial 
firms. For example, it prohibits the use of these authorities to 
rescue a specific failing firm. The Federal Reserve Board is required 
by the act to establish policies and procedures implementing changes 
to its emergency authority under Section 13(3) of the Federal Reserve 
Act, but it has not completed its process for drafting the required 
procedures or set time frames for doing so. Setting time frames could 
help ensure more timely completion of these procedures. FDIC has made 
progress toward implementing its new authority under the Dodd-Frank 
Act to resolve a large failing firm. FDIC continues to work to address 
potential obstacles to the viability of its resolution process as an 
alternative to bankruptcy, such as challenges that could arise when 
resolving more than one failing firm. Finally, the Federal Reserve 
Board has finalized certain enhanced prudential standards for the 
largest financial firms intended to reduce the risks these firms could 
pose to the financial system. 

What GAO Recommends: 

GAO recommends that the Federal Reserve Board establish timeframes for 
completing its process for drafting procedures related to its 
emergency lending authority to ensure timely compliance with Dodd-
Frank Act requirements. The Federal Reserve Board accepted this 
recommendation. 

View [hyperlink, http://www.gao.gov/products/GAO-14-18]. For more 
information, contact Lawrance Evans, Jr. at (202) 512-4802 or 
EvansL@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Government Actions to Stabilize Markets Resulted in Significant 
Support to Bank Holding Companies: 

Dodd-Frank Aims to Restrict Future Government Support, but 
Implementation Is Incomplete and Effectiveness Remains Uncertain: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope and Methodology: 

Appendix II: Overview of Selected Federal Government Programs That 
Provided Emergency Funding Support to Banking Entities during the 2007-
2009 Financial Crisis: 

Appendix III: Methodology for Analysis of Pricing and Terms for 
Financial Stability Programs: 

Appendix IV: Use of Financial Stability Programs by Banking 
Organizations of Different Sizes: 

Appendix V: Comments from the Board of Governors of the Federal 
Reserve System: 

Appendix VI: Comments from the Department of the Treasury: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Overview of Largest Emergency Programs That Provided General 
Funding Support to Bank Holding Companies or Their Subsidiaries: 

Table 2: Pricing Terms for Commercial Paper Funding Facility: 

Table 3. Numbers and average assets of banking organizations in 
analysis sample by size and quarter, June 30, 2008 to December 31, 
2012. 

Table 4: Participation Rates and Average Loan Amounts Outstanding as a 
Percent of Assets at Quarter-End for Participating Banking 
Organizations for CPFF, PDCF, TAF, and TSLF, June 30, 2008 through 
December 31, 2009: 

Table 5: Participation Rates and Average Investment Amounts 
Outstanding as a Percentage of Assets at Quarter-End for Participating 
Banking Organizations for CPP and TIP, December 31, 2008 to December 
31, 2012: 

Table 6: Participation Rates in DGP and TAGP and Average DGP-
Guaranteed Debt and TAGP-Guaranteed Deposits Outstanding as a 
Percentage of Assets at Quarter-End for Participating Banking 
Organizations, December 31, 2008, through December 31, 2012: 

Table 7. Average outstanding amounts of equity provided, loans 
provided, and liabilities guaranteed by emergency programs for select 
bank holding companies and for banking organizations by size at year 
end, 2008-2012. 

Figures: 

Figure 1. Emergency Capital Program Subsidy Estimates: 

Figure 2: Section 23A Exemptions for Firms by Total Assets, 2000-2011: 

Figure 3: Average CPFF, PDCF, TAF, and TSLF Loan Amounts Outstanding 
as a Percentage of Assets at Quarter-End for Banking Organizations by 
Size, June 30, 2008, through December 31, 2012. 

Figure 4: Average CPP and TIP Investment Amounts Outstanding as a 
Percentage of Assets at Quarter-End for All Banking Organizations by 
Size, December 31, 2008 through December 31, 2012. 

Figure 5: Average DGP-Guaranteed Debt and TAGP-Guaranteed Deposits 
Outstanding as a Percentage of Assets at Quarter-End for All Banking 
Organizations by Size, December 31, 2008, through December 31, 2012: 

Abbreviations: 

ABCP: asset-backed commercial paper: 

ABS: asset-backed securities: 

AMLF: Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity 
Facility: 

BEA: Bureau of Economic Analysis: 

CBO: Congressional Budget Office: 

CDCI: Community Development Capital Initiative: 

CDS: credit default swaps: 

COP: Congressional Oversight Panel: 

CPFF: Commercial Paper Funding Facility: 

CPP: Capital Purchase Program: 

DGP: Debt Guarantee Program: 

EESA: Emergency Economic Stabilization Act of 2008: 

FDIC: Federal Deposit Insurance Corporation: 

FHLB: Federal Home Loan Bank: 

FOMC: Federal Open Market Committee: 

FRBNY: Federal Reserve Bank of New York: 

FSOC: Financial Stability Oversight Council: 

GSE: government-sponsored enterprise: 

IDI: insured depository institution: 

ILC: industrial loan corporation: 

LIBOR: London Interbank Offered Rate: 

MBS: mortgage-backed securities: 

MMMF: money market mutual fund: 

NIC: National Information Center: 

OCC: Office of the Comptroller of the Currency: 

OIS: overnight indexed swap: 

OLA: Orderly Liquidation Authority: 

PDCF: Primary Dealer Credit Facility: 

SPOE: Single Point-of-Entry: 

TAF: Term Auction Facility: 

TAGP: Transaction Account Guarantee Program: 

TALF: Term Asset-Backed Securities Loan Facility: 

TARP: Troubled Asset Relief Program: 

TIP: Targeted Investment Program: 

TLGP: Temporary Liquidity Guarantee Program: 

TSLF: Term Securities lending Facility: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

November 14, 2013: 

The Honorable Sherrod Brown: 
Chairman: 
Financial Institutions and Consumer Protection Subcommittee: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable David Vitter: 
United States Senate: 

During the financial crisis of 2007-2009, the federal government 
extended unprecedented amounts of assistance to financial institutions 
to stabilize financial markets and the broader economy. This support 
included the creation of temporary programs that extended more than $1 
trillion in loans, provided hundreds of billions of dollars of 
capital, and guaranteed hundreds of billions of dollars of other 
liabilities for participating financial institutions. On a few 
occasions, the federal government provided additional capital and 
other support to individual large troubled institutions to prevent a 
bankruptcy that could have further destabilized markets. While these 
government interventions helped to avert a more severe crisis, they 
raised questions about moral hazard and the appropriate scope of 
government safety nets for financial institutions.[Footnote 1] In 
particular, extraordinary support for troubled financial institutions 
led to debate about how to decrease the likelihood of future rescues 
of failing institutions and limit the potential for federal safety 
nets intended for insured depository institutions to provide a 
backstop for activities conducted outside these institutions. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) includes provisions intended to prevent government rescues 
of individual financial institutions, place new restrictions on 
emergency authorities used by regulators to assist financial 
institutions during the last financial crisis, and subject a 
designated group of large financial institutions to stricter 
regulatory oversight, among other changes.[Footnote 2] Nevertheless, 
market observers have continued to debate whether some of the largest 
and most complex financial institutions--including bank holding 
companies with more than $500 billion in total consolidated assets--
may continue to benefit from expectations of extraordinary government 
support that could potentially give them funding and other economic 
advantages relative to smaller competitors. 

You asked us to review the economic benefits that the largest bank 
holding companies (those with more than $500 billion in total 
consolidated assets) have received as a result of actual or perceived 
government support. This is the first of two reports we will issue on 
this topic. In this report, we review (1) support banks and bank 
holding companies received as a result of government efforts to 
stabilize financial markets during the financial crisis of 2007-2009, 
and (2) recent statutory and regulatory changes related to government 
support for banks and bank holding companies and factors that could 
impact the effectiveness of these changes. In terms of scope, the 
first section of this report addresses benefits that bank holding 
companies and their subsidiaries received during the crisis from 
actual government support provided through emergency actions taken. It 
does not address benefits that some institutions may have received and 
may continue to receive from perceived government support--that is, 
support that market participants may expect the federal government to 
provide to these institutions in the event that they face large losses 
that threaten them with failure. In a second report to be issued in 
2014, we will address questions about whether the largest bank holding 
companies have received funding or other economic advantages as a 
result of expectations that the government would not allow them to 
fail. That report will include the results of our original empirical 
analysis of funding costs for large bank holding companies. 

To address the objectives for this report, we reviewed relevant 
statutes, regulations, agency documents and data, related studies, and 
prior GAO work. To describe government actions that extended support 
for banks and bank holding companies during the crisis, we included 
information and analyses from prior GAO work on the Troubled Asset 
Relief Program (TARP), the emergency programs of the Board of 
Governors of the Federal Reserve System (Federal Reserve Board), and 
other emergency assistance provided to the banking sector. To obtain 
perspectives on the benefits that bank holding companies and their 
subsidiaries received from emergency government actions, we reviewed 
papers by staff of financial regulators and other experts and 
interviewed federal financial regulators, representatives of bank 
holding companies that received emergency government assistance, trade 
associations, and academics. To describe the amount of funding support 
that institutions of various sizes received from emergency government 
programs, we obtained and analyzed program transaction data for the 
programs introduced by the Department of the Treasury (Treasury), the 
Federal Reserve Board, and the Federal Deposit Insurance Corporation 
(FDIC) that provided the most significant funding support directly to 
bank holding companies or their subsidiaries. For selected programs, 
we compared the terms of this assistance (such as interest rates and 
fees) to indicators of pricing for market alternatives that might have 
been available to program participants. While this analysis provides a 
measure of program pricing versus potential market alternatives, it 
does not produce a precise quantification of the benefits that accrued 
to participating financial institutions. To compare the extent to 
which banking organizations of various sizes used these emergency 
programs, we calculated the percentage of banking organization assets 
that were supported by emergency programs--either through capital 
injections, loans, or guarantees--at quarter-end dates for 2008 
through 2012. Finally, we obtained and analyzed Federal Reserve Board 
documentation of Federal Reserve Board decisions to grant exemptions 
to Section 23A of the Federal Reserve Act and approve applications 
from financial companies to convert to bank holding company status. 
[Footnote 3] 

Our scope did not include an analysis of any benefits that banks or 
bank holding companies may have received from any expectations of 
future government support. As discussed earlier, we will cover any 
benefits to banking entities from perceived government support in our 
second report. For parts of our work that involved the analysis of 
computer-processed data, such as transaction data for the agencies' 
emergency programs, we assessed the reliability of these data and 
determined that they were sufficiently reliable for our purposes. 
Appendix I contains additional information about the data sources used 
and our assessment of the reliability of these data. Appendices III 
and IV contain additional information about our methodology for the 
data analyses in our first objective. 

To address our second objective, we reviewed information on statutory 
and regulatory changes related to the authority to provide government 
support for banks and bank holding companies, including prior GAO work 
on implementation of the Dodd-Frank Act. To update the status of 
agencies' efforts to implement these changes, we reviewed agencies' 
proposed and final rules, and interviewed staff from FDIC, the Federal 
Reserve Board, the Office of the Comptroller of the Currency (OCC), 
and Treasury. We identified statutory provisions or requirements that 
agencies had not fully implemented and interviewed agency staff about 
planned steps to complete implementation. We also reviewed relevant 
congressional testimonies and other public statements by agency 
officials. To describe factors that could impact the effectiveness of 
these provisions, we reviewed prior GAO work on the potential impacts 
of Dodd-Frank Act provisions. To obtain additional perspectives on 
factors that could impact the effectiveness of these provisions, we 
interviewed and reviewed the public statements and analyses of agency 
officials, academics, and market experts. Appendix I contains 
additional information on our scope and methodology. 

We conducted this performance audit from January 2013 through November 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

Bank Holding Companies: 

Bank holding companies are companies that own or control one or more 
banks. In the United States, most banks insured by FDIC are owned or 
controlled by a bank holding company. In addition to bank subsidiaries 
engaged in traditional banking activities of deposit-taking and 
lending, many U.S. bank holding companies also own or control nonbank 
subsidiaries, such as broker-dealers and insurance companies. The Bank 
Holding Company Act of 1956, as amended, establishes the legal 
framework under which bank holding companies operate and establishes 
their supervision, with the Federal Reserve Board having authority 
over bank holding companies and their banking and nonbanking 
interests.[Footnote 4] The Bank Holding Company Act also limits the 
types of activities that bank holding companies may conduct, either 
directly or through their nonbank affiliates. The restrictions, which 
are designed to maintain the general separation of banking and 
commerce in the United States, allow bank holding companies to engage 
only in banking activities and those activities that the Federal 
Reserve Board has determined to be "closely related to banking," such 
as extending credit, servicing loans, and performing appraisals of 
real estate and tangible and intangible personal property, including 
securities.[Footnote 5] Under amendments to the Bank Holding Company 
Act made by the Gramm-Leach-Bliley Act, also known as the Financial 
Services Modernization Act of 1999, a bank holding company can elect 
to become a financial holding company that can engage in a broader 
range of activities that are financial in nature.[Footnote 6] The 
Gramm-Leach-Bliley Act defined a set of activities as financial in 
nature and authorized the Federal Reserve Board, with the agreement of 
Treasury, to determine whether an additional activity is financial in 
nature or incidental or complementary to a financial activity. 
[Footnote 7] For example, financial holding companies are permitted to 
engage in securities underwriting and dealing, but would be 
prohibited, for example, from selling commercial products. Large U.S. 
bank holding companies typically are registered as financial holding 
companies and own a number of domestic bank subsidiaries, as well as 
nonbank and foreign subsidiaries. 

The largest U.S. bank holding companies have grown substantially in 
size and scope in recent decades. Since 1990, in part due to waves of 
mergers, the share of total bank holding company assets controlled by 
the largest 10 firms increased from less than 30 percent to more than 
60 percent, as of July 2012.[Footnote 8] Some bank holding companies 
grew to become large financial conglomerates that offer a wide range 
of products that cut across the traditional financial sectors of 
banking, securities, and insurance. Following the enactment of the 
Gramm-Leach-Bliley Act in 1999, the assets held in nonbank 
subsidiaries or at the holding company level grew to account for a 
progressively larger share of total bank holding company assets. 
Greater involvement by bank holding companies in nontraditional 
banking businesses has been accompanied by an increase in the 
proportion of bank holding company income that is generated by fee 
income, trading, and other noninterest activities. As large bank 
holding companies have broadened the scope of their activities and 
their geographic reach, they have become more organizationally 
complex. A simple indicator of organizational complexity is the number 
of separate legal entities within the bank holding company; the 
largest four U.S. bank holding companies each had at least 2,000 as of 
June 30, 2013.[Footnote 9] 

The 2007-2009 financial crisis raised concerns that some U.S. bank 
holding companies--as well as some nonbank financial institutions--had 
grown so large, interconnected, and leveraged that their failure could 
threaten the stability of the U.S. financial system and the global 
economy. The Dodd-Frank Act includes several provisions intended to 
reduce the risk of a failure of a large, complex financial 
institution, the damage that such a failure could do to the economy, 
and the likelihood that a failing institution would receive government 
support. For example, the act directs the Federal Reserve Board to 
impose enhanced prudential standards and oversight on bank holding 
companies with $50 billion or more in total consolidated assets and 
nonbank financial companies designated by the Financial Stability 
Oversight Council (FSOC) for supervision by the Federal Reserve Board. 
[Footnote 10] 

Federal Safety Net Programs for the Banking Sector: 

The federal government maintains programs--frequently referred to as 
safety nets--to reduce the vulnerability of depository institutions to 
runs that could threaten the health of the banking system and the 
broader economy.[Footnote 11] Following a series of banking crises in 
the early 1900s, the government created two programs generally 
considered to form the core of these safety nets: the Federal Reserve 
System's discount window and FDIC deposit insurance. By making 
emergency liquidity available to solvent depository institutions 
through the discount window and reducing incentives for depositors to 
withdraw their funds, these safety nets were intended to help ensure 
that depository institutions could continue to lend and provide other 
important services, even during turbulent economic conditions. In 
addition to the discount window and deposit insurance, the Federal 
Reserve Board and FDIC have other emergency authorities related to 
maintaining financial stability. Moreover, the Federal Home Loan Bank 
System serves to provide liquidity to the banking system that helps to 
foster stability. In part because access to federal safety nets 
potentially reduced incentives for insured depositors to monitor and 
restrain the risk-taking of banks, banks were also subjected to 
federal supervision and regulation. 

Discount Window: 

The Federal Reserve System, in its role as the lender of last resort, 
operates discount window programs, which provide a backup source of 
liquidity through collateralized loans for depository institutions to 
help ensure the stable flow of credit to households and 
businesses.[Footnote 12] During normal market conditions, banks and 
other depository institutions in generally sound financial condition 
can obtain discount window loans to address short-term funding needs 
arising from unexpected funding pressures. In a financial crisis, 
discount window lending can provide broader liquidity support to the 
banking system that can help mitigate strains in financial markets. 
The Federal Reserve Board authorizes the Reserve Banks to offer three 
discount window programs to depository institutions: primary credit, 
secondary credit, and seasonal credit, each with its own terms. 
[Footnote 13] The primary credit program is the principal discount 
window program and extends credit to depository institutions in 
generally sound condition on a very short-term basis (usually 
overnight). The secondary credit program is available to extend credit 
on a very short-term basis for depository institutions that are not 
eligible for primary credit, with the purpose of helping institutions 
to return to market sources of funds. The seasonal credit program 
generally extends loans to small depository institutions that face 
seasonal fluctuations in their funding needs. Section 10B of the 
Federal Reserve Act provides the statutory framework for these 
programs and, among other things, requires all discount window loans 
to be secured to the satisfaction of the lending Reserve Bank. 
[Footnote 14] 

Deposit Insurance: 

FDIC deposit insurance covers deposit accounts--including checking and 
savings accounts, money market deposit accounts, and certificates of 
deposit--at insured depository institutions up to the insurance limit 
and is backed by the full faith and credit of the U.S. government. 
Federal deposit insurance was created to reduce the incentive for 
depositors to withdraw funds from banks during a financial panic and 
maintain stability and confidence in the nation's banking system. 
During the 1800s and early 1900s, a number of states adopted different 
versions of deposit insurance to insure bank obligations in response 
to a wave of bank failures. However, these state insurance funds were 
later unable to cope with economic events during the 1920s, which led 
to calls for a system of federal deposit insurance to maintain 
financial stability. The Banking Act of 1933, which created FDIC by an 
amendment to the Federal Reserve Act, authorized FDIC to provide 
deposit insurance to banks and went into effect on January 1, 1934. 
[Footnote 15] The deposit insurance fund, administered by FDIC to 
resolve failed banks and thrifts, protects depositors from losses due 
to institution failures up to a limit. The deposit insurance fund is 
primarily funded by fees from assessments on insured depository 
institutions. If necessary, FDIC can borrow from Treasury, the Federal 
Financing Bank, and the Federal Home Loan Banks. As discussed later in 
this report, the Dodd-Frank Act permanently increased the deposit 
insurance limit from $100,000 to $250,000 and changed the base used to 
determine an insured depository institution's risk-based assessment to 
be paid into the deposit insurance fund.[Footnote 16] 

Emergency Authorities: 

In addition to the discount window and deposit insurance, during the 
2007-2009 financial crisis the Federal Reserve Board and FDIC used 
their emergency authorities to assist individual failing institutions. 
As discussed later in this report, the Dodd-Frank Act changed these 
authorities so that emergency lending can no longer be provided to 
assist a single and specific firm but rather can only be made 
available through a program with broad-based eligibility--that is, a 
program that provides funding support to institutions that meet 
program requirements and choose to participate.[Footnote 17] 

* Federal Reserve emergency lending authority. Prior to the Dodd-Frank 
Act, emergency lending authority under Section 13(3) of the Federal 
Reserve Act permitted the Federal Reserve Board, in unusual and 
exigent circumstances, to authorize a Reserve Bank to extend credit to 
individuals, partnerships, or corporations, if the Reserve Bank 
determined that adequate credit was not available from other banking 
institutions, and if the extension of credit was secured to the 
satisfaction of the lending Reserve Bank.[Footnote 18] During the 
financial crisis of 2007-2009, the Federal Reserve Board invoked this 
authority on a number of occasions to authorize one or more Reserve 
Banks to provide emergency assistance to particular institutions or to 
establish new programs to provide liquidity support to important 
credit markets. 

* FDIC open bank assistance. The FDIC Improvement Act of 1991 included 
a systemic risk exception to the requirement that FDIC resolve failed 
banks using the least costly method.[Footnote 19] Under this 
exception, FDIC could provide assistance to a failing bank if 
compliance with its requirements to resolve the bank using the least 
costly approach would have "serious adverse effects on economic 
conditions and financial stability"--that is, would cause systemic 
risk--and if such assistance would "avoid or mitigate such adverse 
effects."[Footnote 20] FDIC could act under the exception only under a 
process that included recommendations from the FDIC Board of Directors 
and Federal Reserve Board and approval by the Treasury Secretary. 
[Footnote 21] The agencies invoked this authority during the crisis to 
authorize FDIC to provide guarantees to particular banks and to 
introduce new guarantee programs with broad-based eligibility. As 
discussed later in this report, the Dodd-Frank Act effectively removed 
FDIC's authority to provide assistance to failing banks outside of a 
receivership. 

Federal Home Loan Bank System: 

The Federal Home Loan Bank (FHLB) System also serves to provide 
funding support to depository institutions during normal and strained 
market conditions. The FHLB System is a government-sponsored 
enterprise (GSE) that consists of 12 Federal Home Loan Banks (FHLB) 
and is cooperatively owned by member financial institutions, which 
include banks, thrifts, insurance companies, and credit unions. The 
primary mission of the FHLB System is to promote housing and community 
development by making loans, known as advances, to member financial 
institutions. These institutions are required to secure FHLB advances 
with high-quality collateral (such as single-family mortgages) and may 
use FHLB advances to fund mortgages. To raise the funds necessary to 
carry out its activities, the FHLB System issues debt in the capital 
markets at favorable rates compared to commercial borrowings due to 
market perceptions that the federal government would intervene to 
support the FHLB System in a crisis, thereby reducing its risk of 
default. When credit markets become strained, as they did during the 
most recent crisis, the FHLB System can serve as an important backup 
source of liquidity for member institutions that meet the FHLBs' 
collateral and other requirements. 

2007-2009 Financial Crisis: 

The 2007-2009 financial crisis was the most severe that the United 
States has experienced since the Great Depression. The dramatic 
decline in the U.S. housing market that began in 2006 precipitated a 
decline in the price of financial assets that were associated with 
housing, particularly mortgage-related assets based on subprime loans. 
Some institutions found themselves so exposed to declines in the 
values of these assets that they were threatened with failure--and 
some failed--because they were unable to raise the necessary capital 
as the value of their lending and securities portfolios declined. 
Uncertainty about the financial condition and solvency of financial 
entities led banks to dramatically raise the interest rates they 
charged each other for funds and, in late 2008, interbank lending 
effectively came to a halt. The same uncertainty also led money market 
funds, pension funds, hedge funds, and other entities that provide 
funds to financial institutions to raise their interest rates, shorten 
their terms, and tighten credit standards. As their funding became 
increasingly difficult to obtain, financial institutions responded by 
raising the prices and tightening their credit standards for lending 
to households and nonfinancial businesses. The liquidity and credit 
crisis made the financing on which businesses and individuals depend 
increasingly difficult to obtain as cash-strapped banks tightened 
underwriting standards, resulting in a contraction of credit to the 
economy. By late summer of 2008, the potential ramifications of the 
financial crisis included the continued failure of financial 
institutions, increased losses of individual wealth, reduced corporate 
investments, and further tightening of credit that would exacerbate 
the emerging global economic slowdown that was beginning to take shape. 

Because financial crises can result in severe damage to the economy 
and the road to recovery can be long, governments and monetary 
authorities have historically undertaken interventions, even though 
some of the resulting actions raise concerns about moral hazard and 
can pose a risk of losses to taxpayers.[Footnote 22] Given its 
severity and systemic nature, the recent global financial crisis 
prompted substantial interventions starting in late 2007, after 
problems in the subprime mortgage market intensified. As discussed 
further in the next section of this report, these interventions 
included the creation of temporary government programs to support 
important credit markets and financial institutions that intermediate 
credit in the economy by channeling funds from savers to borrowers. 

Government Actions to Stabilize Markets Resulted in Significant 
Support to Bank Holding Companies: 

From 2007 through 2009, the federal government's actions to stabilize 
the financial system provided funding support and other benefits to 
bank holding companies and their bank and nonbank financial 
subsidiaries. The Federal Reserve Board, Treasury, and FDIC introduced 
new programs with broad-based eligibility that provided funding 
support to institutions that met program requirements and chose to 
participate.[Footnote 23] Selected programs--for which eligibility was 
not restricted exclusively to institutions that were part of a bank 
holding company--included Federal Reserve System lending programs, 
Treasury capital investment programs, and FDIC programs that 
guaranteed uninsured deposits and new debt issues. Isolating the 
impact of individual interventions is difficult, but collectively 
these actions likely improved financial conditions by enhancing 
confidence in financial institutions and the financial system. Bank 
holding companies and their subsidiaries also accrued benefits 
specific to their own institutions, including liquidity benefits from 
programs that allowed them to borrow at lower interest rates and at 
longer maturities than might have been available in the markets. 
Programs generally were made available to institutions of various 
sizes, and differences in the use of programs by institutions of 
various sizes were driven in part by differences in how institutions 
funded themselves. For example, compared to smaller bank holding 
companies, larger bank holding companies relied less on deposits as a 
source of funding and more on short-term credit markets and 
participated more in programs created to stabilize these markets. At 
the end of 2008, use of these programs--measured for each institution 
as the percentage of total assets supported by the programs--was 
larger on average for larger banking organizations--those with $50 
billion or more in total assets--than for smaller banking 
organizations. The six largest bank holding companies were significant 
participants in several emergency programs but exited most of the 
programs by the end of 2009. Differences in program use across banking 
organizations of various sizes diminished as institutions exited the 
programs. In addition to programs that provided broad-based support, 
the Federal Reserve Board granted a number of regulatory exemptions to 
allow banks to provide liquidity support to their nonbank affiliates 
and for other purposes. Finally, some large bank holding companies 
benefited from individual institution assistance or regulatory relief. 
For example, government assistance to prevent the failures of large 
institutions benefited recipients of this assistance and other market 
participants. 

Crisis Programs with Broad-Based Eligibility Provided Funding Support 
to Bank Holding Companies and Their Subsidiaries: 

During the financial crisis, the Federal Reserve System, Treasury, and 
FDIC introduced new programs with broad-based eligibility to provide 
general funding support to the financial sector and to stabilize the 
financial system. Given this report's focus on bank holding companies, 
this section focuses on the financial stability programs that provided 
the most significant funding support directly to bank holding 
companies or their bank or nonbank subsidiaries. Table 1 provides an 
overview of the size, purpose, terms, and conditions of these 
programs, which included: 

* the Federal Reserve System's Term Auction Facility (TAF); Primary 
Dealer Credit Facility (PDCF); Term Securities Lending Facility 
(TSLF); and Commercial Paper Funding Facility (CPFF); 

* Treasury's Capital Purchase Program (CPP); and: 

* FDIC's Temporary Liquidity Guarantee Program (TLGP), which had two 
components: the Debt Guarantee Program (DGP) guaranteed certain newly 
issued senior unsecured debt, and the Transaction Account Guarantee 
Program (TAGP) guaranteed certain previously uninsured deposits. 

Institutions eligible for these programs included both entities that 
were part of a bank holding company structure and entities that were 
not. The Federal Reserve System designed its emergency programs to 
address disruptions to particular credit markets and to assist 
participants in these markets. For example, the Federal Reserve 
System's programs that targeted support to repurchase agreement 
markets provided assistance to securities firms that were subsidiaries 
of bank holding companies and securities firms that were not. The 
Federal Reserve System's CPFF purchased commercial paper from 
participating bank holding companies and other financial and 
nonfinancial firms that met the program's eligibility requirements. 
Treasury's CPP and FDIC's TLGP provided support primarily to insured 
depository institutions (banks and thrifts) and bank and savings and 
loan holding companies. 

Table 1: Overview of Largest Emergency Programs That Provided General 
Funding Support to Bank Holding Companies or Their Subsidiaries: 

Federal Reserve System: 

Program: TAF - Term Auction Facility[A]; (Dec. 12, 2008-Mar. 8, 2010); 
Peak dollar amount: Federal Reserve System: $493 billion; 
Purpose: Auctioned 1 and 3-month discount window loans to depository 
institutions to address strains in term interbank lending markets; 
Key terms: 
Eligible Institutions. Depository institutions eligible for the 
primary credit discount window program and expected to remain so over 
the TAF loan term[B]; 
Interest rate. The interest rate was determined by auction. For each 
auction, winning bidders were awarded loans at the 
same interest rate; 
Collateral eligibility. Based on discount window requirements[C]. 

Program: PDCF - Primary Dealer Credit Facility; (Mar. 16, 2008-Feb. 1, 
2010); 
Peak dollar amount: Federal Reserve System: $130 billion; 
Purpose: Provided overnight cash loans to primary dealers against 
eligible collateral to address strains in the repurchase agreement 
markets; 
Key terms: 
Eligible institutions. Primary dealers, a designated group of broker-
dealers and banks that transacted with the Federal Reserve Bank 
of New York in its conduct of open market operations[D]; 
Interest rate and fees. The interest rate was equal to the primary 
credit rate - the rate charged on discount window loans in the primary 
credit program. The Federal Reserve Bank of New York charged a 
frequency-based fee, ranging from 10 to 40 basis points, to dealers 
who accessed the facility on more than 45 out of 180 business days; 
Collateral eligibility. Initially limited to collateral eligible for 
open market operations (e.g., Treasury and agency securities) as well 
as investment-grade corporate securities, municipal securities, and 
asset-backed securities (ABS); later expanded to include all securities 
eligible to be pledged in the tri-party repurchase agreements system, 
including noninvestment grade securities and equities. 

Program: TSLF - Term Securities Lending Facility; (Mar. 11, 2008-Feb. 
1, 2010); 
Peak dollar amount: Federal Reserve System: $236 billion; 
Purpose: Auctioned loans of U.S. Treasury securities to primary 
dealers against eligible collateral to address strains in the 
repurchase agreement markets; 
Key terms: 
Eligible institutions. Primary dealers (same as PDCF); 
Interest rate. The interest rate was determined by auction 
(similar to TAF). For each auction, winning bidders were awarded loans 
at the same interest rate; 
Collateral eligibility. TSLF auctioned loans of securities against two 
schedules of collateral. Schedule 1 included all collateral eligible 
for open market operations. Schedule 2 collateral initially included 
Schedule 1 collateral as well as highly-rated mortgage-backed 
securities (MBS). Schedule 2 collateral was later expanded to include 
investment grade corporate and municipal securities, MBS, and ABS. 

Program: CPFF - Commercial Paper Funding Facility; (Oct. 7, 2008-Feb. 
1, 2010); 
Peak dollar amount: Federal Reserve System: $348 billion; 
Purpose: Purchased asset-backed commercial paper (ABCP) and unsecured 
commercial paper from eligible issuers; 
Key terms: 
Eligible issuers. All U.S. issuers (including those with a foreign 
parent) with eligible commercial paper. To be eligible, commercial 
paper was required to have received the highest rating from at least 
one major credit rating agency; 
Interest rate. The interest rate was set at a fixed spread above the 
daily 3-month overnight indexed swap (OIS) rate to control for changes 
in short-term interest rates.[E] This spread was 100 basis points for 
unsecured commercial paper and 300 basis points for ABCP; 
Credit surcharge. To provide additional loss protection, issuers of 
unsecured paper were required to pay a credit surcharge of 100 basis 
points. Commercial paper issues guaranteed by TLGP were exempt from the 
surcharge. 

Department of the Treasury (Treasury): 

Program: CPP - Capital Purchase Program; (Oct. 14, 2008-Dec. 31, 2009); 
Peak dollar amount: Federal Reserve System: $205 billion; 
Purpose: The first and largest initiative under Treasury's Troubled 
Asset Relief Program; provided capital to eligible financial 
institutions by purchasing preferred shares and subordinated debt; 
Key terms: 
Eligible institutions. Qualifying institutions generally included U.S.-
controlled depository institutions, bank holding companies, and most 
savings and loan holding companies; 
Dividends. Senior preferred shares paid dividends at a rate of 5 
percent annually for the first 5 years and 9 percent annually 
thereafter. Treasury also received warrants to purchase shares of 
stock or a senior debt instrument; 
Interest on subordinated debt. For certain issuers, Treasury received 
subordinated debt rather than preferred shares to protect these 
institutions' special tax status. Interest rates for this debt were 
set at 7.7 percent for the first 5 years and 13.8 percent for the 
remaining years. 

Federal Deposit Insurance Corporation: 

Program: TLGP - Temporary Liquidity Guarantee Program[F] (Announced 
Oct. 14, 2008); 
* DGP - Debt Guarantee Program (Expired Dec. 31, 2012); 
* TAGP - Transaction Account Guarantee Program (Expired Dec. 31, 2010); 
Peak dollar amount: Federal Reserve System: Approx. $346 billion debt 
and approx. $835 billion deposits; 
Purpose: DGP guaranteed certain newly-issued senior unsecured debt of 
eligible institutions to improve liquidity in term funding markets; 
TAGP temporarily extended an unlimited deposit guarantee to all 
domestic noninterest-bearing transaction accounts at participating 
insured depository institutions to limit further outflows of these 
deposits[G]; 
Key terms: 
Eligible institutions. FDIC insured depository institutions (IDI); 
U.S. bank and savings and loan holding companies; and affiliates of 
IDIs upon application; 
DGP fees. FDIC assessed fees on each DGP-guaranteed debt issuance 
based on time to maturity. Following extensions of the DGP, FDIC also 
assessed surcharges. Surcharges for holding companies and affiliates 
of IDIs were twice as high as those for IDIs; 
TAGP fees. FDIC assessed a fee of 10 basis points on the quarter-end 
balance of eligible deposits over $250,000. Beginning in 2010, FDIC 
instead assessed risk-based fees of 15, 20, or 25 basis points of 
quarter-end balances over $250,000. 

Source: FDIC, Federal Reserve System, and Treasury documents. 

Note: This table includes the emergency programs that provided the most 
significant funding support directly to bank holding companies and 
their subsidiaries. Bank holding companies and their subsidiaries 
benefited from other emergency government programs, such as programs 
that assisted money market mutual funds. Dates in parentheses are the 
program announcement dates, and where relevant, the date the program or 
assistance was closed or terminated. The peak dollar amount shown for 
CPP represents the total dollar amount invested through CPP. For all 
other programs, the peak dollar amount shown represents the peak dollar 
amount outstanding. 

[A] 12 C.F.R. § 201.4(e). 

[B] U.S. branches and agencies of foreign institutions that met program 
requirements were eligible to participate in TAF. The Reserve Banks 
extend discount window credit to U.S. depository institutions 
(including U.S. branches and agencies of foreign banks) under three 
programs, one of which is the primary credit program. Primary credit is 
available to generally sound depository institutions, typically on an 
overnight basis. To assess whether a depository institution is in sound 
financial condition, its Reserve Bank can regularly review the 
institution's condition, using supervisory ratings and data on adequacy 
of the institution's capital. 

[C] TAF loans were collateralized based on haircut requirements for the 
discount window program. For TAF loans, Reserve Banks accepted as 
collateral any assets that were eligible to secure discount window 
loans. 

[D] Several primary dealers were subsidiaries of large U.S. bank 
holding companies or large foreign banking organizations. U.S. bank 
holding companies with primary dealer subsidiaries included Citigroup, 
Inc., Bank of America Corporation, Goldman Sachs, JP Morgan Chase & 
Co., and Morgan Stanley. Goldman Sachs and Morgan Stanley were not bank 
holding companies when PDCF and TSLF launched in March 2008, but most 
of their participation in these programs occurred after they converted 
to bank holding companies in September 2008. 

[E] The OIS rate is an interest rate that tracks expectations of the 
future federal funds rate. 

[F] 12 C.F.R. § 370 . 

[G] The Dodd-Frank Act provided temporary unlimited deposit insurance 
coverage for noninterest-bearing transaction accounts at all FDIC-
insured institutions from December 31, 2010 through December 31, 2012. 
This coverage essentially was similar to that offered by TAGP. Pub. L. 
No. 111-203, § 343, 124 Stat. 1376, 1544 (2010). 

[End of table] 

Bank holding companies also benefited from other government programs, 
such as programs that targeted support to other market participants. 
For example, in the absence of Treasury and Federal Reserve System 
programs to guarantee and support money market mutual funds, 
respectively, such funds may have reduced their purchases of money 
market instruments issued by subsidiaries of bank holding companies 
and other firms, thereby exacerbating funding pressures on these 
firms. Other significant government programs included the Term Asset-
Backed Securities Loan Facility (TALF), which was created by the 
Federal Reserve System to support certain securitization markets, and 
other programs created by Treasury under TARP authority.[Footnote 24] 

While the Federal Reserve System and FDIC provided expanded support 
through traditional safety net programs for insured banks during the 
crisis, some of the emergency government programs provided funding 
support at the bank holding company level--where it could be used to 
support both bank and nonbank subsidiaries--or directly to nonbank 
entities. In late 2007, the Federal Reserve Board took a series of 
actions to ease strains in interbank funding markets, including 
lowering the target federal funds rate, easing terms at the discount 
window, and introducing a new program--TAF--to auction term loans to 
banks.[Footnote 25] However, in part due to statutory and regulatory 
restrictions on the ability of insured banks to provide funding 
support to their nonbank affiliates, agencies determined that 
emergency government support to insured banks was not sufficient to 
stem disruptions to important credit markets. Nonbank credit markets--
such as repurchase agreement and debt securities markets--had grown to 
rival the traditional banking sector in facilitating loans to 
consumers and businesses, and agencies determined that actions to 
address disruptions to these markets were needed to avert adverse 
impacts to the broader economy. For example, in March 2008, the 
Federal Reserve Board authorized PDCF and TSLF to address strains in 
repurchase agreement markets by providing emergency loans to broker-
dealers, a few of whom were owned by U.S. bank holding companies. 
[Footnote 26] When the crisis intensified in September 2008 following 
the failure of Lehman Brothers Holdings Inc.--a large broker-dealer 
holding company--the Federal Reserve Board modified terms for its 
existing programs and took other actions to expand funding support for 
both bank and nonbank entities.[Footnote 27] In September 2008, 
Treasury and the Federal Reserve System introduced new temporary 
programs to address liquidity pressures on money market funds and to 
help ensure that these funds could continue to purchase money market 
instruments issued by bank holding companies and other firms.[Footnote 
28] In addition, in October 2008, Congress enacted legislation under 
which Treasury provided capital investments to banks, bank holding 
companies, and other institutions; the legislation also temporarily 
increased FDIC's deposit insurance limit from $100,000 to $250,000. 
[Footnote 29] Also that month, the Federal Reserve System created CPFF 
to support commercial paper markets, and FDIC introduced TLGP, under 
which it guaranteed previously uninsured transaction accounts and 
certain newly issued senior unsecured debt for participating insured 
depository institutions, bank and savings and loan holding companies, 
and approved affiliates of insured depository institutions. For a more 
detailed discussion of the circumstances surrounding the creation of 
these programs, see appendix II. 

Isolating the impact of individual government interventions is 
difficult, but collectively these interventions helped to improve 
financial conditions by enhancing confidence in financial institutions 
and the financial system overall.[Footnote 30] Bank holding companies 
and their subsidiaries, in addition to the financial sector and the 
economy as a whole, benefited from improved financial conditions. Bank 
holding companies and their subsidiaries also experienced individual 
benefits from participating in particular programs. 

Individually and collectively, government lending, guarantee, and 
capital programs provided important liquidity and other benefits to 
bank holding companies and their subsidiaries including: 

* Access to funding in quantities and/or at prices that were generally 
not available in the markets. Government entities generally sought to 
set prices for assistance through these programs to be less expensive 
than prices available during crisis conditions but more expensive than 
prices available during normal market conditions.[Footnote 31] In some 
credit markets assisted by government programs--such as commercial 
paper and repurchase agreement markets--conditions had deteriorated 
such that many institutions faced substantially reduced access to 
these markets or had no access at all. As discussed below, we compared 
program pricing to relevant indicators of market pricing where 
available and found that emergency lending and guarantee programs 
generally were priced below market alternatives that may have been 
available. The availability of funding support at this pricing in 
predictable quantities was also beneficial. Even at times when 
eligible institutions did not access the available programs, these 
programs diversified the sources of funds that could be available to 
them if they faced increased funding pressures. 

* Access to funding at longer maturities. By providing and standing 
ready to provide funding support for terms of 1 month or longer, 
government programs helped to reduce rollover risk--the risk that an 
institution would be unable to renew or "rollover" funding obligations 
as they came due--for individual institutions and their 
counterparties. At times during the crisis, bank holding companies and 
their subsidiaries faced difficulties borrowing at terms of 1 month or 
longer in several important credit markets, including interbank, 
repurchase agreement, and commercial paper markets. Government 
programs mitigated funding pressures for borrowers in these markets by 
reducing the risk that funding sources would rapidly disappear for an 
institution or its counterparties. Because participants in these 
programs were also lenders of funds, these programs helped to 
encourage these institutions to continue to lend funds to support the 
economy. 

* Stabilizing deposit funding. FDIC's TAGP, which temporarily insured 
certain previously uninsured deposits for a fee, helped to stabilize 
deposit funding by removing the risk of loss from deposit accounts 
that were commonly used to meet payroll and other business transaction 
purposes and allowing banks, particularly smaller ones, to retain 
these accounts. Deposits are the primary source of funding for most 
banks, and smaller banks tend to fund themselves to a greater extent 
with deposits. 

* Funding support for a broad range of collateral types. A few Federal 
Reserve System programs provided important liquidity benefits to 
individual institutions and credit markets by allowing institutions to 
obtain liquidity against a broad range of collateral types. TAF 
provided 1-month and 3-month loans to eligible banks against 
collateral types that could also be used to secure discount window 
loans. While TAF collateral requirements were based on discount window 
requirements, TAF provided emergency credit on a much larger scale, 
with TAF loans outstanding peaking at nearly $500 billion, compared to 
peak primary credit outstanding during the crisis of just over $100 
billion.[Footnote 32] In March 2008, the Federal Reserve System began 
providing liquidity support to certain nonbank financial firms--the 
primary dealers--for less liquid collateral types through PDCF and 
TSLF. Through PDCF, the Federal Reserve Bank of New York (FRBNY) 
allowed primary dealers to obtain overnight cash loans against harder-
to-value collateral types, such as mortgage-backed securities. Through 
TSLF, FRBNY auctioned loans of Treasury securities to primary dealers 
in exchange for less-liquid collateral types to increase the amount of 
high-quality collateral these dealers had available to borrow against 
in repurchase agreement markets. When pressures in repurchase 
agreement markets intensified in September 2008, the Federal Reserve 
Board expanded the types of collateral it accepted for both PDCF and 
TSLF. 

Although imperfect, one indicator of the extent to which an 
institution directly benefited from participation in an emergency 
program is the relative price of estimated market alternatives to the 
program. To determine how pricing of the emergency assistance compared 
to market rates, we compared pricing for programs to the pricing for 
market alternatives that might have been available to program 
participants. First, we compared the interest rates and fees charged 
by the Federal Reserve System and FDIC for participation in the 
emergency lending and guarantee programs with available market 
alternatives. We considered a number of potential indicators of market 
interest rates available to financial institutions, including a survey 
of interbank interest rates (the London Interbank Offered Rate or 
LIBOR), commercial paper interest rates published by the Federal 
Reserve Board, spreads on bank credit default swaps (CDS) and interest 
rates on repurchase agreements. These interest rates provide a general 
indication of market alternatives that could have been available to 
participants, but for a number of reasons the rates are unlikely to 
reflect available alternatives for all participants at all points in 
time during the crisis and cannot be used to produce a precise 
quantification of the benefits that accrued to participating financial 
institutions.[Footnote 33] For example, participants' access to market 
alternatives may have been limited, data on the relevant private 
market may be limited, or market alternatives could vary across 
participants in ways that we do not observe in the data. The markets 
targeted by emergency programs had experienced significant strains, 
such as a substantial drop in liquidity, a sharp increase in prices, 
or lenders restricting access only to the most credit worthy borrowers 
or accepting only the safest collateral. Also, our indicators do not 
capture all of the benefits associated with participation in the 
relevant programs. Furthermore, once programs were introduced, they 
probably influenced the price of market alternatives, making it 
difficult to interpret differences between emergency program and 
market prices while programs were active. Second, to determine the 
extent to which Treasury capital investment programs were priced more 
generously than market alternatives, we reviewed estimates of the 
expected budget cost associated with equity funding support programs 
as well as a valuation analysis commissioned by the Congressional 
Oversight Panel. For more details on our methodology for these 
analyses, see appendix III. 

Based on our analysis, we found that emergency assistance provided 
through these programs was often priced below estimated market 
alternatives that might have been available to program participants. 
This result is consistent with a policy goal of these programs to 
stabilize financial markets and restore confidence in the financial 
sector. The pricing of emergency assistance below estimated market 
alternatives is also evidenced by the significant participation in 
these programs. Specifically, we found that emergency lending and 
guarantee programs were generally priced below certain indicators of 
market alternatives that could have been available. In addition, based 
on analyses we reviewed, Treasury paid prices above estimated market 
prices for emergency equity support programs. For selected programs 
that we analyzed, we also found that program pricing would likely have 
become unattractive in comparison to market pricing during normal and 
more stable credit conditions. 

Federal Reserve System programs. Federal Reserve System emergency 
lending programs during the crisis provided sources of both secured 
and unsecured funding at rates that were often below those of 
potential market alternatives and at terms that reduced rollover risk 
for participants. These characteristics are consistent with a policy 
goal to stabilize financial conditions by providing funding support 
for financial institutions that relied on wholesale funding markets. 
At the time, the markets targeted by the Federal Reserve emergency 
programs had experienced strains, such as a drop in volume or a 
significant increase in prices or collateral standards. 

* TAF. Interest rates on TAF loans, on average, were between 22 and 39 
basis points lower than three market interest rates that could have 
represented alternatives for participants. TAF auctioned 
collateralized loans--generally at terms of either 28 or 84 days--to 
insured banks to help alleviate strains in term funding markets. We 
compared interest rates for 28-day TAF loans with 1-month LIBOR, 30-
day asset-backed commercial paper (ABCP) rates, and interest rates on 
very large 1-month unsecured certificates of deposit.[Footnote 34] We 
chose these interest rates because they are all indicators of the cost 
of borrowing for financial institutions in term funding markets. 
However each differs from TAF in important ways. For example, LIBOR is 
based on unsecured loans (TAF loans were secured by collateral) and 
ABCP, despite being secured, has other features that differ from TAF, 
including the mix of underlying collateral.[Footnote 35] We found that 
LIBOR exceeded TAF interest rates by an average of 22 basis points. 
ABCP interest rates exceeded TAF interest rates by on average 39 basis 
points and interest rates on very large certificates of deposit 
exceeded TAF interest rates by on average 29 basis points while the 
program was active. Because of differences between TAF and these 
measures of market interest rates, these spreads are an imperfect 
measure of the extent to which banks derived benefits from 
participating in TAF. 

* PDCF. Our analysis suggests that PDCF provided secured overnight 
funding on more favorable terms for some types of collateral (such as 
corporate debt) than market alternatives that some primary dealers 
might have relied upon in the absence of PDCF. Because PDCF operated 
in a similar manner to repurchase agreement markets, we compared PDCF 
terms to available data for triparty and bilateral repurchase 
agreement transactions.[Footnote 36] One important term for repurchase 
agreement loans is the haircut, which is the amount of additional 
collateral the lender requires over the value of the loan.[Footnote 
37] Repurchase agreement lenders generally require higher haircuts on 
riskier and less liquid collateral types. PDCF offered loans at the 
same interest rate (the discount rate charged on discount window 
loans) for all collateral types and applied a haircut schedule that 
assigned progressively higher haircuts to riskier assets. We compared 
PDCF haircuts to market haircuts for selected asset classes in the 
triparty repurchase agreement market. We found that the haircut 
required by PDCF was consistently greater than the median haircut in 
the triparty repurchase agreement market for comparable asset classes. 
Thus, borrowers who faced the median haircut on their collateral in 
the triparty market were better off borrowing in the triparty market 
than through PDCF, all else being equal. However, the PDCF haircut was 
smaller than the 75th percentile haircut in the triparty market for a 
variety of collateral types. This implies that higher-risk borrowers 
were better off borrowing through PDCF than through the triparty 
market, at least for certain types of collateral. Smaller haircuts 
would have allowed these PDCF participants to borrow more against the 
same collateral than in private repurchase agreement markets. 

* TSLF. TSLF allowed primary dealers to obtain funding for the most 
commonly pledged collateral types at 32 basis points below an 
estimated market alternative. When TSLF was created in March 2008, 
repurchase agreement lenders were requiring higher interest rates and 
haircuts for loans against a range of less-liquid collateral types and 
were reluctant to lend against mortgage-related securities.[Footnote 
38] Through TSLF, primary dealers paid an auction-determined interest 
rate to exchange harder-to-finance collateral for more liquid Treasury 
securities--which were easier to borrow against in repurchase 
agreement markets--generally for a term of 28 days. TSLF held separate 
auctions of Treasury securities against two different schedules of 
collateral to apply a higher interest rate to riskier collateral. 
Schedule 1 collateral included higher quality assets, such as agency 
debt and agency mortgage-backed securities (MBS), and Schedule 2 
collateral included Schedule 1 collateral and a broader range of asset 
types, such as highly-rated private-label MBS. We compared TSLF 
interest rates to the difference between lower interest rates primary 
dealers might have paid on repurchase agreements secured by Treasury 
securities and the higher interest rates they could have paid on 
repurchase agreements secured by TSLF-eligible collateral. Due to 
limited availability of interest rate data for repurchase agreements 
collateralized by other lower-quality collateral eligible for TSLF, 
such as private-label MBS, we compared TSLF interest rates to the 
difference or spread between interest rates on repurchase agreements 
collateralized by agency MBS and repurchase agreements collateralized 
by Treasury securities.[Footnote 39] We found that the spread between 
repurchase agreement interest rates on agency MBS (the most commonly-
pledged collateral for TSLF) and Treasury securities exceeded TSLF 
interest rates by on average 32 basis points while the program was 
active.[Footnote 40] 

* CPFF. CPFF purchased 3-month commercial paper at prices that were 
lower than market rates during the crisis on instruments that could 
have represented alternative funding sources but were more expensive 
than average commercial paper rates during normal market conditions. 
CPFF controlled for changes in short-term interest rates by setting 
the price of commercial paper issuance to CPFF at a fixed spread above 
the daily 3-month overnight indexed swap rate, a rate that tracks 
investor expectations about the future federal funds rate. Table 2 
summarizes the pricing structure for CPFF. We compared all-in 
borrowing costs (an interest rate plus a credit surcharge for 
unsecured borrowing) for CPFF borrowers with 3-month LIBOR. To 
determine how CPFF pricing compared to borrowing costs in crisis 
conditions, we compared CPFF pricing terms to 3-month LIBOR for the 
period from the failure of Lehman Brothers Holdings Inc. (Sept. 14, 
2008) through the date on which CPFF became operational (Oct. 27, 
2008). We found that average CPFF pricing terms were lower than the 
average LIBOR rate by 92 basis points and 44 basis points for CPFF 
purchases of unsecured commercial paper and collateralized ABCP, 
respectively. To determine how unsecured CPFF rates compared to 
benchmarks for borrowing costs in normal market conditions, we applied 
the CPFF pricing rule for unsecured commercial paper to a 2-month 
period in 2006 and found that CPFF pricing would have been more 
expensive than AA unsecured commercial paper interest rates by roughly 
200 basis points and LIBOR by over 190 basis points. This analysis 
suggests that CPFF would have become less attractive to participants 
as market conditions improved. 

Table 2: Pricing Terms for Commercial Paper Funding Facility: 

Rates and fees: Interest rate; 
Unsecured commercial paper: 3-month OIS + 100 basis points; 
ABCP: 3-month OIS + 300 basis points. 

Rates and fees: Credit surcharge; 
Unsecured commercial paper: 100 basis points; 
ABCP: None. 

Rates and fees: All-in-cost; 
Unsecured commercial paper: 3-month OIS + 200 basis points; 
ABCP: 3-month OIS + 300 basis points. 

Source: Federal Reserve Board. 

[End of table] 

Treasury capital investments. Analyses we reviewed suggest that the 
prices Treasury paid for equity in financial institutions 
participating in TARP exceeded estimated market prices that private 
investors might have paid for comparable investments in these 
institutions during the crisis. This pricing is consistent with a 
policy goal to stabilize financial conditions by improving the equity 
capitalization of banks. In late 2008, before CPP was announced, banks 
had difficulty issuing sufficient new equity to investors. We reviewed 
estimates of the expected budget cost associated with Treasury's 
equity funding support programs under TARP, CPP and the Targeted 
Investment Program (TIP), as well as a valuation analysis commissioned 
by the Congressional Oversight Panel.[Footnote 41] Some of the 
benefits that accrued to banks from participation in equity funding 
support programs are likely to be proportional to the expected 
budgetary cost (also known as subsidy rates) estimated for accounting 
purposes. Treasury and Congressional Budget Office estimates of 
subsidy rates are based on a net present value analysis--the price and 
terms which are offered by a federal agency are compared to the 
lifetime expected cost (net present value) of the equity, and the 
difference is known as a subsidy.[Footnote 42] The valuation analysis 
commissioned by the Congressional Oversight Panel explicitly compared 
the prices received by Treasury with market-based valuations of 
securities it determined to be comparable. Estimates of subsidy rates 
by Treasury, the Congressional Budget Office, and the Congressional 
Oversight Panel were generally similar for CPP, while the 
Congressional Budget Office's estimates for TIP were substantially 
lower than those of Treasury and the Congressional Oversight Panel 
(see figure 1). Based on these three analyses, these estimated subsidy 
rates suggest that the prices Treasury paid for equity in financial 
institutions were 18 to 27 percent over estimated market prices for 
CPP and 26 to 50 percent over estimated market prices for TIP equity. 
Estimates reflect differences in timing, methodology, and institutions 
included in the analyses, which we discussed previously and in the 
note to figure 1.[Footnote 43] 

Figure 1: Emergency Capital Program Subsidy Estimates: 

[Refer to PDF for image: vertical bar graph] 

Congressional Budget office: 
Capital Purchase Program: 18%; 
Targeted Investment Program: 26%. 

Treasury: 
Capital Purchase Program: 27%; 
Targeted Investment Program: 49%. 

Congressional Oversight Panel: 
Capital Purchase Program: 22%; 
Targeted Investment Program: 50%. 

Source: GAO analysis of CBO, Treasury, and COP data. 

Note: Analysis by the Congressional Budget Office is as of December 
31, 2008, and the Targeted Investment Program (TIP) estimate includes 
only Citigroup. Treasury financial statement information is as of 
September 30, 2009. Analysis commissioned by the Congressional 
Oversight Panel includes valuations based on data from October 2008 
through November 2008 and the TIP estimate includes only Citigroup, 
and the CPP estimate is based on a sample of 8 relatively large 
financial institutions. We used the earliest available estimates from 
the Congressional Budget Office and Treasury as they were closest to 
market conditions at the time that programs were initiated. Estimates 
of these subsidy rates depended on timing and market conditions and 
the size of these subsidy rates likely fell over time as market 
conditions improved. 

[End of figure] 

FDIC's DGP. For the DGP guarantees that we analyzed, the fees for 
FDIC's DGP were on average 278 basis points below the private cost of 
similar guarantees during crisis conditions, but more expensive than 
similar guarantees that were available in the private market during 
normal credit conditions. This pricing is consistent with a policy 
goal to promote financial stability by improving access to sources of 
debt funding. FDIC's DGP provided guarantees for certain newly issued 
senior unsecured debt for banks, bank holding companies, and other 
eligible institutions. When DGP was created in October 2008, lending 
to financial institutions in public debt markets had dropped 
dramatically. The fees for participation in DGP were based on the 
maturity of guaranteed liabilities (the longer the maturity the higher 
the fee) and the type of financial institution. We analyzed the 100-
basis point fee that DGP charged to guarantee debt with a maturity of 
1 year, plus the 10-basis point premium charged to bank holding 
companies.[Footnote 44] We compared the total DGP fee with the 
weighted average price of 1-year bank CDS for certain bank holding 
companies because the guarantee is essentially similar to a private 
party insuring against the risk of default using a CDS.[Footnote 45] 
Our analysis covered the period from the failure of Lehman Brothers 
(in September 2008) through the date DGP became operational (in 
October 2008). We found that the cost of insuring against bank default 
on the private market exceeded the FDIC fee terms by on average 278 
basis points, with considerable variation across users--varying from 
over 1,000 basis points above the DGP fee terms to a few basis points 
below. We also applied the DGP pricing rule for guaranteeing bank 
holding company debt to a 2-month period in 2006, before the crisis, 
and found that DGP pricing would have exceeded the private cost of 
guarantees by roughly 100 basis points. This pricing suggests that DGP 
would have become less attractive to participants as market conditions 
improved. For more detail on our analysis of the prices and terms of 
all of the emergency programs, please see appendix III. 

Programs Provided Support to Banking Organizations of Various Sizes 
and Some Programs Supported Funding Sources Used More by Larger Firms: 

Emergency government programs to stabilize financial markets provided 
funding support to bank holding companies and insured depository 
institutions (collectively, banking organizations) of various 
sizes.[Footnote 46] This section also focuses on the programs that 
provided the most significant funding support directly to bank holding 
companies and their subsidiaries (listed previously in table 1). 
Agencies made these programs available to specific types of 
institutions regardless of their size, and institutions of various 
sizes participated in these programs. Differences in the level of 
program use by institutions of various sizes were driven in part by 
differences in how institutions funded themselves. For example, 
compared to smaller bank holding companies, larger bank holding 
companies relied to a greater extent on short-term credit markets that 
were the most severely disrupted during the crisis and participated 
more in programs intended to address disruptions in these markets. 
Smaller banking organizations relied more on deposits to fund their 
activities. 

To compare the extent to which banking organizations of various sizes 
used emergency programs, we calculated the percentage of banking 
organization assets that were supported by emergency programs--either 
through capital injections, loans, or guarantees--at quarter-end dates 
for 2008 through 2012. Capital provided by emergency programs includes 
capital investments by Treasury under CPP and TIP. Loans provided by 
emergency programs include TAF, TSLF, PDCF, and CPFF loans from the 
Federal Reserve System. Funding guaranteed by emergency programs 
includes deposits guaranteed by FDIC through TAGP and debt guaranteed 
by FDIC through DGP. We then calculated each of these three types of 
liabilities as a percentage of assets for banking organizations by 
size for quarter-end dates from mid-2008 to the end of 2012. Finally, 
for each of the three types of liabilities, we decomposed average 
liabilities as a percentage of assets for banking organizations of 
different sizes into two components: (1) the rate of participation in 
emergency programs by banking organizations of different sizes and (2) 
the average liabilities as a percentage of assets for those 
participants. 

We found that the extent to which banking organizations of different 
sizes used emergency programs varied over time and across programs. 
For example, the largest bank holding companies--those with more than 
$500 billion in assets as of June 30, 2013--used the programs to 
varying degrees but had exited most of the programs by the end of 
2009. Moreover, as of December 31, 2008, average use of emergency 
programs generally was higher for banking organizations with $50 
billion or more in assets than it was for banking organizations with 
less than $50 billion in assets. Total loans outstanding from Federal 
Reserve System programs (TAF, TSLF, PDCF, and CPFF) combined were at 
least 2 percent of assets on average for banking organizations with 
$50 billion or more in assets but less than 1 percent of assets on 
average for smaller banking organizations. CPP and TIP capital 
investments were at least 1.5 percent of assets on average for banking 
organizations with $50 billion or more in assets and less than 1 
percent of assets on average for smaller organizations. Finally, DGP-
guaranteed debt and TAGP-guaranteed deposits together were at least 6 
percent of assets on average for banking organizations with $50 
billion or more in assets and were less than 4 percent of assets on 
average for smaller banking organizations. However, by December 31, 
2010, the Federal Reserve System's loan programs had closed, and 
differences in use of remaining programs by banking organizations of 
different sizes had diminished. For a more detailed discussion of our 
analysis of utilization of these programs by banking organizations of 
various sizes, see appendix IV. 

Several factors influenced the extent to which eligible institutions 
used emergency programs. As explained above, one factor driving an 
institution's level of participation in a program was the extent to 
which it relied on the type of funding assisted by the program. In 
addition, market conditions and the speed with which eligible firms 
recovered affected the amount and duration of use of the programs by 
different firms. Agencies generally designed program terms and 
conditions to make the programs attractive only for institutions 
facing liquidity strains. Use of several of the programs peaked during 
the height of the financial crisis and fell as market conditions 
recovered. Federal Reserve Board officials told us that even as 
markets recovered, funding conditions improved for certain borrowers 
but not others. As a result, in PDCF, TSLF, and CPFF, several 
participants remained in the programs while others exited. 
Participants in CPP required the approval of their primary federal 
regulator before exiting the program. In addition, several of the 
programs included limits on the amount of assistance an entity could 
receive. Under CPP, qualified financial institutions were eligible to 
receive an investment of between 1 and 3 percent of their risk-
weighted assets, up to a maximum of $25 billion. To prevent excessive 
use of CPFF that would be inconsistent with its role as a backstop, 
the Federal Reserve Board limited the maximum amount a single issuer 
could have outstanding at CPFF to the greatest amount of U.S.-dollar-
denominated commercial paper the issuer had had outstanding on any day 
between January 1 and August 31, 2008. The Federal Reserve Board also 
set limits on the maximum amount that institutions could bid in each 
TAF and TSLF auction.[Footnote 47] Finally, in some cases, 
institutions accepted emergency government assistance at the 
encouragement of their regulators. For example, several institutions 
accepted TARP capital investments at the encouragement of Treasury or 
their regulator.[Footnote 48] However, participation in other programs 
appears to have been driven by market conditions and other factors. 

The Federal Reserve Board Granted Exemptions to Allow Banks to Provide 
Liquidity Support to the Nonbanking Sector and for Other Purposes: 

During the financial crisis, the Federal Reserve Board granted a 
number of exemptions to requirements under Section 23A of the Federal 
Reserve Act for a range of purposes, such as allowing banks to provide 
greater liquidity support to the nonbank sector. The number of 
exemptions granted increased significantly during the crisis, and the 
majority of these exemptions were granted to U.S. bank holding 
companies and other firms with $500 billion or more in total assets 
(see figure 2). Section 23A of the Federal Reserve Act imposes 
quantitative limits on certain transactions between an insured 
depository institution and its affiliates, prohibits banks from 
purchasing low-quality assets from their nonbank affiliates, and 
imposes collateral requirements on extensions of credit to 
affiliates.[Footnote 49] In letters documenting its approval of 
exemptions to Section 23A, the Federal Reserve Board has indicated 
that the twin purposes of Section 23A are (1) to protect against a 
depository institution suffering losses in transactions with its 
affiliates, and (2) to limit the ability of a depository institution 
to transfer to its affiliates the subsidy arising from the 
institution's access to the federal safety net.[Footnote 50] In other 
words, these restrictions are intended to protect the safety and 
soundness of banks and to prevent them from subsidizing the activities 
of nonbank affiliates by passing on any benefits they may receive 
through access to deposit insurance and the discount window. The 
Federal Reserve Act granted the Federal Reserve Board authority to 
exempt transactions and relationships from Section 23A restrictions if 
such exemptions were in the public interest and consistent with 
statutory purposes.[Footnote 51] Prior to the Dodd-Frank Act, the 
Federal Reserve Board had exclusive authority to grant exemptions to 
Section 23A. 

Figure 2: Section 23A Exemptions for Firms by Total Assets, 2000-2011: 

[Refer to PDF for image: stacked vertical bar graph] 

Number of exemptions: 

Year: 2000; 
Firms with $500 billion or more in assets: 2; 
Firms with less than $50 billion in assets: 0; 
Firms with $50 billion or more and less than $500 billion in assets: 0. 

Year: 2001; 
Firms with $500 billion or more in assets: 2; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 0. 

Year: 2002; 
Firms with $500 billion or more in assets: 0; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 3. 

Year: 2003; 
Firms with $500 billion or more in assets: 2; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 2. 

Year: 2004; 
Firms with $500 billion or more in assets: 3; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 0. 

Year: 2005; 
Firms with $500 billion or more in assets: 3; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 4. 

Year: 2006; 
Firms with $500 billion or more in assets: 3; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 1. 

Year: 2007; 
Firms with $500 billion or more in assets: 9; 
Firms with less than $50 billion in assets: 1; 
Firms with $50 billion or more and less than $500 billion in assets: 0. 

Year: 2008; 
Firms with $500 billion or more in assets: 7; 
Firms with less than $50 billion in assets: 3; 
Firms with $50 billion or more and less than $500 billion in assets: 2. 

Year: 2009; 
Firms with $500 billion or more in assets: 6; 
Firms with less than $50 billion in assets: 4; 
Firms with $50 billion or more and less than $500 billion in assets: 1. 

Year: 2010; 
Firms with $500 billion or more in assets: 1; 
Firms with less than $50 billion in assets: 0; 
Firms with $50 billion or more and less than $500 billion in assets: 1. 

Year: 2011; 
Firms with $500 billion or more in assets: 0; 
Firms with less than $50 billion in assets: 0; 
Firms with $50 billion or more and less than $500 billion in assets: 1. 

Source: GAO analysis of Federal Reserve Board documents. 

[End of figure] 

During the financial crisis, the Federal Reserve Board granted a 
number of exemptions from the requirements of Section 23A, for a range 
of purposes that included, but were not limited to, the following: 

* Facilitating Liquidity Support for Holders of Mortgage-Related 
Assets. In August 2007, the Federal Reserve Board issued three similar 
exemption letters granting Section 23A exemptions to three of the 
largest U.S. bank holding companies (Citigroup Inc., Bank of America 
Corporation, and JP Morgan Chase & Co.) to allow their bank 
subsidiaries (Citibank, N.A.; Bank of America, N.A.; and JPMorgan 
Chase Bank, N.A.) to engage in securities financing transactions with 
their affiliated broker-dealers. The purpose of these exemptions was 
to allow each of these banks to extend up to $25 billion of credit 
(using their broker-dealer affiliates as conduits) to unaffiliated 
market participants in need of short-term liquidity to finance their 
holdings of certain mortgage loans and other assets.[Footnote 52] The 
Federal Reserve Board's letters noted that these exemptions would 
provide significant public benefits by allowing banks to provide a 
substantial amount of liquidity into the market for these mortgage-
related assets. 

* Facilitating Liquidity Support for Holders of Auction-Rate 
Securities. In December 2008 and January 2009, the Federal Reserve 
Board granted exemptions to allow four large banks (Fifth Third Bank, 
BB&T Company, Northern Trust Company, and Wachovia Bank, N.A.) to 
purchase auction-rate securities and variable rate demand notes from 
their securities affiliates or parent company.[Footnote 53] The 
Federal Reserve Board's letters noted that these exemptions were 
intended to facilitate the provision of liquidity by these banks to 
customers of their affiliates that were holding illiquid auction-rate 
securities or variable rate demand notes.[Footnote 54] The securities 
affiliates of banks had been active in underwriting and selling 
auction-rate securities and when these securities became illiquid, the 
affiliates repurchased them from clients that sought to liquidate 
their positions. In this case, 23A exemptions allowed banks to provide 
financing for these purchases. The size of transactions permitted 
under these exemptions ranged from $600 million for The Northern Trust 
Company to approximately $7 billion for Wachovia Bank, N.A. 

* Facilitating Liquidity Support to Money Market Funds and Repurchase 
Agreement Markets. In addition to exemptions granted to individual 
institutions, the Federal Reserve Board granted broad-based exemptions 
from Section 23A to enable banks to provide liquidity support to 
repurchase agreement markets and money market mutual funds (MMMF). 
First, on September 14, 2008, concurrent with the decision to expand 
eligible collateral types for PDCF and TSLF, the Federal Reserve Board 
adopted an interim final rule granting a temporary exemption to allow 
banks to provide their securities affiliates with short-term financing 
for assets that they ordinarily would have financed through the 
repurchase agreements markets. The purpose of this exemption was to 
improve the ability of broker-dealers to continue financing their 
securities and other assets despite the liquidity shortage in the 
triparty repurchase agreement market. Several days later, on September 
19, the Federal Reserve Board amended Regulation W to grant a 
temporary exemption from Section 23A requirements for member banks' 
purchases of ABCP from affiliated money market funds, subject to 
certain conditions.[Footnote 55] The purpose of this exemption was to 
enable banks to take full advantage of the Asset-Backed Commercial 
Paper Money Market Mutual Fund Liquidity Facility (AMLF), a program 
authorized by the Federal Reserve Board to provide loans to banks to 
fund the purchase of ABCP from MMMFs. 

* Facilitating Acquisitions of Failing Firms. The Federal Reserve 
Board also granted Section 23A exemptions in connection with its 
efforts to facilitate private acquisitions of firms whose failure 
could have destabilized financial markets. Such acquisitions included 
JP Morgan Chase & Co.'s acquisition of Bear Stearns and Wells Fargo & 
Company's acquisition of Wachovia Corporation. JP Morgan Chase & Co. 
received exemptions that allowed JP Morgan Chase Bank, N.A. to, among 
other things, extend credit to, and issue guarantees on behalf of, 
former Bear Stearns entities and to purchase a derivatives portfolio 
valued at approximately $44 billion from Bear Stearns. In November 
2008, the Federal Reserve Board granted an exemption to allow Wells 
Fargo Bank, N.A., to extend up to $17 billion in credit to Wachovia 
Bank, N.A. to assist it in meeting its short-term funding obligations 
until the merger was completed. 

For many of these cases, the Federal Reserve Board granted an 
exemption to help facilitate liquidity support to nonbank entities as 
part of its actions to reduce systemic risk and promote financial 
stability. In granting exemptions, the Federal Reserve Board imposed 
conditions that were intended to mitigate risks to the bank that would 
be providing credit, purchasing assets, or engaging in other 
transactions with affiliates.[Footnote 56] However, one expert has 
raised concerns that such conditions might not offer sufficient 
protection for an insured depository institution during crisis 
conditions and that these exemptions in aggregate resulted in a large-
scale transfer of safety net benefits created for banks to the 
nonbank, or "shadow banking," system.[Footnote 57] As discussed in the 
next section of this report, the Dodd-Frank Act made changes to 
Section 23A of the Federal Reserve Act. 

Some Large Bank Holding Companies Benefited from Individual 
Institution Assistance or Regulatory Relief: 

In addition to introducing emergency programs with broad-based 
eligibility, federal government agencies took special actions with 
respect to individual financial institutions on several occasions in 
2008 and 2009. While these actions were intended to benefit a range of 
market participants and the broader financial system, some large U.S. 
bank holding companies received substantial direct benefits from these 
actions. Such actions included (1) assistance from multiple agencies 
to rescue or facilitate the acquisition of troubled firms whose 
failures posed significant risks to the financial system, and (2) the 
Federal Reserve Board granting bank holding company status to several 
nonbank financial companies and providing liquidity support to the 
London broker-dealers of a few of the largest bank holding companies. 

On several occasions in 2008 and early 2009, the federal government 
provided extraordinary support to or facilitated the acquisition of 
large financial institutions, which benefited recipients of this 
assistance and other market participants, such as firms that had large 
risk exposures to these institutions. 

Individual Institution Assistance: 

* Assistance to Facilitate JP Morgan's Acquisition of Bear Stearns. In 
2008, the Federal Reserve Board authorized emergency assistance to 
avert the failure of Bear Stearns Companies, Inc. (Bear Stearns) and 
facilitate the acquisition of the firm by JP Morgan Chase & Co. 
[Footnote 58] On Friday, March 14, 2008, the Federal Reserve Board 
voted to authorize FRBNY to provide a $12.9 billion loan to Bear 
Stearns to enable the firm to avoid bankruptcy and to provide time for 
potential acquirers, including JP Morgan Chase & Co, to assess its 
financial condition. On Sunday, March 16, 2008, the Federal Reserve 
Board announced that FRBNY would lend up to $30 billion against 
certain Bear Stearns assets to facilitate JP Morgan Chase & Co's 
acquisition of Bear Stearns. During the following week, the terms of 
this assistance were renegotiated, resulting in the creation of a new 
lending structure under which a $28.82 billion FRBNY senior loan and a 
$1.15 billion JP Morgan Chase & Co subordinated loan funded the 
purchase of certain Bear Stearns's assets. FRBNY also provided certain 
regulatory exemptions to JP Morgan Chase & Co. in connection with its 
agreement to acquire Bear Stearns. For example, the Federal Reserve 
Board granted an 18-month exemption to allow JP Morgan Chase & Co to 
exclude certain Bear Stearns assets from its risk-weighted assets for 
purposes of applying risk-based capital requirements. 

* Assistance to Government-Sponsored Enterprises. Extraordinary 
government support to Fannie Mae and Freddie Mac helped to stabilize 
mortgage markets and the broader financial markets and provided 
specific benefits to bank holding companies and other firms that 
likely would have incurred losses if the federal government had 
allowed these government-sponsored enterprises to fail. On September 
6, 2008, the Federal Housing Finance Agency placed Fannie Mae and 
Freddie Mac into conservatorship out of concern that their 
deteriorating financial condition threatened their safety and 
soundness and their ability to fulfill their public mission.[Footnote 
59] Treasury's investments in Fannie Mae and Freddie Mac under the 
Senior Preferred Stock Purchase Agreements program represent the 
federal government's single largest risk exposure remaining from its 
emergency actions to assist the financial sector.[Footnote 60] As of 
June 30, 2013, cumulative cash draws by the GSEs under this program 
totaled $187.4 billion and cumulative dividends paid by the GSEs to 
Treasury totaled $131.6 billion. 

* Assistance to AIG. Federal government actions to prevent the failure 
of AIG benefited AIG and its counterparties--which included some of 
the largest U.S. and foreign financial institutions--and were intended 
to benefit the broader financial system.[Footnote 61] In September 
2008, the Federal Reserve Board and Treasury determined that market 
events could have caused AIG to fail, which would have posed systemic 
risk to financial markets. The Federal Reserve Board and Treasury 
collaborated to make available up to $182.3 billion in assistance to 
AIG. This assistance, which began with a revolving credit facility of 
up to $85 billion from FRBNY, was provided in several stages and was 
restructured over time.[Footnote 62] In November 2008, the Federal 
Reserve Board authorized the creation of two special-purpose vehicles-
-Maiden Lane II LLC and Maiden Lane III LLC--to purchase certain AIG-
related assets. Maiden Lane II was created to alleviate capital and 
liquidity pressures arising from a securities lending portfolio 
operated by certain AIG subsidiaries by purchasing residential MBS 
held in this portfolio. Maiden Lane III helped to fund the purchase of 
collateralized debt obligations from AIG counterparties that had 
purchased CDS from AIG to protect the value of those assets. AIG 
repaid all loans and capital investments it received from government 
entities during the crisis. In December 2012, Treasury sold its 
remaining investments in AIG, resulting in a total positive return of 
$22.7 billion for Treasury and FRBNY. 

* Extraordinary Assistance to Citigroup. On November 23, 2008, 
Treasury, the Federal Reserve Board, and FDIC announced a package of 
additional assistance to Citigroup Inc. (Citigroup) that included $20 
billion of capital from TIP and a loss-sharing agreement with the 
government entities that was intended to assure market participants 
that Citigroup would not fail in the event of larger-than-expected 
losses on certain of its assets. As discussed in our April 2010 report 
on Treasury's use of the systemic risk determination, Treasury, FDIC, 
and the Federal Reserve Board said they provided emergency assistance 
to Citigroup because they were concerned that a failure of a firm of 
Citigroup's size and interconnectedness would have systemic 
implications.[Footnote 63] As of September 30, 2008, Citigroup was the 
second largest banking organization in the United States, with total 
consolidated assets of approximately $2 trillion. In June 2009, 
Treasury entered into an agreement to exchange the $25 billion in 
Citigroup preferred shares purchased in its initial CPP investment for 
Citigroup common shares to help improve Citigroup's capital position. 
[Footnote 64] In December 2009, Citigroup repaid the $20 billion TIP 
investment. On December 23, 2009, Citigroup announced that it had 
entered into an agreement with FDIC, FRBNY, and Treasury to terminate 
the loss-sharing agreement. As part of the termination agreement, 
Citigroup agreed to pay a $50 million termination fee to FRBNY. 

* Extraordinary Assistance to Bank of America. On January 16, 2009, 
Treasury, the Federal Reserve Board, and FDIC announced a similar 
package of assistance to Bank of America Corporation (Bank of 
America). The additional assistance included capital through TIP and a 
loss-sharing agreement that was similar to the one executed for 
Citigroup. While Bank of America received $20 billion in capital 
through TIP, the government entities never finalized the announced 
loss-sharing agreement with Bank of America. In September 2009, the 
agencies agreed to terminate the loss-sharing agreement with Bank of 
America. As part of the agreement to terminate the agreement-in-
principle, Bank of America paid fees of $276 million to Treasury, $57 
million to the Federal Reserve Board, and $92 million to FDIC. Bank of 
America repaid its $20 billion TIP investment in December 2009. 

Bank Holding Company Status and Liquidity Support for London 
Subsidiaries: 

In late 2008, at the height of the financial crisis, the Federal 
Reserve Board approved applications by several large nonbank financial 
firms to convert to bank holding company status. Becoming bank holding 
companies provided these firms with greater access to emergency 
government funding support, while subjecting them to oversight by the 
Federal Reserve System and other requirements under the Bank Holding 
Company Act.[Footnote 65] Eligibility for TARP capital investments 
under CPP and debt guarantees through TLGP were generally restricted 
to depository institutions and their holding companies, and several 
large firms that became bank holding companies in late 2008 
subsequently participated in one or both of these programs. Among the 
largest firms converting to bank holding companies during the crisis 
were two investment banks (Goldman Sachs Group, Inc. and Morgan 
Stanley), two companies that were large providers of credit card 
products and other services (American Express Company and Discover 
Financial Services), and two other financial firms (CIT Group Inc. and 
GMAC LLC). In many cases, obtaining bank holding company status 
involved firms converting an industrial loan corporation (ILC) into a 
bank.[Footnote 66] Federal Reserve Board officials noted that these 
firms already had access to the discount window through their ILCs and 
converting these ILCs to banks did not change their access to the 
discount window, but their access to discount window liquidity was 
limited by the amount of assets these subsidiaries--first as ILCs and 
later as banks--could pledge to the discount window as collateral. 
According to Federal Reserve Board documents, deposits held by these 
firms were a small fraction of their total consolidated assets at the 
time they became bank holding companies. While bank holding companies 
are subject to restrictions on nonbanking activities under the Bank 
Holding Company Act, Federal Reserve Board orders approving bank 
holding company applications described nonbanking activities of the 
companies that were permissible under the act and noted that the act 
provides each newly formed bank holding company 2 years to conform its 
existing nonbanking investments and activities to the act's 
requirements. 

On September 21, 2008, the Federal Reserve Board announced that FRBNY 
would extend credit--on terms similar to those applicable for PDCF 
loans--to the U.S. and London broker-dealer subsidiaries of Goldman 
Sachs Group, Inc., Morgan Stanley, and Merrill Lynch & Co. to provide 
support to these subsidiaries as they became part of bank holding 
companies that would be regulated by the Federal Reserve System. 
[Footnote 67] On November 23, 2008, in connection with other actions 
taken by Treasury, FDIC, and the Federal Reserve Board to assist 
Citigroup, the Federal Reserve Board authorized FRBNY to extend credit 
to the London-based broker-dealer of Citigroup on terms similar to 
those applicable to PDCF loans. 

Dodd-Frank Aims to Restrict Future Government Support, but 
Implementation Is Incomplete and Effectiveness Remains Uncertain: 

Enacted in July 2010, the Dodd-Frank Act contains provisions intended 
to modify the scope of federal safety nets for financial firms, place 
limits on agency authorities to provide emergency assistance, and 
strengthen regulatory oversight of the largest firms, among other 
things.[Footnote 68] FDIC and the Federal Reserve Board have finalized 
certain changes to traditional safety nets for insured banks, but 
impacts of the act's provisions to limit the scope of financial 
transactions that benefit from these safety nets will depend on how 
they are implemented. The act also prohibits regulators' use of 
emergency authorities to rescue an individual institution and places 
other restrictions on these authorities. For example, the act 
effectively removes FDIC's authority to provide assistance to a 
single, specific failing bank outside of receivership and grants FDIC 
new authority to resolve a large failing institution outside of 
bankruptcy.[Footnote 69] FDIC has made progress toward implementing 
its new resolution authority and continues to work to address 
potential obstacles to the viability of its resolution process as an 
alternative to bankruptcy, such as challenges that could arise when 
resolving more than one large institution concurrently. The act also 
places new restrictions and requirements on the Federal Reserve 
Board's emergency lending authority. However, the Federal Reserve 
Board has not yet completed its process for drafting policies and 
procedures required by the act to implement these changes or set 
timeframes for doing so. Finalizing such procedures would help ensure 
that any future use of this authority complies with Dodd-Frank Act 
requirements. Finally, the Federal Reserve Board has made progress 
towards implementing certain enhanced regulatory standards that are 
intended to reduce the risks that the largest financial institutions 
pose to the financial system. 

Agencies Have Finalized Changes to Traditional Safety Nets, but Have 
Not Fully Implemented Provisions to Limit the Scope of Transactions 
That Have Access: 

The Dodd-Frank Act instituted a series of reforms related to the 
traditional safety nets for insured banks, including changes to 
deposit insurance and discount window reporting requirements. In 
addition, the act contains provisions intended to limit the scope of 
financial transactions that benefit from access to these traditional 
safety nets. These provisions include revisions to the Federal Reserve 
Board's authority to permit certain transactions between banks and 
their affiliates under Section 23A of the Federal Reserve Act, 
restrictions on the ability of bank holding companies to engage in 
proprietary trading; and restrictions on the ability of insured banks 
to engage in certain derivatives transactions. 

Deposit Insurance: 

FDIC has implemented Dodd-Frank Act provisions that increased the 
deposit insurance limit and required FDIC to change the calculation 
for premiums paid by insured depository institutions. Section 335 of 
the Dodd-Frank Act permanently raised the standard maximum deposit 
insurance amount from $100,000 to $250,000 for individual deposit 
accounts, as previously discussed.[Footnote 70] FDIC issued and made 
effective a final rule instituting the increase in August 2010 and 
required insured depository institutions to comply by January 2011. 
[Footnote 71] Section 343 of the act provided temporary unlimited 
deposit insurance coverage for certain uninsured deposits from 
December 2010 through December 2012.[Footnote 72] This coverage 
expired on December 31, 2012, and transaction accounts can now only be 
insured to the $250,000 ceiling.[Footnote 73] Section 331 of the Dodd-
Frank Act required FDIC to amend its regulation and modify the 
definition of an insured depository institution's assessment base, 
which can affect the amount of deposit insurance assessment the 
institution pays into the deposit insurance fund. Under the Dodd-Frank 
Act, the assessment base changed from total domestic deposits to 
average consolidated total assets minus average tangible equity (with 
some possible exceptions).[Footnote 74] FDIC issued a final rule 
changing the assessment base in February 2011, and the rule became 
effective in April 2011.[Footnote 75] According to FDIC, the change in 
the assessment base calculation shifted some of the overall assessment 
burden from community banks to larger institutions that rely less on 
domestic deposits for their funding than smaller institutions, but 
without affecting the overall amount of assessment revenue collected. 
[Footnote 76] In the quarter after the rule became effective, those 
banks with less than $10 billion in assets saw a 33 percent drop in 
their assessments (from about $1 billion to about $700 million), while 
those banks with over $10 billion in assets saw a 17 percent rise in 
their assessments (from about $2.4 billion to about $2.8 billion). 

Discount Window Reporting Requirements: 

The Dodd-Frank Act made changes to the Federal Reserve Board's 
reporting requirements to increase the transparency for discount 
window transactions. During and after the crisis, some members of 
Congress and others expressed concern that certain details of the 
Federal Reserve System's discount window and emergency lending 
activities, including the names of borrowers receiving loans, were 
kept confidential. Section 1103 of the Dodd-Frank Act requires the 
Federal Reserve Board to disclose transaction-level details for 
discount window loans and open market transactions on a quarterly 
basis after a 2-year delay.[Footnote 77] The Dodd-Frank Act 
established similar reporting requirements for the Federal Reserve 
Board's Section 13(3) authority, as discussed later. No rulemaking was 
required, and the Federal Reserve Board began to post the data 
publicly on its website in September 2012. The first set of releases 
covered loans made between July and September 2010, and data for 
subsequent periods are being published quarterly with a 2-year lag. 
The Dodd-Frank Act also grants GAO authority to audit certain aspects 
of discount window transactions occurring after July 21, 2010. 

Section 23A: 

The Dodd-Frank Act made numerous changes to Section 23A of the Federal 
Reserve Act that both significantly expanded the scope of activities 
covered by Section 23A's restrictions and created new requirements for 
participation by FDIC and the OCC in granting exceptions.[Footnote 78] 
As previously discussed, the Federal Reserve Board granted a number of 
exemptions to Section 23A during the crisis. Some observers have 
raised concerns that these exemptions in aggregate resulted in a large 
scale transfer of federal safety net benefits to the nonbank, or 
"shadow banking," system. The changes listed below, with the exception 
of changes related to investments in private funds, did not require 
rulemakings and became effective on July 21, 2012. 

* The Dodd-Frank Act gave FDIC and OCC, jointly with the Federal 
Reserve Board, the authority to grant Section 23A exemptions by order 
for institutions they supervise. The Dodd-Frank Act requires the 
regulators to notify FDIC of any proposed exemption and give FDIC 60 
days to object in writing, should FDIC determine the proposed 
exemption constitutes an unacceptable risk to the deposit insurance 
fund.[Footnote 79] The Federal Reserve retains the authority to grant 
exemptions by regulation. 

* The Dodd-Frank Act expanded the scope of activities that are covered 
by Section 23A by amending the definition of covered transactions to 
include derivatives transactions with affiliates and transactions with 
affiliates that involve securities lending and borrowing that may 
cause a bank to face credit exposure to an affiliate.[Footnote 80] The 
Dodd-Frank Act also removed the exception from the 10 percent 
quantitative limit for certain covered transactions between a bank and 
its financial subsidiary and extended section 23A and 23B to cover 
permitted investments in certain private funds. 

* The Dodd-Frank Act changed the collateral requirements for 23A 
transactions by requiring banks to maintain the correct level of 
collateral at all times for covered transactions subject to 
collateralization.[Footnote 81] Previously, banks only had to post 
collateral at the time of entrance into the covered transaction. This 
change was designed to strengthen the protection granted to banks 
extending credit to their affiliates by ensuring that the collateral 
remains correctly valued and simultaneously shields the bank's 
interest from fluctuations in market prices of collateralized assets. 

As of October 2013, the Federal Reserve Board has granted only two 
exemptions since the enactment of the Dodd-Frank Act, according to 
available information on its website. How the Federal Reserve Board, 
FDIC, and OCC might respond to requests for exemptions in the future 
is uncertain. Representatives from one large bank told us that their 
primary regulator advised them that because of FDIC's required 
approval, they should not expect exemptions to be available going 
forward. However, one academic has expressed concern about how 
exemptions might be applied under different circumstances, such as in 
periods of economic stress. 

Proprietary Trading (Volcker Rule): 

Agencies have not yet issued final rules to implement the Dodd-Frank 
Act's restrictions on proprietary trading--trading activities 
conducted by banking entities for their own account as opposed to 
those of their clients. A number of market participants and 
researchers with whom we spoke maintain that the ability of banking 
entities to use federally insured deposits to seek profits for their 
own account provides incentives for them to take on excessive risk. To 
address these concerns, Section 619 of the Dodd-Frank Act (also known 
as the Volcker Rule) generally prohibits proprietary trading by 
insured depository institutions and their affiliates and places 
restrictions on sponsorship or investment in hedge and private equity 
funds. An FSOC study noted that implementing the act's restrictions on 
proprietary trading will be challenging because certain trading 
activities exempted from the act's restrictions may appear very 
similar to proprietary trading activities that the act seeks to 
restrict. While regulators issued proposed rules in November 2011 and 
February 2012, no final or interim final rules have been issued. 
[Footnote 82] 

Restrictions on Some Derivatives Transactions: 

Section 716 of the Dodd-Frank Act requires banks that are registered 
dealers of derivatives known as swaps to transfer certain swap 
activities to nonbank affiliates, or lose access to deposit insurance 
and the Federal Reserve System liquidity provided through the discount 
window for certain activities taken in connection with the swap 
entity's swap business.[Footnote 83] Section 716's prohibition on 
federal assistance to swaps entities became effective in July 2013, 
but the law allowed for an initial 2-year extension as well as an 
additional 1-year extension. Several banks applied for and were 
granted 2-year extensions by the Federal Reserve Board and OCC, and 
those financial institutions now have until July 2015 to comply, with 
the additional option of applying for another 1-year exemption. 

Dodd-Frank Restricts Certain FDIC Authorities but Provides New 
Resolution Authority: 

The Dodd-Frank Act restricts emergency authorities used by financial 
regulators during the most recent financial crisis, such as FDIC's 
open bank assistance authority; provides FDIC with new resolution 
authority to resolve a large, complex failing firm in a manner that 
limits the disruption to the financial system; and establishes a 
requirement for certain firms to develop and submit to regulators 
resolution plans (known as living wills) for their resolution under 
bankruptcy. 

Open Bank Assistance: 

The Dodd-Frank Act restricts FDIC's authority to provide open bank 
assistance to an individual failing bank outside of receivership and 
replaces it with a new authority, subject to certain restrictions and 
a joint resolution of congressional approval, to create a debt-
guarantee program with broad-based eligibility.[Footnote 84] 
Previously, FDIC could provide open bank assistance upon a joint 
determination by FDIC, the Federal Reserve Board, and the Secretary of 
the Treasury that compliance with certain cost limitations would 
result in serious adverse effects on economic conditions or financial 
stability and that such assistance could mitigate these systemic 
effects.[Footnote 85] Sections 1104 through 1106 of the Dodd-Frank Act 
provide permanent authority for FDIC to establish a widely available 
program to guarantee certain debt obligations of solvent insured 
depository institutions or solvent bank holding companies during times 
of severe economic distress, upon a liquidity event finding. In 
addition, institutions would have to pay fees for these guarantees as 
they did under TLGP during the crisis.[Footnote 86] In order for FDIC 
to exercise the authority, the Dodd-Frank Act requires the Secretary 
of the Treasury (in consultation with the President) to determine the 
maximum amount of debt outstanding that FDIC can guarantee, and the 
guarantee authority requires congressional approval.[Footnote 87] 
Furthermore, the Dodd-Frank Act amendments to the Federal Deposit 
Insurance Act that provided for temporary unlimited deposit insurance 
for noninterest-bearing transaction accounts were repealed as of 
January 1, 2013. The FDIC may not rely on this authority or its former 
systemic risk exception authority to provide unlimited deposit 
insurance for transaction accounts in a future crisis. 

Resolution Authority: 

The Dodd-Frank Act includes two key reforms intended to facilitate the 
orderly resolution of a large failing firm without a taxpayer-funded 
rescue: (1) the Orderly Liquidation Authority (OLA), through which 
FDIC can liquidate large financial firms outside of the bankruptcy 
process; and (2) requirements for bank holding companies with $50 
billion or more in assets and nonbank financial companies designated 
by FSOC to formulate and submit to regulators resolution plans (or 
"living wills") that detail how the companies could be resolved in 
bankruptcy in the event of a material financial distress or failure. 
[Footnote 88] 

OLA gives FDIC the authority, subject to certain constraints, to 
liquidate large financial firms, including nonbanks, outside of the 
bankruptcy process.[Footnote 89] This authority allows for FDIC to be 
appointed receiver for a financial firm if the Secretary of the 
Treasury determines that the firm's failure and its resolution under 
applicable federal or state law, including bankruptcy, would have 
serious adverse effects on U.S. financial stability and no viable 
private sector alternative is available to prevent the default of the 
financial company.[Footnote 90] While the Dodd-Frank Act does not 
specify how FDIC must exercise its OLA resolution authority and while 
a number of approaches have been considered, FDIC's preferred approach 
to resolving a firm under OLA is referred to as Single Point-of-Entry 
(SPOE). Under the SPOE approach, FDIC would be appointed receiver of a 
top-tier U.S. parent holding company of the financial group determined 
to be in default or in danger of default following the completion of 
the appointment process set forth under the Dodd-Frank Act. 
Immediately after placing the parent holding company into 
receivership, FDIC would transfer some assets (primarily the equity 
and investments in subsidiaries) from the receivership estate to a 
bridge financial holding company. By taking control of the firm at the 
holding company level, this approach is intended to allow subsidiaries 
(domestic and foreign) carrying out critical services to remain open 
and operating. One key factor for the success of the SPOE approach is 
ensuring that the holding company builds up sufficient loss-absorbing 
capacity to enable it to recapitalize its subsidiaries, if necessary. 

In a SPOE resolution, at the parent holding company level, 
shareholders would be wiped out, and unsecured debt holders would have 
their claims written down to reflect any losses that shareholders 
cannot cover. Under the Dodd-Frank Act, officers and directors 
responsible for the failure cannot be retained.[Footnote 91] FDIC 
expects the well-capitalized bridge financial company and its 
subsidiaries to borrow in the private markets and from customary 
sources of liquidity. The new resolution authority under the Dodd-
Frank Act provides a back-up source for liquidity support, the Orderly 
Liquidation Fund, which could provide liquidity support to the bridge 
financial company if customary sources of liquidity are unavailable. 
[Footnote 92] The law requires FDIC to recover any losses arising from 
a resolution by assessing bank holding companies with $50 billion or 
more in consolidated assets, nonbank financial holding companies 
designated for supervision by the Federal Reserve System, and other 
financial companies with $50 billion or more in consolidated assets. 
[Footnote 93] 

Progress has been made to implement the reforms related to resolving 
large, complex financial institutions. FDIC has largely completed the 
core rulemakings necessary to carry out its systemic resolution 
responsibilities. For example, FDIC approved a final rule implementing 
OLA that addressed the priority of claims and the treatment of 
similarly situated creditors.[Footnote 94] The FDIC plans to seek 
public comment on its resolution strategy by the end of 2013. In 
addition, FDIC has worked with other financial regulatory agencies, 
both domestic and foreign, to make extensive preparations and to 
conduct planning exercises in order to be as prepared as possible to 
successfully resolve a firm whose failure could threaten the stability 
of the financial system. 

Although progress has been made, FDIC and others have acknowledged 
that OLA is new and untested, and several challenges to its 
effectiveness remain. For example, FDIC could face difficulties in 
effectively managing the failure of one or more large bank holding 
companies or credibly imposing losses on the creditors of those 
holding companies. These challenges include the following: 

* Financial stability concerns. FDIC may find it difficult to impose 
losses on all creditors of failing financial institutions because of 
concerns about financial stability. FDIC could in principle transfer 
certain bank holding company liabilities to a bridge holding company 
in order to protect those creditors. This concern has been subject to 
debate. For example, a report by the Bipartisan Policy Center, a think-
tank, emphasized the importance of protecting short-term creditors of 
systemically important firms, while an industry association report 
emphasized the importance of imposing losses on short-term creditors 
in order to maintain market discipline.[Footnote 95] While the Dodd-
Frank Act allows FDIC to treat similarly situated creditors 
differently, it places restrictions on FDIC's ability to do so. Any 
transfer of liabilities from the receivership to the bridge financial 
company that has a disparate impact upon similarly situated creditors 
will only be made if such a transfer will maximize the return to those 
creditors left in the receivership and if such action is necessary to 
initiate and continue operations essential to the bridge financial 
company.[Footnote 96] 

* Global cooperation. Some experts have questioned how FDIC would 
handle issues related to the non-U.S. subsidiaries of a failed firm. 
For example, if a global U.S. firm were at risk of being placed in 
receivership under OLA, foreign regulators might act to ring-fence 
assets of a non-U.S. subsidiary to prevent these assets from being 
transferred abroad where they would not be available to protect 
counterparties in their jurisdiction. Such a development could 
increase financial instability by reducing the assets available to a 
U.S. firm to satisfy creditors' claims. Because SPOE involves losses 
borne only by holding company creditors, some observers have suggested 
this approach would avoid potential challenges associated with the 
failure of foreign subsidiaries or actions of foreign regulators to 
ring-fence the assets of a subsidiary. For example, if subsidiary 
liabilities were guaranteed under SPOE, foreign regulators would not 
need to ring-fence foreign subsidiaries in order to protect foreign 
customers or creditors. 

* Multiple, simultaneous insolvencies. Experts have questioned whether 
FDIC has sufficient capacity to use OLA to handle multiple failures of 
systemically important firms and thus prevent further systemic 
disruption. In addition, FDIC may find it more difficult to impose 
losses on creditors when multiple large institutions are failing at 
once, which could reduce the credibility of OLA. According to a survey 
of investors, few respondents believed that FDIC could effectively use 
OLA to handle the resolution of multiple firms simultaneously. 
[Footnote 97] 

Living Wills: 

Title I of the Dodd-Frank Act requires bank holding companies with $50 
billion or more in consolidated assets and nonbank financial companies 
designated by FSOC to formulate and submit to FDIC, the Federal 
Reserve Board, and FSOC resolution plans (or "living wills") that 
detail how the companies could be resolved in the event of material 
financial distress or failure.[Footnote 98] The Federal Reserve Board 
and FDIC finalized rules relating to resolution plans, and the large 
financial institutions that were the first firms required to prepare 
such plans submitted these to regulators as expected in July 2012. 
[Footnote 99] Regulators reviewed these initial plans and developed 
guidance on what information should be included in 2013 resolution 
plan submissions.[Footnote 100] 

Experts have expressed mixed views on the usefulness of the living 
wills. Some experts have noted that resolution plans may provide 
regulators with critical information about a firm's organizational 
structure that could aid the resolution process or motivate complex 
firms to simplify their structures, and this simplification could help 
facilitate resolution. However, other experts have told us that 
resolution plans may provide limited benefits in simplifying firm 
structures, in part because tax, jurisdictional, and other 
considerations may outweigh the benefits of simplification. 
Furthermore, some experts commented that although resolution plans may 
assist regulators in gaining a better understanding of the structures 
and activities of complex financial firms, the plans may not be useful 
guides during an actual liquidation--in part because the plans could 
become outdated or because the plans may not be helpful during a 
crisis. 

Dodd-Frank Restricts Emergency Lending Authority, but the Federal 
Reserve Board Has Not Completed its Process for Drafting Required 
Procedures: 

The Dodd-Frank Act creates new restrictions and requirements 
associated with the Federal Reserve Board's Section 13(3) authority. 
[Footnote 101] Generally, the act prohibits use of Section 13(3) 
authority to assist an individual institution (as the Federal Reserve 
Board did with Bear Stearns and AIG). While the act continues to allow 
the Federal Reserve Board to use 13(3) authority to authorize programs 
with broad-based eligibility, it sets forth new restrictions and 
requirements for such programs. For example, the act prohibits a 
Reserve Bank from lending to an insolvent firm through a broad-based 
program or creating a program designed to remove assets from a single 
and specific institution's balance sheet.[Footnote 102] According to 
Federal Reserve Board staff, under its current Section 13(3) 
authority, the Federal Reserve Board could re-launch emergency 
programs to assist the repurchase agreement, commercial paper, and 
other credit markets, if these markets became severely strained and if 
the program is broad-based and meets the other requirements imposed by 
the Dodd-Frank Act. The Dodd-Frank Act also includes additional 
transparency and reporting requirements should the Federal Reserve 
Board exercise its Section 13(3) authority.[Footnote 103] 

Although the Dodd-Frank Act requires the Federal Reserve Board to 
promulgate regulations that establish policies and procedures 
governing any future lending under Section 13(3) authority, Federal 
Reserve Board officials told us that they have not yet completed the 
process for drafting these policies and procedures.[Footnote 104] 
Federal Reserve Board staff have made progress in drafting these 
policies and procedures by regulation, but have not set time frames 
for completing and publicly proposing a draft regulation. While there 
is no mandated deadline for completion of the procedures, the Dodd-
Frank Act does require the Federal Reserve Board to establish the 
policies and procedures "as soon as is practicable."[Footnote 105] 
According to a Federal Reserve Board official, in implementing its 
regulatory responsibilities under the Dodd-Frank Act, the Federal 
Reserve Board has focused first on the required regulations that have 
statutory deadlines and the regulations which are specifically 
directed at enhancing the safety and soundness of the financial 
system. Although the act did not set a specific deadline, the Federal 
Reserve Board can better ensure accountability for implementing 
rulemaking and more timely completion of these procedures by setting 
internal timelines for completing the rulemaking process. Furthermore, 
finalizing these policies and procedures could help the Federal 
Reserve Board to ensure that any future emergency lending does not 
assist an insolvent firm and complies with other Dodd-Frank Act 
requirements. 

Completing these policies and procedures could also address prior 
recommendations we made with respect to the Federal Reserve System's 
emergency assistance programs.[Footnote 106] For example, in our July 
2011 report, we recommended that the Chairman of the Federal Reserve 
Board direct Federal Reserve Board and Reserve Bank staff to set forth 
the Federal Reserve Board's process for documenting its justification 
for each use of section 13(3) authority. We noted that more complete 
documentation could help the Federal Reserve Board ensure that it is 
complying with the Dodd-Frank Act's requirement on its use of this 
authority.[Footnote 107] The Federal Reserve Board agreed that this 
prior report's recommendations would benefit its response to future 
crises and agreed to strongly consider how best to respond. 

Enhanced Prudential Standards for Large Financial Firms Have Not Been 
Fully Implemented: 

The Dodd-Frank Act also introduced a number of regulatory changes 
designed to reduce the risks that the largest financial institutions 
pose to the financial system. A notable change is a set of new 
prudential requirements and capital standards designed to strengthen 
the regulatory oversight and capital base of large financial 
institutions.[Footnote 108] The Federal Reserve Board has made 
progress towards implementing these enhanced regulatory standards. 

The Dodd-Frank Act requires the Federal Reserve Board to create 
enhanced capital and prudential standards for bank holding companies 
with $50 billion or more in consolidated assets and nonbank financial 
holding companies designated by FSOC.[Footnote 109] The act's 
provisions related to enhanced prudential standards for these covered 
firms include the following: 

* Risk-based capital requirements and leverage limits. The Federal 
Reserve Board must establish capital and leverage standards, which as 
proposed would include a requirement for covered firms to develop 
capital plans to help ensure that they maintain capital ratios above 
specified standards, under both normal and adverse conditions. 
[Footnote 110] In addition, the Federal Reserve Board has announced 
its intention to apply capital surcharges to some or all firms based 
on the risks firms pose to the financial system. 

* Liquidity requirements. The Federal Reserve Board must establish 
liquidity standards, which as proposed would include requirements for 
covered firms to hold liquid assets that can be used to cover their 
cash outflows over short periods.[Footnote 111] 

* Single-counterparty credit limits. The Federal Reserve Board must 
issue rules that, in general, limit the total net credit exposure of a 
covered firm to any single unaffiliated company to 25 percent of its 
total capital stock and surplus.[Footnote 112] 

* Risk management requirements. Publicly traded covered firms must 
establish a risk committee and be subject to enhanced risk management 
standards.[Footnote 113] 

* Stress testing requirements. The Federal Reserve Board is required 
to conduct an annual evaluation of whether covered firms have 
sufficient capital to absorb losses that could arise from adverse 
economic conditions.[Footnote 114] 

* Debt-to-equity limits. Certain covered firms may be required to 
maintain a debt-to-equity ratio of no more than 15-to-1.[Footnote 115] 

* Early remediation. The Federal Reserve Board is required to 
establish a regulatory framework for the early remediation of 
financial weaknesses of covered firms in order to minimize the 
probability that such companies will become insolvent and the 
potential harm of such insolvencies to the financial stability of the 
United States.[Footnote 116] 

Some of these rules have been finalized, while others have not. For 
example, in October 2012, the Federal Reserve Board issued a final 
rule implementing the supervisory and company-run stress test 
requirements.[Footnote 117] In December 2012, the Federal Reserve 
Board issued proposed regulations designed to implement enhanced 
prudential standards and early remediation requirements for foreign 
banking organizations and foreign nonbank financial companies. 
[Footnote 118] 

The Federal Reserve Board intends to satisfy some aspects of the Dodd-
Frank Act's heightened prudential standards rules for bank holding 
companies with total consolidated assets of $50 billion or more 
through implementation of the new Basel Committee on Banking 
Supervision standards, known as Basel III. The new standards seek to 
improve the quality of regulatory capital and introduce a new minimum 
common equity requirement. Basel III also raises the quantity and 
quality of capital required and introduces capital conservation and 
countercyclical buffers designed to better ensure that banks have 
sufficient capital to absorb losses in a future crisis. In addition, 
Basel III establishes for the first time an international leverage 
standard for internationally active banks. 

Consistent with that intention, in July 2013 FDIC, the Federal Reserve 
Board, and OCC finalized a rule that revised risk-based and leverage 
capital requirements for banking organizations.[Footnote 119] The 
interim final rule implements a revised definition of regulatory 
capital, a new common equity Tier 1 minimum capital requirement, a 
higher minimum Tier 1 capital requirement, and a supplementary 
leverage ratio that incorporates a broader set of exposures in the 
denominator.[Footnote 120] 

In addition, in July 2013 FDIC, the Federal Reserve Board, and OCC 
proposed a rule to establish a new leverage buffer.[Footnote 121] 
Specifically, the proposed rule requires bank holding companies with 
more than $700 billion in consolidated total assets or $10 trillion in 
assets under custody to maintain a Tier 1 capital leverage buffer of 
at least 2 percent above the minimum supplementary leverage ratio 
requirement of 3 percent, for a total of 5 percent. In addition to the 
leverage buffer for covered bank holding companies, the proposed rule 
would require insured depository institutions of covered bank holding 
companies to meet a 6 percent supplementary leverage ratio to be 
considered "well capitalized" for prompt corrective action purposes. 
[Footnote 122] The proposed rule would take effect beginning on 
January 1, 2018. 

Conclusions: 

During the 2007-2009 financial crisis, federal agencies determined 
that expanding support to insured banks through traditional safety 
nets--the discount window and deposit insurance--would not be 
sufficient to stem disruptions to important credit markets. The 
Federal Reserve System, Treasury, and FDIC introduced new programs to 
provide general funding support to the financial sector, and some of 
these programs provided support at the bank holding company level or 
directly to nonbank financial institutions. These programs helped to 
improve financial conditions, and bank holding companies and their 
subsidiaries also experienced individual benefits from participating 
in particular programs, including liquidity benefits from programs 
that allowed them to borrow at lower interest rates and at longer 
maturities than might have been available in the markets. In addition, 
the Federal Reserve Board granted exemptions to allow banks to channel 
additional funding support to nonbank financial firms that lacked 
direct access to the federal safety nets for insured depository 
institutions. Government assistance to prevent the failures of large 
financial institutions--such as Fannie Mae, Freddie Mac, and AIG--also 
benefited bank holding companies, their subsidiaries, and other firms 
that had large risk exposures to these institutions. While these 
actions collectively helped to avert a more severe crisis, they raised 
concerns about moral hazard and the appropriate scope of federal 
safety nets for the financial sector. 

The Dodd-Frank Act contains provisions that aim to restrict future 
government support for financial institutions, but the effectiveness 
of these provisions will depend in large part on how agencies 
implement them. Among other things, the act places new restrictions on 
the Federal Reserve Board and FDIC's emergency authorities and grants 
FDIC new resolution authority to resolve a large failing institution 
outside of the bankruptcy process. While the act continues to allow 
the Federal Reserve Board to use its authority under Section 13(3) of 
the Federal Reserve Act to authorize programs with broad-based 
eligibility, it sets forth new restrictions and requirements for such 
programs, including a requirement that lending not assist insolvent 
firms. The act also requires the Federal Reserve Board to establish 
policies and procedures governing future actions under this authority. 
As of the date of this report, the Federal Reserve Board has not yet 
completed its process for drafting these policies and procedures and 
has not set time frames for doing so. A Federal Reserve Board official 
indicated that the Board of Governors has focused first on completion 
of other required regulations that have statutory deadlines and the 
regulations that are specifically directed at enhancing the safety and 
soundness of the U.S. financial system. While the act did not set a 
specific deadline, setting time frames could help ensure more timely 
completion of these policies and procedures. Moreover, finalizing 
these procedures could help the Federal Reserve Board to ensure that 
any future emergency lending does not assist a failing firm and 
complies with other new requirements. Consistent with the changes to 
Federal Reserve Board authorities, the act removes FDIC's authority to 
provide open bank assistance under the systemic risk exception while 
allowing FDIC (subject to congressional approval) to provide certain 
assistance through a broadly available program. FDIC continues to work 
to implement its new resolution authority. The viability and 
credibility of its resolution process as an alternative to placing a 
systemically important firm into bankruptcy is a critical part of 
removing market expectations of future extraordinary government 
assistance. The act also contains provisions to limit the scope of 
financial transactions that benefit from access to federal safety 
nets, although it remains to be seen how these provisions will be 
implemented. For example, the act could result in fewer regulatory 
exemptions allowing banks to provide additional funding to their 
nonbank affiliates. Finally, certain provisions of the act that 
require the Federal Reserve Board to subject the largest financial 
firms to heightened prudential standards have not been fully 
implemented but could reduce the risks that those institutions pose to 
the financial system. 

Recommendation for Executive Action: 

To better ensure that the design and implementation of any future 
emergency lending programs comply with Dodd-Frank Act requirements in 
a timely manner, we recommend that the Chairman of the Board of 
Governors of the Federal Reserve System set timeframes for completing 
the process for drafting policies and procedures governing the use of 
emergency lending authority under Section 13(3) of the Federal Reserve 
Act. 

Agency Comments and Our Evaluation: 

We provided copies of this draft report to the FDIC, the Federal 
Reserve Board, FSOC, OCC, and Treasury for their review and comment. 
We also provided excerpts of the draft report for technical comment to 
the Federal Housing Finance Agency. All of the agencies provided 
technical comments, which we have incorporated, as appropriate. 

In its written comments, which are reprinted in appendix V, the 
Federal Reserve Board accepted our recommendation and noted that it 
has made progress toward completing draft policies and procedures 
governing the use of its emergency lending authority under Section 
13(3) of the Federal Reserve Act. The Federal Reserve Board's letter 
referred to its Chairman's July 2013 remarks on the status of these 
efforts. The Chairman said that he was hopeful that a final product 
would be completed relatively soon, perhaps by the end of this year. 
He further noted that in the meantime, the law is clear about what the 
Federal Reserve Board can and cannot do. Based on these remarks, we 
conducted further audit work at the Federal Reserve Board and revised 
our draft to include additional information about the Federal Reserve 
Board's progress towards drafting the required policies and 
procedures. While the Federal Reserve Board has made progress on a 
draft regulation, it has not set timeframes for completing the 
drafting process and issuing a final regulation. Setting timeframes 
for completing draft and final policies and procedures would help to 
ensure more timely completion of the rulemaking process. Furthermore, 
while certain restrictions outlined in the act may not require 
clarification by rulemaking, the Dodd-Frank Act explicitly directs the 
Federal Reserve Board to draft policies and procedures to help ensure 
that it complies with the full set of new restrictions and 
requirements the act imposes on its emergency lending authority. 

In its response, the Federal Reserve Board also noted that Federal 
Reserve System and FDIC assistance was repaid with interest and 
suggested that it would be helpful for GAO, perhaps in a future 
report, to analyze the offsetting costs paid by financial institutions 
assisted through the emergency programs. We note that our draft report 
contained some information and analyses related to such offsetting 
costs. In table 1 on pages 14 through 16, we describe the key terms of 
selected broad-based programs, including interest, fees, and dividends 
that participating institutions were required to pay for this 
assistance. Furthermore, our draft report noted that one indicator of 
the extent to which an institution benefited from participation in an 
emergency government program is the relative price of estimated market 
alternatives to the program. On pages 21 through 29, we report the 
results of our analyses of the pricing terms of some of the largest 
programs that provided funding support to bank holding companies and 
other eligible financial institutions. While past GAO reports have 
reported on the income earned by the Federal Reserve System, FDIC, and 
Treasury on their crisis interventions, this information is not 
relevant to this report's discussion of the support that bank holding 
companies received during the government's attempt to stabilize the 
financial system. As we discussed, these government interventions 
helped to avert a more severe crisis, but raised questions about moral 
hazard as market participants may expect similar emergency actions in 
future crises. 

Treasury also provided written comments, which are reprinted in 
appendix VI. Treasury noted that the emergency programs discussed in 
the report were necessary to prevent a collapse of the financial 
system and that they created economic benefits not only for individual 
firms, large and small, but also for the financial system and the 
broader economy. Treasury also observed that the Dodd-Frank Act 
reforms discussed in our draft report were consistent with its 
commitment to ending "too big to fail." In separate comments provided 
via email, Treasury and FSOC provided suggestions related to the 
report's analyses of the pricing and utilization of selected emergency 
programs. In response to these suggestions, we added additional 
information about the exclusion of observations from our pricing 
analyses, and added data on average assets per institution to Table 3 
in appendix IV, among other changes. Treasury and FSOC also suggested 
that GAO consider using different benchmarks for analyzing the pricing 
for the Federal Reserve System's CPFF and FDIC's DGP. While analyses 
of these suggested benchmarks (short-dated bond prices for CPFF and 2-
3 year bond prices for DGP borrowers) could provide useful insights 
into the robustness of our results, these analyses also have 
limitations and would not necessarily improve on the analyses of the 
benchmarks that we conducted. We concluded that the analyses included 
in our report are appropriate. As noted in the report, while these 
analyses have limitations, we determined that they are sufficient for 
our purposes. We note that Federal Reserve System and FDIC staff with 
whom we discussed our selected benchmarks for these programs agreed 
that the benchmarks we used in our pricing analysis are appropriate. 

We are sending copies of this report to FDIC, the Federal Reserve 
Board, FSOC, OCC, Treasury, interested congressional committees, 
members, and others. In addition, the report is available at no charge 
on the GAO website at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions regarding this report, please 
contact me at (202) 512-8678 or EvansL@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix VII. 

Signed by: 

Lawrance L. Evans, Jr. 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Objectives, Scope and Methodology: 

The objectives of our report were to examine: (1) support banks and 
bank holding companies received as a result of government efforts to 
stabilize financial markets during the financial crisis of 2007-2009; 
and (2) recent statutory and regulatory changes related to government 
support for banks and bank holding companies and factors that could 
impact the effectiveness of these changes. In terms of scope, the 
first section of this report addresses benefits that bank holding 
companies and their subsidiaries received during the crisis from 
actual government support provided through emergency actions. It does 
not address benefits that some financial institutions may have 
received and may continue to receive from perceived government 
support. In a second report to be issued in 2014, we will report the 
results of our examination into whether the largest bank holding 
companies have received funding cost or other economic advantages as a 
result of expectations that the government would not allow them to 
fail. 

To address our first objective, we reviewed documents from financial 
regulatory agencies--the Board of Governors of the Federal Reserve 
System (Federal Reserve Board), the Federal Deposit Insurance 
Corporation (FDIC), and the Department of the Treasury (Treasury) and 
analyzed agency data on emergency government actions to stabilize 
financial markets. Our review focused on (1) emergency government 
programs that provided funding support to bank holding companies or 
their subsidiaries as well as other eligible financial institutions, 
(2) government actions that provided extraordinary assistance to 
individual financial institutions, and (3) regulatory exemptions that 
allowed banks to engage in certain transactions with their nonbank 
affiliates. To identify the programs that provided the most 
significant funding support directly to bank holding companies or 
their subsidiaries, we reviewed program eligibility rules and data on 
program participation for programs created during the 2007-2009 
financial crisis by Treasury, FDIC, and the Federal Reserve System. 
[Footnote 123] Specifically, we identified a set of emergency programs 
created during the crisis that provided at least $10 billion in direct 
funding support to bank holding companies or their subsidiaries. We 
determined that these programs included Treasury's Capital Purchase 
Program (CPP); FDIC's Temporary Liquidity Guarantee Program (TLGP); 
and the Federal Reserve System's Term Auction Facility (TAF), Primary 
Dealer Credit Facility (PDCF), Term Securities Lending Facility 
(TSLF), and Commercial Paper Funding Facility (CPFF).[Footnote 124] To 
describe the purpose, terms, and conditions of these programs and 
other emergency government actions discussed in our first objective, 
we reviewed agency documents and included information and analyses 
from prior GAO work on the Troubled Asset Relief Program (TARP), the 
Federal Reserve System's emergency programs, and other emergency 
assistance provided to the financial sector. To obtain perspectives on 
the benefits that bank holding companies received from emergency 
government actions, we reviewed papers by staff of regulators and 
other subject-matter experts and interviewed federal financial 
regulators, representatives of bank holding companies that received 
emergency government assistance, and academics. For the Federal 
Reserve System and FDIC programs that were among the programs that 
provided the most significant funding support, we compared the pricing 
and terms of this assistance (such as interest rates and fees) to 
indicators of funding market conditions during normal and crisis 
conditions. While this analysis provides a measure of program pricing 
versus potential market alternatives, it does not produce a precise 
quantification of the benefits that accrued to participating financial 
institutions. To determine the extent to which emergency equity 
support programs, CPP and the Targeted Investment Program (TIP), were 
priced more generously than estimated market alternatives, we reviewed 
estimates of the expected budget cost associated with equity funding 
support programs as well as a valuation analysis commissioned by the 
Congressional Oversight Panel (COP). For more information about the 
methodology for our analysis of the pricing and terms of these 
programs and associated limitations, see appendix III. For programs 
that provided the most significant direct funding support, to compare 
the extent to which banking organizations of various sizes used these 
emergency programs, we calculated the percentage of banking 
organization assets that were supported by emergency programs--either 
through capital injections, loans, or guarantees--at quarter-end dates 
for 2008 through 2012. For more information about our methodology for 
analyzing program utilization, see appendix IV. Finally, we obtained 
and analyzed Federal Reserve Board documentation of Federal Reserve 
Board decisions to grant exemptions to Section 23A of the Federal 
Reserve Act and approve applications from financial companies to 
convert to bank holding company status.[Footnote 125] 

To address our second objective, we identified and reviewed relevant 
statutory provisions, regulations, and agency documents. To identify 
recent statutory and regulatory changes related to government support 
for banks and bank holding companies, we reviewed sections of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 
that change rules or create new requirements for safety net programs 
for insured depository institutions; further restrict the types of 
financial activities that can be conducted by insured depository 
institutions or their holding companies; make changes to agencies' 
emergency authorities to assist or resolve financial institutions; and 
subject the largest bank holding companies to enhanced regulatory 
oversight and standards.[Footnote 126] To corroborate our selection of 
Dodd-Frank Act provisions, we obtained the views of regulatory 
officials and financial markets experts on the provisions that are 
related to government support for banks and bank holding companies. To 
update the status of agencies' efforts to implement these provisions, 
we reviewed agencies' proposed and final rules, and interviewed staff 
from FDIC, the Federal Reserve Board, the Office of the Comptroller of 
the Currency, and Treasury. We also reviewed relevant congressional 
testimonies and other public statements by agency officials. We 
identified statutory provisions or requirements that agencies had not 
fully implemented and interviewed agency staff about planned steps to 
complete implementation. To describe factors that could impact the 
effectiveness of relevant provisions, we reviewed prior GAO work on 
the potential impacts of Dodd-Frank Act provisions. To obtain 
additional perspectives on factors that could impact the effectiveness 
of these provisions, we interviewed and reviewed the public statements 
and analyses of agency officials, academics, and market experts. 

For parts of our work that involved the analysis of computer-processed 
data, we assessed the reliability of these data and determined that 
they were sufficiently reliable for our purposes. Data sets for which 
we conducted data reliability assessments include Federal Reserve 
Board transaction data for TAF, PDCF, TSLF, and CPFF; Treasury 
transaction data for CPP and TIP; and FDIC transaction data for TLGP 
programs (the Debt Guarantee Program and the Transaction Account 
Guarantee Program). We have relied on Federal Reserve Board and 
Treasury transaction data for their respective emergency programs for 
past reports, and we determined that these data were sufficiently 
reliable for the purpose of presenting and analyzing the pricing and 
utilization of these programs. To assess the reliability of FDIC's 
TLGP data, we interviewed FDIC staff about steps they took to maintain 
the integrity and reliability of program data. We also assessed the 
reliability of data sources used to provide indicators of the pricing 
and terms for market alternatives that could have been available to 
institutions that participated in these programs. These data sources 
were interbank interest rates (the London Interbank Offered Rate), 
additional interest rates from the Federal Reserve, credit default 
swap spreads from Bloomberg, repurchase agreement interest rates from 
IHS Global Insight, and repurchase agreement haircuts from the Federal 
Reserve Bank of New York. To assess the reliability of these data we 
took a number of steps including inspecting data for missing 
observations, corroborating interest rate data with other sources, and 
discussing data with agency officials. We determined these data were 
sufficiently reliable for measuring market alternatives that might 
have been available to participants in emergency programs. To 
calculate the average percentage of assets supported by emergency 
programs for banking organizations of different sizes, in addition to 
the program transaction data discussed above, we used Y-9 data for 
bank holding companies from the Federal Reserve Bank of Chicago, 
demographic data for bank holding companies and other emergency 
program participants from the Federal Reserve System's National 
Information Center and SNL Financial, balance sheet and demographic 
data for depository institutions from FDIC, and gross domestic product 
price index data from the Bureau of Economic Analysis. To assess the 
reliability of these data, we reviewed relevant documentation. In 
addition, for the Y-9 data for bank holding companies from the Federal 
Reserve Bank of Chicago and the balance sheet data for depository 
institutions from FDIC, we conducted electronic testing of key 
variables. 

We conducted this performance audit from January 2013 through November 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Overview of Selected Federal Government Programs That 
Provided Emergency Funding Support to Banking Entities during the 2007-
2009 Financial Crisis: 

During the financial crisis, the Federal Reserve System, Treasury, and 
FDIC introduced new programs with broad-based eligibility to provide 
general funding support to the banking sector and stabilize the 
financial system. Federal government interventions that provided the 
most significant direct funding support to U.S. bank holding companies 
or their subsidiaries were: 

* the Federal Reserve System's credit and liquidity programs;[Footnote 
127] 

* Treasury's capital investments through the Troubled Asset Relief 
Program; and: 

* FDIC's guarantees of certain newly issued debt and previously 
uninsured deposits through the Temporary Liquidity Guarantee Program 
(TLGP). 

The first of these interventions occurred in late 2007 when the 
Federal Reserve System modified discount window terms and launched a 
new program to auction discount window loans to banks to address 
strains in interbank credit markets. 

* Discount window. In August 2007, the cost of term funding (loans 
provided at terms of 1 month or longer) spiked suddenly--primarily due 
to investor concerns about banks' actual exposures to various mortgage-
related securities--and commercial banks increasingly had to borrow 
overnight to meet their funding needs.[Footnote 128] The Federal 
Reserve Board feared that the disorderly functioning of interbank 
lending markets would impair the ability of commercial banks to 
provide credit to households and businesses. To ease stresses in these 
markets, on August 17, 2007, the Federal Reserve Board approved two 
temporary changes to discount window terms: (1) a reduction of the 
discount rate--the interest rate at which the Reserve Banks extended 
collateralized loans at the discount window--by 50 basis points; and 
(2) an extension of the discount window lending term from overnight to 
up to 30 days, with the possibility of renewal.[Footnote 129] This 
change initially resulted in little additional borrowing from the 
discount window. After subsiding in October 2007, tensions in term 
funding markets reappeared in late November, possibly driven by a 
seasonal contraction in the supply of year-end funding. 

* Term Auction Facility (TAF). On December 12, 2007, the Federal 
Reserve Board announced the creation of TAF to address continuing 
disruptions in U.S. term interbank lending markets.[Footnote 130] TAF 
provided term funding to depository institutions eligible to borrow 
from the discount window.[Footnote 131] In contrast to the traditional 
discount window program, which loaned funds to individual institutions 
at the discount rate, TAF auctioned loans to many eligible 
institutions at once at a market-determined interest rate. Federal 
Reserve Board officials noted that one important advantage of this 
auction approach was that it could address concerns among eligible 
borrowers about the perceived stigma of discount window borrowing. TAF 
was the largest Federal Reserve System emergency program in terms of 
the dollar amount of funding support provided, with TAF loans 
outstanding peaking at $493 billion in March 2009. 

In March 2008, the Federal Reserve Board invoked its emergency 
authority under Section 13(3) of the Federal Reserve Act to authorize 
two new programs to support repurchase agreement markets--large, short-
term collateralized funding markets--that many financial institutions 
rely on to finance a wide range of securities.[Footnote 132] The 
Federal Reserve Board limited eligibility for these programs to the 
primary dealers, a designated group of broker-dealers and banks that 
transact with the Federal Reserve Bank of New York (FRBNY) in its 
conduct of open market operations.[Footnote 133] Many of the primary 
dealers are subsidiaries of U.S. bank holding companies or large 
foreign banking organizations. 

* Term Securities Lending Facility (TSLF). On March 11, 2008, the 
Federal Reserve Board announced the creation of TSLF to auction 28-day 
loans of U.S. Treasury securities to primary dealers to increase the 
amount of high-quality collateral available for these dealers to 
borrow against in the repurchase agreement markets. In early March, 
the Federal Reserve Board found that repurchase agreement lenders were 
requiring higher haircuts for loans against a range of securities and 
were becoming reluctant to lend against mortgage-related securities. 
As a result, many financial institutions increasingly had to rely on 
higher-quality collateral, such as U.S. Treasury securities, to obtain 
cash in these markets, and a shortage of such high quality collateral 
emerged. Through competitive auctions that allowed dealers to bid a 
fee to exchange harder-to-finance collateral for easier-to-finance 
Treasury securities, TSLF was intended to promote confidence among 
lenders and to reduce the need for dealers to sell illiquid assets 
into the markets, which could have further depressed the prices of 
these assets. The market value of TSLF securities loans outstanding 
peaked at $236 billion in October 2008. 

* Primary Dealer Credit Facility (PDCF). On March 16, 2008, the 
Federal Reserve Board announced the creation of PDCF to provide 
overnight collateralized cash loans to the primary dealers. In the 
days following the March 11 announcement of TSLF, one of the primary 
dealers, Bear Stearns, experienced a run on its liquidity.[Footnote 
134] Because the first TSLF auction would not be held until later that 
month, Federal Reserve Board and FRBNY staff worked to ready PDCF for 
launch by Monday, March 17, 2008, when Federal Reserve Board officials 
feared a Bear Stearns bankruptcy announcement might trigger runs on 
the liquidity of other primary dealers. Although the Bear Stearns 
bankruptcy was averted, PDCF commenced operation on March 17, 2008. 
[Footnote 135] Eligible PDCF collateral initially included collateral 
eligible for open-market operations as well as investment-grade 
corporate securities, municipal securities, and asset-backed 
securities, including private label mortgage-backed securities. The 
Federal Reserve Board later expanded eligible collateral types for 
both TSLF and PDCF. 

In late 2008, the bankruptcy of Lehman Brothers triggered an 
intensification of the crisis and the Federal Reserve System, Treasury 
and FDIC took a range of new actions to provide additional support to 
financial institutions and key credit markets. 

* Federal Reserve System actions. In September and October 2008, the 
Federal Reserve Board modified its existing programs, launched new 
programs, and took other actions to address worsening market 
conditions. 

- Modifications to TSLF, PDCF, and TAF. On September 14, 2008, shortly 
before Lehman Brothers announced it would file for bankruptcy, the 
Federal Reserve Board announced changes to TSLF and PDCF to provide 
expanded liquidity support to primary dealers. Specifically, the 
Federal Reserve Board announced that TSLF-eligible collateral would be 
expanded to include all investment-grade debt securities and PDCF-
eligible collateral would be expanded to include all securities 
eligible to be pledged in the tri-party repurchase agreements system, 
including noninvestment grade securities and equities.[Footnote 136] 
On September 29, 2008, the Federal Reserve Board also announced 
expanded support through TAF by doubling the amount of funds that 
would be available in each TAF auction cycle from $150 billion to $300 
billion. 

- Commercial Paper Funding Facility (CPFF). On October 7, 2008, the 
Federal Reserve Board announced the creation of CPFF under its Section 
13(3) authority to provide a liquidity backstop to U.S. issuers of 
commercial paper. Commercial paper is an important source of short-
term funding for U.S. financial and nonfinancial businesses.[Footnote 
137] CPFF became operational on October 27, 2008, and was operated by 
FRBNY. In the weeks leading up to CPFF's announcement, the commercial 
paper markets showed signs of strain: the volume of commercial paper 
outstanding declined, interest rates on longer-term commercial paper 
increased significantly, and increasing amounts of commercial paper 
were issued on an overnight basis as money-market funds and other 
investors became reluctant to purchase commercial paper at longer-
dated maturities. By standing ready to purchase eligible commercial 
paper, CPFF was intended to eliminate much of the risk that commercial 
paper issuers would be unable to issue new commercial paper to replace 
their maturing commercial paper obligations. 

- Other actions. The Federal Reserve System launched other new 
programs that provided liquidity support for other market 
participants, but did not serve a major source of direct support for 
U.S. bank holding companies or their subsidiaries.[Footnote 138] 

* Troubled Asset Relief Program. On October 3, 2008, the Emergency 
Economic Stabilization Act of 2008 (EESA) was signed into law to help 
stem the financial crisis.[Footnote 139] EESA provided Treasury with 
the authority to create the Troubled Asset Relief Program (TARP), 
under which it could buy or guarantee up to almost $700 billion of the 
"troubled assets" that it deemed to be at the heart of the crisis, 
including mortgages, mortgage-backed securities, and any other 
financial instruments, such as equity investments. Treasury created 
the Capital Purchase Program (CPP) in October 2008 to provide capital 
to viable financial institutions by using its authority to purchase 
preferred shares and subordinated debt. In return for its investments, 
Treasury received dividend or interest payments and warrants.[Footnote 
140] On October 14, 2008, Treasury allocated $250 billion of the 
original $700 billion in overall TARP funds for CPP. The allocation 
was subsequently reduced in March 2009 to reflect lower estimated 
funding needs, as evidenced by actual participation rates. The program 
was closed to new investments on December 31, 2009. Smaller capital 
infusion programs included the Targeted Investment Program (TIP) and 
the Community Development Capital Initiative (CDCI). 

* Temporary Liquidity Guarantee Program. In October 2008, FDIC created 
TLGP to complement the Federal Reserve and Treasury programs in 
restoring confidence in financial institutions and repairing their 
capacity to meet the credit needs of American households and 
businesses.[Footnote 141] TLGP's Debt Guarantee Program (DGP) was 
designed to improve liquidity in term-funding markets by guaranteeing 
certain newly issued senior unsecured debt of financial institutions 
and their holding companies. By guaranteeing payment of these debt 
obligations, DGP was intended to address the difficulty that 
creditworthy institutions were facing in replacing maturing debt 
because of risk aversion in the markets. TLGP's Transaction Account 
Guarantee Program (TAGP) also was created to stabilize an important 
source of liquidity for many financial institutions. TAGP temporarily 
extended an unlimited deposit guarantee to certain noninterest-bearing 
transaction accounts to assure holders of the safety of these deposits 
and limit further outflows. By facilitating access to borrowed funds 
at lower rates, Treasury, FDIC, and the Federal Reserve expected TLGP 
to free up funding for banks to make loans to creditworthy businesses 
and consumers. Furthermore, by promoting stable funding sources for 
financial institutions, they intended TLGP to help avert bank and 
thrift failures that would impose costs on the insurance fund and 
taxpayers and potentially contribute to a worsening of the crisis. 

[End of section] 

Appendix III: Methodology for Analysis of Pricing and Terms for 
Financial Stability Programs: 

Although imperfect, one indicator of the extent to which an 
institution benefited from participation in an emergency program is 
the relative price of estimated market alternatives to the program. To 
determine how pricing of the emergency assistance compared to market 
rates, we compared the interest rates and fees charged by the Federal 
Reserve and FDIC for participation in the emergency lending and 
guarantee programs with market alternatives that might have been 
available to program participants. We considered a number of potential 
indicators of market interest rates available to financial 
institutions, including a survey of interbank interest rates (the 
London Interbank Offered Rate or LIBOR), commercial paper interest 
rates published by the Federal Reserve Board, spreads on bank credit 
default swaps (CDS), and interest rates on repurchase agreements. 
These interest rates and spreads provide a general indication of 
market alternatives available to participants but are imperfect and 
hence unlikely to reflect available alternatives for all participants 
at all points in time. For example, participants' access to market 
alternatives may have been limited, there may be only limited data on 
the relevant private market, or market alternatives could vary across 
participants in ways that we do not observe in the data. Furthermore, 
once programs were introduced, they probably influenced the price of 
market alternatives, making it difficult to interpret differences 
between program pricing to contemporary market pricing while programs 
were active. Where possible--when programs had pricing rules (PDCF, 
CPFF, and DGP)--we applied program pricing rules during time periods 
that were not influenced by the program itself to compare program 
pricing with counterfactual market prices. By choosing high and low 
financial stress time periods, we can estimate the extent to which 
participants may have benefited from program pricing during the 
financial crisis as well as the extent to which program pricing became 
less attractive as financial conditions returned to normal. 

Programs with auction-based pricing (TAF and TSLF) raise particular 
challenges in interpreting differences between program pricing and 
market pricing. Under certain assumptions, bidders would bid program 
pricing up to their market alternatives, which could limit potential 
benefits from the program as well as eliminate any difference between 
program and market pricing.[Footnote 142] In addition, without a 
pricing rule we cannot apply pricing for auction-based programs to 
high or low financial stress time periods not influenced by the 
program itself--in other words, contemporaneous pricing is 
contaminated by the program itself, making it difficult to determine 
the true market alternative. As a result, deviations between program 
and market pricing could indicate differences in terms rather than a 
benefit to participating financial institutions. These challenges 
suggest that our estimates of the difference between program and 
market pricing for auction-based programs should be interpreted with 
caution. TAF and TSLF also had minimum pricing determined by the 
Federal Reserve that was prescribed when auctions were 
undersubscribed. In these instances prices were no longer auction-
determined in the traditional sense although the outcome of the 
auction (undersubscription) determined when the minimum pricing would 
apply. 

It is important to note that, among other limitations, our indicators 
do not capture all the benefits associated with program participation. 
Because our proxies for market alternatives are imperfect, market 
prices appear on occasion to be lower than emergency program pricing 
despite significant participation by financial institutions at these 
times. Participation by itself suggests that program prices and/or 
terms were relatively attractive in comparison to available 
alternatives--benefits could arise from price, quantity available, or 
other nonprice characteristics of the assistance (loan term, eligible 
collateral, etc.). Therefore, we discarded values of spreads between 
program pricing and market alternatives when they were zero or 
negative since negative spreads are unlikely to capture the benefits 
that accrued to participants. If these truly reflected market 
alternatives for the pool of potential participants, then there would 
be no participation or the participation would have been based on 
other nonprice considerations. We assume that the true (unobserved) 
market alternatives overlap at times with our observed proxies. At 
other times the market alternatives we are able to observe and measure 
may not overlap with the true market alternatives for participants 
(including when observed market alternatives indicate programs are 
more expensive than market rates). 

Because PDCF operated similarly to repurchase agreement markets, we 
compared collateral haircuts in PDCF with select asset classes in the 
triparty (intermediated by a clearing bank) repurchase agreement 
markets. We selected those asset classes where we were able to draw 
clear parallels between categories of collateral allowed under PDCF 
and categories identified in data based on private repurchase 
agreement market we received from the Federal Reserve Bank of New 
York. The haircut is an important loan term in repurchase agreement 
contracts and collateralized lending, the amount of additional 
collateral required over the value of the loan that is required to 
secure the loan. Securities with greater risk or less liquidity 
generally have larger haircuts (i.e., more collateral is required). 
PDCF borrowers might have utilized triparty repurchase agreement 
markets for alternative sources of secured borrowing during the 2007-
2009 financial crisis. 

To determine the extent to which emergency equity support programs, 
CPP and TIP, were priced more generously than estimated market 
alternatives, we reviewed estimates of the expected budget cost 
associated with equity funding support programs as well as a valuation 
analysis commissioned by the Congressional Oversight Panel (COP). The 
benefits that accrued to banks from participation in equity funding 
support programs are likely to be proportional to the subsidy rates 
estimated for accounting purposes. Estimates of subsidy rates are 
based on a net present value analysis--the price and terms which are 
offered by a federal agency are compared to the lifetime expected cost 
(net present value) of the equity and the difference is known as a 
subsidy. Because private market participants might have charged a 
price based on a comparable net present value analysis, banks would 
have benefited to the extent that the prices offered by Treasury for 
their equity exceed what they were likely to receive based on the net 
present value. The valuation analysis commissioned by COP explicitly 
compared the prices received by Treasury with market-based valuations 
of similar securities. We assume that the net present values estimated 
for accounting purposes by Treasury and CBO are reasonable proxies for 
the market valuations that are more directly estimated in the COP 
analysis. We used the earliest available estimates from the 
Congressional Budget Office (CBO) and Treasury as they were closest to 
market conditions at the time that programs were initiated. Estimates 
of these subsidy rates depended on timing and market conditions and 
the size of these subsidy rates likely fell over time as market 
conditions improved. 

[End of section] 

Appendix IV: Use of Financial Stability Programs by Banking 
Organizations of Different Sizes: 

Data: 

Emergency government programs to stabilize financial markets resulted 
in funding support to bank holding companies and insured depository 
institutions (collectively, banking organizations) of various sizes. 
[Footnote 143] To compare use of emergency funding programs by banking 
organizations of different sizes, we analyzed quarterly data on bank 
holding companies and depository institutions for the period from 2008 
to 2012 along with data on emergency program transactions that 
occurred during that period. We used quarterly balance sheet and 
demographic data on bank holding companies for the period from the 
first quarter of 2008 through the fourth quarter of 2012 from the 
Federal Reserve Bank of Chicago and the Federal Reserve System's 
National Information Center (NIC), quarterly balance sheet and 
demographic data on depository institutions from FDIC for the period 
from the first quarter of 2008 through the fourth quarter of 2012, and 
quarterly data on the GDP price index from the Bureau of Economic 
Analysis (BEA) for the period from the first quarter of 2008 through 
the fourth quarter of 2012. We also used data on Debt Guarantee 
Program (DGP) and TAGP transactions from FDIC, data on Commercial 
Paper Funding Facility, Primary Dealer Credit Facility, TAF, and TSLF 
transactions from the Board of Governors of the Federal Reserve 
System, and data on CPP and TIP transactions from the U.S. Department 
of the Treasury. Finally, we used demographic data on emergency 
funding program participants obtained from NIC and from SNL Financial. 

Methodology: 

We organized depository institutions and bank holding companies into 
groups--hereafter banking organizations--based on their regulatory 
high holder (the highest holding company in a tiered organization), 
where depository institutions or bank holding companies that did not 
indicate a high holder are assumed to be their own high holder. We 
calculated consolidated assets for each banking organization, 
excluding banking organizations for which we cannot reliably calculate 
consolidated assets. We excluded banking organizations with a high 
holder that was not in our data, e.g., banking organizations with 
foreign high holders. For banking organizations with a high holder 
that was in our data and that included at least one bank holding 
company, we excluded those for which the high holder did not report 
consolidated assets, those for which the high holder reported 
consolidated assets but they were less than its parent-only assets, 
those for which the high holder's consolidated assets were less than 
consolidated assets reported by some other bank holding company in the 
organization, those for which none of the bank holding companies 
reported consolidated assets, and those that did not contain any 
depository institutions. For all remaining banking organizations that 
contained at least one bank holding company, we set consolidated 
assets for the group equal to consolidated assets reported by the high 
holder. Note that consolidated assets for a bank holding company 
include the assets of all consolidated subsidiaries, which generally 
include all companies for which the bank holding company owns more 
than 50 percent of the outstanding voting stock. For banking 
organizations with a high holder in our data that did not include a 
bank holding company, such as standalone depository institutions, we 
set consolidated assets for the banking organization equal to the 
depository institution's consolidated assets. 

Banking organizations for which we could reliably calculate 
consolidated assets constitute our analysis sample. Small bank holding 
companies (those with assets less than $500 million) generally report 
their consolidated assets in the second and fourth quarters of each 
year, but they generally do not do so in the first and third quarters 
of each year. To maintain consistency in the composition of the 
analysis sample over time, we ultimately used results for only the 
second and fourth quarters of each year from 2008 to 2012. Companies 
that converted to bank holding companies during the crisis are 
included in our analysis only for the quarters for which they filed 
financial statements for bank holding companies with the Federal 
Reserve. For example, both Goldman Sachs Group, Inc. and Morgan 
Stanley became bank holding companies in September 2008 but neither 
filed form FR Y-9C, the source of our data on consolidated assets for 
large bank holding companies, until the first quarter of 2009. As a 
result, these two companies are not part of our analysis sample until 
2009. We assigned banking organizations in our analysis sample to one 
of six size groups based on their consolidated assets, adjusted for 
inflation and expressed in fourth quarter 2012 dollars: less than $500 
million; at least $500 million and less than $1 billion; at least $1 
billion and less than $10 billion; at least $10 billion and less than 
$50 billion; at least $50 billion and less than $250 billion; and $250 
billion or more. Table 3 shows the numbers of banking organizations in 
our analysis sample by size group and the numbers of banking 
organizations excluded from our analysis sample for the second and 
fourth quarters of each year from 2008 to 2012. 

Table 3: Numbers and average assets of banking organizations in 
analysis sample by size and quarter, June 30, 2008 to December 31, 
2012. 

Quarter: 2008q2; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,824; 
Assets more than or equal to $500 million, less than $1 billion: 686; 
Assets more than or equal to $1 billion, less than $10 billion: 536; 
Assets more than or equal to $10 billion, less than $50 billion: 59; 
Assets more than or equal to $50 billion, less than $250 billion: 20; 
Assets more than or equal to $250 billion: 8; 
Banking organizations excluded from analysis sample: 256. 

Quarter: 2008q4; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,746; 
Assets more than or equal to $500 million, less than $1 billion: 674; 
Assets more than or equal to $1 billion, less than $10 billion: 546; 
Assets more than or equal to $10 billion, less than $50 billion: 61; 
Assets more than or equal to $50 billion, less than $250 billion: 15; 
Assets more than or equal to $250 billion: 8; 
Banking organizations excluded from analysis sample: 269. 

Quarter: 2009q2; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,687; 
Assets more than or equal to $500 million, less than $1 billion: 676; 
Assets more than or equal to $1 billion, less than $10 billion: 554; 
Assets more than or equal to $10 billion, less than $50 billion: 60; 
Assets more than or equal to $50 billion, less than $250 billion: 18; 
Assets more than or equal to $250 billion: 9; 
Banking organizations excluded from analysis sample: 264. 

Quarter: 2009q4; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,595; 
Assets more than or equal to $500 million, less than $1 billion: 681; 
Assets more than or equal to $1 billion, less than $10 billion: 540; 
Assets more than or equal to $10 billion, less than $50 billion: 57; 
Assets more than or equal to $50 billion, less than $250 billion: 19; 
Assets more than or equal to $250 billion: 9; 
Banking organizations excluded from analysis sample: 264. 

Quarter: 2010q2; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,520; 
Assets more than or equal to $500 million, less than $1 billion: 671; 
Assets more than or equal to $ 1billion, less than $10 billion: 528; 
Assets more than or equal to $ 10billion, less than $50 billion: 53; 
Assets more than or equal to $50 billion, less than $250 billion: 20; 
Assets more than or equal to $250 billion: 9; 
Banking organizations excluded from analysis sample: 261. 

Quarter: 2010q4; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,448; 
Assets more than or equal to $500 million, less than $1 billion: 648; 
Assets more than or equal to $ 1billion, less than $10 billion: 520; 
Assets more than or equal to $10 billion, less than $50 billion: 53; 
Assets more than or equal to $50 billion, less than $250 billion: 20; 
Assets more than or equal to $250 billion: 10; 
Banking organizations excluded from analysis sample: 262. 

Quarter: 2011q2; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,377; 
Assets more than or equal to $500 million, less than $1 billion: 644; 
Assets more than or equal to $1 billion, less than $10 billion: 512; 
Assets more than or equal to $10 billion, less than $50 billion: 54; 
Assets more than or equal to $50 billion, less than $250 billion: 19; 
Assets more than or equal to $250 billion: 10; 
Banking organizations excluded from analysis sample: 255. 

Quarter: 2011q4; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,287; 
Assets more than or equal to $500 million, less than $1 billion: 628; 
Assets more than or equal to $1 billion, less than $10 billion: 514; 
Assets more than or equal to $10 billion, less than $50 billion: 54; 
Assets more than or equal to $50 billion, less than $250 billion: 18; 
Assets more than or equal to $250 billion: 10; 
Banking organizations excluded from analysis sample: 256. 

Quarter: 2012q2; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,215; 
Assets more than or equal to $500 million, less than $1 billion: 632; 
Assets more than or equal to $1 billion, less than $10 billion: 506; 
Assets more than or equal to $10 billion, less than $50 billion: 55; 
Assets more than or equal to $50 billion, less than $250 billion: 17; 
Assets more than or equal to $250 billion: 11; 
Banking organizations excluded from analysis sample: 251. 

Quarter: 2012q4; 
Banking organization in analysis sample: 
Assets less than $500 million: 5,076; 
Assets more than or equal to $500 million, less than $1 billion: 634; 
Assets more than or equal to $1 billion, less than $10 billion: 505; 
Assets more than or equal to $10 billion, less than $50 billion: 55; 
Assets more than or equal to $50 billion, less than $250 billion: 16; 
Assets more than or equal to $250 billion: 10; 
Banking organizations excluded from analysis sample: 248. 

Source: GAO analysis of BEA, FDIC, and Federal Reserve data. 

Note: Assets are adjusted for inflation and expressed in fourth 
quarter 2012 dollars. We do not report average assets for banking 
organizations we excluded from the analysis sample because the banking 
organizations we excluded from the analysis sample are the ones for 
which we could not reliably calculate consolidated assets. 

[End of table] 

For each banking organization in our analysis sample, we calculated 
the percentage of assets funded by capital provided, loans provided, 
and liabilities guaranteed by emergency programs at quarter-end for 
the second and fourth quarters of 2008 through 2012. Capital provided 
by emergency programs includes capital investments by Treasury under 
CPP and TIP. Loans provided by emergency programs include TAF, TSLF, 
PDCF, and CPFF loans from the Federal Reserve System. Funding 
guaranteed by emergency programs includes deposits guaranteed by FDIC 
through TAGP and debt guaranteed by FDIC through DGP. To compare the 
extent to which banking organizations of various sizes used emergency 
programs, we calculated the percentage of banking organization assets 
that were supported by emergency programs--either through capital 
injections, loans, or guarantees--at quarter-end dates from mid-2008 
through the end of 2012. In addition, for each of the three types of 
support, we decomposed average support as a percentage of assets for 
banking organizations of different sizes into its two components: (1) 
the rate of participation in emergency programs by banking 
organizations of different sizes as measured by the percentage of 
banking organizations using funds provided or guaranteed by the 
emergency programs and (2) average support as a percentage of assets 
for those participants. 

Results: 

Federal Reserve System programs. TAF was established in December 2007, 
PDCF and TSLF were established in March 2008, and CPFF began 
purchasing commercial paper in October 2008. As of the end of 2008, 
combined CPFF, PDCF, TAF, and TSLF loans outstanding ranged from about 
0.01 percent of assets on average for all banking organizations with 
less than $500 million in assets to about 2.5 percent of assets on 
average for all banking organizations with at least $50 billion but 
less than $250 billion in assets (see figure 3). For banking 
organizations with $250 billion or more in assets, combined CPFF, 
PDCF, TAF, and TSLF loans outstanding were about 2.0 percent of assets 
on average. As of mid-2009, loans outstanding for these four programs 
combined had declined to less than 1 percent of assets on average for 
banking organizations of all sizes, and as of the end of 2009, they 
had declined to less than half a percent of assets on average. 

Figure 3: Average CPFF, PDCF, TAF, and TSLF Loan Amounts Outstanding 
as a Percentage of Assets at Quarter-End for Banking Organizations by 
Size, June 30, 2008, through December 31, 2012. 

[Refer to PDF for image: stacked vertical bar graph] 

2008-Q2: 

$250 billion or more: 
TAF: 0.46%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0.19%. 

$5 billion-$250 billion: 
TAF: 0.63%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$10 billion-$50 billion: 
TAF: 0.28%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$1 billion-$10 billion: 
TAF: 0.05%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$500 million-$1 billion: 
TAF: 0.03%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

Less than $500 million: 
TAF: 0.003%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

2008-Q4: 

$250 billion or more: 
TAF: 1.38%; 
CPFF: 0.24%; 
PDCF: 0.09%; 
TSLF: 0.25%. 

$5 billion-$250 billion: 
TAF: 2.21%; 
CPFF: 0.24%; 
PDCF: 0; 
TSLF: 0. 

$10 billion-$50 billion: 
TAF: 0.81%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$1 billion-$10 billion: 
TAF: 0.26%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$500 million-$1 billion: 
TAF: 0.08%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

Less than $500 million: 
TAF: 0.01%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

2009-Q2: 

$250 billion or more: 
TAF: 0.31%; 
CPFF: 0.03%; 
PDCF: 0; 
TSLF: 0. 

$5 billion-$250 billion: 
TAF: 0.7%; 
CPFF: 0.007%; 
PDCF: 0; 
TSLF: 0. 

$10 billion-$50 billion: 
TAF: 0.93%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$1 billion-$10 billion: 
TAF: 0.31%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$500 million-$1 billion: 
TAF: 0.15%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

Less than $500 million: 
TAF: 0.06%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

2009-Q4: 

$250 billion or more: 
TAF: 0; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$5 billion-$250 billion: 
TAF: 0.22%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$10 billion-$50 billion: 
TAF: 0.20%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$1 billion-$10 billion: 
TAF: 0.22%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

$500 million-$1 billion: 
TAF: 0.06%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

Less than $500 million: 
TAF: 0.05%; 
CPFF: 0; 
PDCF: 0; 
TSLF: 0. 

Source: GAO analysis of data from the Bureau of Economic Analysis, 
FDIC, the Federal Reserve Board, the Federal Reserve Bank of Chicago, 
SNL Financial, and Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Banking organizations are divided into groups each quarter 
using consolidated assets that were first adjusted for inflation and 
measured in fourth quarter 2012 dollars. Size groups include banking 
organizations with assets equal to the lower bound but do not include 
banking organizations with assets equal to the upper bound. For 
example, banking organizations with $50 billion in assets would be in 
the "$50-250 billion" group, not the "$10-50 billion" group. 

[End of figure] 

Through mid-2009, the larger banking organizations participated in the 
four Federal Reserve System programs we analyzed at higher rates than 
smaller banking organizations (see Panel A of table 4). However, by 
the end of 2009, banking organizations with $250 billion or more in 
assets had completely exited all of these programs, but of the 
remaining institutions, larger banking organizations continued to 
participate at higher rates than smaller banking organizations. These 
programs all closed in the first quarter of 2010.[Footnote 144] 

Table 4: Participation Rates and Average Loan Amounts Outstanding as a 
Percent of Assets at Quarter-End for Participating Banking 
Organizations for CPFF, PDCF, TAF, and TSLF, June 30, 2008 through 
December 31, 2009: 

A. Percent of banking organizations participating in CPFF, PDCF, TAF, 
or TSLF (%). 

Quarter: 2008q2; 
Assets less than $500 million: 0.03%; 
Assets more than or equal to $500 million, less than $1 billion: 0.58%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.24%; 
Assets more than or equal to $10 billion, less than $50 billion: 
11.86%; 
Assets more than or equal to $50 billion, less than $250 billion: 
30.00%; 
Assets more than or equal to $250 billion: 75.00%. 

Quarter: 2008q4; 
Assets less than $500 million: 0.19%; 
Assets more than or equal to $500 million, less than $1 billion: 1.78%; 
Assets more than or equal to $1 billion, less than $10 billion: 6.04%; 
Assets more than or equal to $10 billion, less than $50 billion: 
26.23%; 
Assets more than or equal to $50 billion, less than $250 billion: 
60.00%; 
Assets more than or equal to $250 billion: 75.00%. 

Quarter: 2009q2; 
Assets less than $500 million: 0.83%; 
Assets more than or equal to $500 million, less than $1 billion: 3.25%; 
Assets more than or equal to $1 billion, less than $10 billion: 8.48%; 
Assets more than or equal to $10 billion, less than $50 billion: 
25.00%; 
Assets more than or equal to $50 billion, less than $250 billion: 
38.89%; 
Assets more than or equal to $250 billion: 44.44%. 

Quarter: 2009q4; 
Assets less than $500 million: 0.66%; 
Assets more than or equal to $500 million, less than $1 billion: 1.91%; 
Assets more than or equal to $1 billion, less than $10 billion: 5.56%; 
Assets more than or equal to $10 billion, less than $50 billion: 7.02%; 
Assets more than or equal to $50 billion, less than $250 billion: 
10.53%; 
Assets more than or equal to $250 billion: 0. 

B. Average CPFF, PDCF, TAF, and TSLF loans outstanding as a percent of 
assets for participating banking organizations (%). 

Quarter: 2008q2; 
Assets less than $500 million: 8.46%; 
Assets more than or equal to $500 million, less than $1 billion: 4.30%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.41%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.39%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.11%; 
Assets more than or equal to $250 billion: 0.87%. 

Quarter: 2008q4; 
Assets less than $500 million: 5.99%; 
Assets more than or equal to $500 million, less than $1 billion: 4.76%; 
Assets more than or equal to $1 billion, less than $10 billion: 4.27%; 
Assets more than or equal to $10 billion, less than $50 billion: 3.08%; 
Assets more than or equal to $50 billion, less than $250 billion: 
4.09%; 
Assets more than or equal to $250 billion: 2.61%. 

Quarter: 2009q2; 
Assets less than $500 million: 7.56%; 
Assets more than or equal to $500 million, less than $1 billion: 4.60%; 
Assets more than or equal to $1 billion, less than $10 billion: 3.69%; 
Assets more than or equal to $10 billion, less than $50 billion: 3.70%; 
Assets more than or equal to $50 billion, less than $250 billion: 
1.83%; 
Assets more than or equal to $250 billion: 0.76%. 

Quarter: 2009q4; 
Assets less than $500 million: 7.94%; 
Assets more than or equal to $500 million, less than $1 billion: 3.31%; 
Assets more than or equal to $1 billion, less than $10 billion: 3.91%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.86%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.09%; 
Assets more than or equal to $250 billion: N/A. 

Source: GAO analysis of data from BEA, FDIC, the Federal Reserve Board, 
the Federal Reserve Bank of Chicago, SNL Financial, and Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Banking organizations are divided into groups each quarter 
using consolidated assets that were first adjusted for inflation and 
measured in fourth quarter 2012 dollars. The participation rate is the 
percentage of banking organizations with CPFF, PDCF, TAF, or TSLF 
loans outstanding at quarter-end. 

[End of table] 

Among banking organizations that participated in at least one of the 
four Federal Reserve programs, average combined CPFF, PDCF, TAF, and 
TSLF loans outstanding as a percentage of assets were generally larger 
for smaller participants (see Panel B of table 4). As of the end of 
2008, among participating banking organizations, combined CPFF, PDCF, 
TAF, and TSLF loans outstanding ranged from about 2.6 percent of 
assets on average for participants with $250 billion or more in assets 
to about 6.0 percent of assets on average for participants with less 
than $500 million in assets. As of the end of 2009, combined CPFF, 
PDCF, TAF, and TSLF loans outstanding ranged from about 2.1 percent of 
assets for participants with at least $50 billion but less than $250 
billion in assets to about 7.9 percent of assets for banking 
organizations with less than $500 million in assets, while banking 
organizations with $250 billion or more in assets were no longer 
participating in these programs. 

Treasury capital investments. Treasury began making equity investments 
in banking organizations through CPP in October 2008 and it 
established TIP in December 2008. As of the end of 2008, CPP 
investment amounts outstanding ranged from about 0.01 percent of 
assets on average for banking organizations with less than $500 
million in assets to about 1.9 percent of assets on average for 
banking organizations with at least $50 billion but less than $250 
billion in assets (see figure 4). CPP and TIP investment amounts 
outstanding for banking organizations with $250 billion or more were 
about 1.6 percent of assets on average.[Footnote 145] As of mid-2010, 
banking organizations with $250 billion or more in assets had repaid 
Treasury and exited CPP and TIP. At the same time, CPP investment 
amounts had fallen to less than 1 percent of assets on average for 
banking organizations in all smaller size groups. As of the end of 
2012, banking organizations with at least $50 billion but less than 
$250 billion in assets had repaid Treasury and exited CPP, and CPP 
investment amounts had fallen to less than 0.25 percent of assets on 
average for banking organizations in all smaller size groups.: 

Figure 4: Average CPP and TIP Investment Amounts Outstanding as a 
Percentage of Assets at Quarter-End for All Banking Organizations by 
Size, December 31, 2008 through December 31, 2012. 

[Refer to PDF for image: vertical bar graph] 

Assets: 

2008, Q4; 
$250 billion of more: 1.568%; 
$50-$250 billion: 1.906%; 
$10-$50 billion: 0.877%; 
$1-$10 billion: 0.325%; 
$500-$999 million: 0.089%; 
Less than $500 million: 0.011%. 

2009, Q2; 
$250 billion of more: 1.01%; 
$50-$250 billion: 1.429%; 
$10-$50 billion: 0.965%; 
$1-$10 billion: 0.543%; 
$500-$999 million: 0.370% 
Less than $500 million: 0.098%. 

2009, Q4; 
$250 billion of more: 0.312%; 
$50-$250 billion: 1.516%; 
$10-$50 billion: 0.828%; 
$1-$10 billion: 0.543%; 
$500-$999 million: 0.357%; 
Less than $500 million: 0.121%. 

2010, Q2; 
$250 billion of more: 0; 
$50-$250 billion: 0.984%; 
$10-$50 billion: 0.762%; 
$1-$10 billion: 0.534%; 
$500-$999 million: 0.361%; 
Less than $500 million: 0.119%. 

2010, Q4; 
$250 billion of more: 0; 
$50-$250 billion: 0.947%; 
$10-$50 billion: 0.450%; 
$1-$10 billion: 0.508%; 
$500-$999 million: 0.356%; 
Less than $500 million: 0.110%. 

2011, Q2; 
$250 billion of more: 0; 
$50-$250 billion: 0.310%; 
$10-$50 billion: 0.394%; 
$1-$10 billion: 0.469%; 
$500-$999 million: 0.368%; 
Less than $500 million: 0.109%. 

2011, Q4; 
$250 billion of more: 0; 
$50-$250 billion: 0.327%; 
$10-$50 billion: 0.304%; 
$1-$10 billion: 0.333%; 
$500-$999 million: 0.236%; 
Less than $500 million: 0.083%. 

2012, Q2; 
$250 billion of more: 0; 
$50-$250 billion: 0.105%; 
$10-$50 billion: 0.266%; 
$1-$10 billion: 0.249%; 
$500-$999 million: 0.218%; 
Less than $500 million: 0.082%. 

2012, Q4; 
$250 billion of more: 0; 
$50-$250 billion: 0; 
$10-$50 billion: 0.156%; 
$1-$10 billion: 0.174%; 
$500-$999 million: 0.146%; 
Less than $500 million: 0.063%. 

Source: GAO analysis of data from BEA, FDIC, the Federal Reserve 
Board, the Federal Reserve Bank of Chicago, SNL Financial, and 
Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Banking organizations are divided into groups each quarter 
using consolidated assets that were first adjusted for inflation and 
measured in fourth quarter 2012 dollars. Size groups include banking 
organizations with assets equal to the lower bound but do not include 
banking organizations with assets equal to the upper bound. For 
example, banking organizations with $50 billion in assets would be in 
the "$50-250 billion" group, not the "$10-50 billion" group. 

[End of figure] 

At the end of 2008, participation rates in CPP and TIP were higher for 
larger banking organizations and ranged from about 0.5 percent for 
banking organizations with less than $500 million in assets to about 
87.5 percent for banking organizations with $250 billion or more in 
assets (see Panel A of Table 5). As of the end of 2010, all banking 
organizations with $250 billion or more in assets had repaid Treasury 
and were no longer participating in CPP or TIP. For banking 
organizations that continued to participate in CPP, participation 
rates ranged from about 4.8 percent for banking organizations with 
less than $500 million in assets to 35 percent for banking 
organizations with at least $50 billion but less than $250 billion in 
assets. As of the end of 2012, all banking organizations with $50 
billion or more had exited CPP and TIP. For banking organizations that 
continued to participate in CPP, participation rates ranged from about 
2.4 percent for banking organizations with less than $500 million in 
assets to about 6.5 percent for banking organizations with $1-10 
billion in assets (see Panel A of table 5). For participating banking 
organizations of all sizes, average CPP and TIP amounts outstanding 
were 2 to 3 percent of assets in most quarters (see Panel B of table 
5). 

Table 5: Participation Rates and Average Investment Amounts 
Outstanding as a Percentage of Assets at Quarter-End for Participating 
Banking Organizations for CPP and TIP, December 31, 2008 to December 
31, 2012: 

A. Percent of banking organizations participating in CPP or TIP at 
quarter-end (%). 

Quarter: 2008q4; 
Assets less than $500 million: 0.49%; 
Assets more than or equal to $500 million, less than $1 billion: 4.30%; 
Assets more than or equal to $1 billion, less than $10 billion: 14.65%; 
Assets more than or equal to $10 billion, less than $50 billion: 
37.70%; 
Assets more than or equal to $50 billion, less than $250 billion: 
80.00%; 
Assets more than or equal to $250 billion: 87.50%. 

Quarter: 2009q2; 
Assets less than $500 million: 4.57%; 
Assets more than or equal to $500 million, less than $1 billion: 
17.46%; 
Assets more than or equal to $1 billion, less than $10 billion: 25.81%; 
Assets more than or equal to $10 billion, less than $50 billion: 
41.67%; 
Assets more than or equal to $50 billion, less than $250 billion: 
50.00%; 
Assets more than or equal to $250 billion: 44.44%. 

Quarter: 2009q4; 
Assets less than $500 million: 5.20%; 
Assets more than or equal to $500 million, less than $1 billion: 
16.89%; 
Assets more than or equal to $1 billion, less than $10 billion: 25.93%; 
Assets more than or equal to $10 billion, less than $50 billion: 
36.84%; 
Assets more than or equal to $50 billion, less than $250 billion: 
52.63%; 
Assets more than or equal to $250 billion: 11.11%. 

Quarter: 2010q2; 
Assets less than $500 million: 5.22%; 
Assets more than or equal to $500 million, less than $1 billion: 
17.14%; 
Assets more than or equal to $1 billion, less than $10 billion: 25.38%; 
Assets more than or equal to $10 billion, less than $50 billion: 
33.96%; 
Assets more than or equal to $50 billion, less than $250 billion: 
35.00%; 
Assets more than or equal to $250 billion: 0.00. 

Quarter: 2010q4; 
Assets less than $500 million: 4.75; 
Assets more than or equal to $500 million, less than $1 billion: 
16.98%; 
Assets more than or equal to $1 billion, less than $10 billion: 23.46%; 
Assets more than or equal to $10 billion, less than $50 billion: 
18.87%; 
Assets more than or equal to $50 billion, less than $250 billion: 
35.00%; 
Assets more than or equal to $250 billion: 0.00. 

Quarter: 2011q2; 
Assets less than $500 million: 4.72%; 
Assets more than or equal to $500 million, less than $1 billion: 
17.24%; 
Assets more than or equal to $1 billion, less than $10 billion: 21.68%; 
Assets more than or equal to $10 billion, less than $50 billion: 
16.67%; 
Assets more than or equal to $50 billion, less than $250 billion: 
15.79%; 
Assets more than or equal to $250 billion: 0.00. 

Quarter: 2011q4; 
Assets less than $500 million: 3.4%; 
Assets more than or equal to $500 million, less than $1 billion: 
10.03%; 
Assets more than or equal to $1 billion, less than $10 billion: 14.59%; 
Assets more than or equal to $10 billion, less than $50 billion: 
12.96%; 
Assets more than or equal to $50 billion, less than $250 billion: 
16.67%; 
Assets more than or equal to $250 billion: 0.00. 

Quarter: 2012q2; 
Assets less than $500 million: 3.32%; 
Assets more than or equal to $500 million, less than $1 billion: 9.18%; 
Assets more than or equal to $1 billion, less than $10 billion: 10.47%; 
Assets more than or equal to $10 billion, less than $50 billion: 
10.91%; 
Assets more than or equal to $50 billion, less than $250 billion: 
11.76%; 
Assets more than or equal to $250 billion: 0.00. 

Quarter: 2012q4; 
Assets less than $500 million: 2.36%; 
Assets more than or equal to $500 million, less than $1 billion: 5.68%; 
Assets more than or equal to $1 billion, less than $10 billion: 6.53%; 
Assets more than or equal to $10 billion, less than $50 billion: 5.45%; 
Assets more than or equal to $50 billion, less than $250 billion: 0.00; 
Assets more than or equal to $250 billion: 0.00. 

B. Average CPP and TIP investment amounts outstanding as a percent of 
assets at quarter-end for participating banking organizations (%). 

Quarter: 2008q4; 
Assets less than $500 million: 2.25%; 
Assets more than or equal to $500 million, less than $1 billion: 2.08%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.22%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.33%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.38%; 
Assets more than or equal to $250 billion: 1.79%. 

Quarter: 2009q2; 
Assets less than $500 million: 2.14%; 
Assets more than or equal to $500 million, less than $1 billion: 2.12%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.10%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.31%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.86%; 
Assets more than or equal to $250 billion: 2.27%. 

Quarter: 2009q4; 
Assets less than $500 million: 2.32%; 
Assets more than or equal to $500 million, less than $1 billion: 2.11%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.09%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.25%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.88%; 
Assets more than or equal to $250 billion: 2.81%. 

Quarter: 2010q2; 
Assets less than $500 million: 2.28%; 
Assets more than or equal to $500 million, less than $1 billion: 2.10%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.10%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.24%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.81%; 
Assets more than or equal to $250 billion: N/A. 

Quarter: 2010q4; 
Assets less than $500 million: 2.32%; 
Assets more than or equal to $500 million, less than $1 billion: 2.10%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.16%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.39%; 
Assets more than or equal to $50 billion, less than $250 billion: 
2.71%; 
Assets more than or equal to $250 billion: N/A. 

Quarter: 2011q2; 
Assets less than $500 million: 2.30%; 
Assets more than or equal to $500 million, less than $1 billion: 2.14%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.16%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.36%; 
Assets more than or equal to $50 billion, less than $250 billion: 
1.96%; 
Assets more than or equal to $250 billion: N/A. 

Quarter: 2011q4; 
Assets less than $500 million: 2.42%; 
Assets more than or equal to $500 million, less than $1 billion: 2.35%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.28%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.34%; 
Assets more than or equal to $50 billion, less than $250 billion: 
1.96%; 
Assets more than or equal to $250 billion: N/A. 

Quarter: 2012q2; 
Assets less than $500 million: 2.47%; 
Assets more than or equal to $500 million, less than $1 billion: 2.38%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.38%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.44%; 
Assets more than or equal to $50 billion, less than $250 billion: 
0.89%; 
Assets more than or equal to $250 billion: N/A. 

Quarter: 2012q4; 
Assets less than $500 million: 2.65%; 
Assets more than or equal to $500 million, less than $1 billion: 2.56%; 
Assets more than or equal to $1 billion, less than $10 billion: 2.66%; 
Assets more than or equal to $10 billion, less than $50 billion: 2.86%; 
Assets more than or equal to $50 billion, less than $250 billion: 0.0; 
Assets more than or equal to $250 billion: N/A. 

Source: GAO analysis of data from BEA, FDIC, the Federal Reserve 
Board, the Federal Reserve Bank of Chicago, and Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Banking organizations are divided into groups each quarter 
using consolidated assets that were first adjusted for inflation and 
measured in fourth quarter 2012 dollars. The participation rate is the 
percentage of banking organizations with CPP or TIP amounts 
outstanding at quarter-end. 

[End of table] 

FDIC's TLGP. FDIC implemented DGP and TAGP, the two components of 
TLGP, in October 2008. As of the end of 2008, average DGP-guaranteed 
debt and TAGP-guaranteed deposit amounts outstanding altogether as a 
percentage of assets were higher for larger banking organizations than 
smaller banking organizations and ranged from about 1.5 percent of 
assets on average for banking organizations with less than $500 
million in assets to 7.7 percent of assets on average for banking 
organizations with $250 billion or more in assets (see figure 5). By 
the end of 2010, differences in utilization of DGP and TAGP across 
banking organizations of different sizes had diminished somewhat, with 
DGP-guaranteed debt and TAGP-guaranteed deposit amounts outstanding 
altogether ranging from 1.4 percent for banking organizations with 
$250 billion or more in assets to about 3.2 percent for banking 
organizations with at least $1 billion but less than $10 billion in 
assets. TAGP expired on December 31, 2010, and by the end of 2011, DGP-
guaranteed debt amounts outstanding were less than 1 percent of assets 
on average for banking organizations of all sizes. DGP expired on 
December 31, 2012, so none of the assets of any banking organization 
were funded using DGP-guaranteed debt after that date. 

Figure 5: Average DGP-Guaranteed Debt and TAGP-Guaranteed Deposits 
Outstanding as a Percentage of Assets at Quarter-End for All Banking 
Organizations by Size, December 31, 2008, through December 31, 2012: 

[Refer to PDF for image: vertical bar graph] 

2008, Q4: 

$250 billion or more: 
TAGP: 6.85%; 
DGP: 0.86%; 
$5 billion-$250 billion or more: 
TAGP: 5.52%; 
DGP: 0.40%; 
$10 billion-$50 billion: 
TAGP: 3.61%; 
DGP: 0.054%; 
$1 billion-$10 billion: 
TAGP: 2.47%; 
DGP: 0.002%; 
$500 million-$1 billion: 
TAGP: 2.042%; 
DGP: 0.008%; 
Less than $500 million: 
TAGP: 1.52%; 
DGP: 0.001%. 

2009, Q2: 

$250 billion or more: 
TAGP: 4.30%; 
DGP: 2.04%; 
$5 billion-$250 billion or more: 
TAGP: 5.63%; 
DGP: 1.04%; 
$10 billion-$50 billion: 
TAGP: 4.33%; 
DGP: 0.03%; 
$1 billion-$10 billion: 
TAGP: 2.99%; 
DGP: 0.05%; 
$500 million-$1 billion: 
TAGP: 2.33%; 
DGP: 0.02%; 
Less than $500 million: 
TAGP: 1.57; 
DGP: 0.001%. 

2009, Q4: 

$250 billion or more: 
TAGP: 4.56%; 
DGP: 1.81%; 
$5 billion-$250 billion or more: 
TAGP: 6.32; 
DGP: 1.06786; 
$10 billion-$50 billion: 
TAGP: 5.20%; 
DGP: 0.03%; 
$1 billion-$10 billion: 
TAGP: 3.43%; 
DGP: 0.05%; 
$500 million-$1 billion: 
TAGP: 2.71%; 
DGP: 0.02%; 
Less than $500 million: 
TAGP: 1.88%; 
DGP: 0.001%. 

2010, Q2: 

$250 billion or more: 
TAGP: 0.07%; 
DGP: 1.74%; 
$5 billion-$250 billion or more: 
TAGP: 4.27%; 
DGP: 0.97%; 
$10 billion-$50 billion: 
TAGP: 5.13%; 
DGP: 0.03%; 
$1 billion-$10 billion: 
TAGP: 3.20%; 
DGP: 0.05%; 
$500 million-$1 billion: 
TAGP: 2.84%; 
DGP: 0.01%; 
Less than $500 million: 
TAGP: 1.70%; 
DGP: 0.0007%. 

2010, Q4: 

$250 billion or more: 
TAGP: 0; 
DGP: 1.41%; 
$5 billion-$250 billion or more: 
TAGP: 0.59%; 
DGP: 0.85%; 
$10 billion-$50 billion: 
TAGP: 2.49%; 
DGP: 0.03%; 
$1 billion-$10 billion: 
TAGP: 3.12%; 
DGP: 0.05%; 
$500 million-$1 billion: 
TAGP: 2.84%; 
DGP: 0.02%; 
Less than $500 million: 
TAGP: 1.80; 
DGP: 0.000687. 

2011, Q2: 

$250 billion or more: 
TAGP: 0; 
DGP: 1.23%; 
$5 billion-$250 billion or more: 
TAGP: 0; 
DGP: 0.84%; 
$10 billion-$50 billion: 
TAGP: 0; 
DGP: 0.03%; 
$1 billion-$10 billion: 
TAGP: 0; 
DGP: 0.05%; 
$500 million-$1 billion: 
TAGP: 0; 
DGP: 0.02%; 
Less than $500 million: 
TAGP: 0; 
DGP: 0.0007%. 

2011, Q4: 

$250 billion or more: 
TAGP: 0; 
DGP: 0.91%; 
$5 billion-$250 billion or more: 
TAGP: 0; 
DGP: 0.46%; 
$10 billion-$50 billion; 
TAGP: 0; 
DGP: 0.004%; 
$1 billion-$10 billion; 
TAGP: 0; 
DGP: 0.05%; 
$500 million-$1 billion; 
TAGP: 0; 
DGP: 0.01%; 
Less than $500 million; 
TAGP: 0; 
DGP: 0.0006%. 

2012, Q2: 

$250 billion or more: 
TAGP: 0; 
DGP: 0.10%; 
$5 billion-$250 billion or more: 
TAGP: 0; 
DGP: 0.24%; 
$10 billion-$50 billion; 
TAGP: 0; 
DGP: 0; 
$1 billion-$10 billion; 
TAGP: 0; 
DGP: 0; 
$500 million-$1 billion; 
TAGP: 0; 
DGP: 0; 
Less than $500 million; 
TAGP: 0; 
DGP: 0. 

2012, Q4: 

$250 billion or more: 
TAGP: 0; 
DGP: 0; 
$5 billion-$250 billion or more: 
TAGP: 0; 
DGP: 0; 
$10 billion-$50 billion; 
TAGP: 0; 
DGP: 0; 
$1 billion-$10 billion; 
TAGP: 0; 
DGP: 0; 
$500 million-$1 billion; 
TAGP: 0; 
DGP: 0; 
Less than $500 million; 
TAGP: 0; 
DGP: 0. 

Source: GAO analysis of data from the Bureau of Economic Analysis, 
FDIC, the Federal Reserve Board, the Federal Reserve Bank of Chicago, 
SNL Financial, and Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Banking organizations are divided into groups each quarter 
using consolidated assets that were first adjusted for inflation and 
measured in fourth quarter 2012 dollars. Size groups include banking 
organizations with assets equal to the lower bound but do not include 
banking organizations with assets equal to the upper bound. For 
example, banking organizations with $50 billion in assets would be in 
the "$50-250 billion" group, not the "$10-50 billion" group. 

[End of figure] 

In general, 50 percent or more of the banking organizations in every 
size group were using either DGP-guaranteed debt or TAGP-guaranteed 
deposits (or both) as funding through the end of 2010 (see Panel A of 
table 6). At the end of 2008, participation rates ranged from about 
66.3 percent for banking organizations with less than $500 million in 
assets to about 92.9 percent for banking organizations with at least 
$1 billion but less than $10 billion in assets. At the end of 2010, 
participation rates ranged from about 50 percent for banking 
organizations with at least $50 billion but less than $250 billion in 
assets to 100 percent for banking organizations with $250 billion or 
more in assets. Participation rates for banking organizations with 
less than $50 billion in assets fell after TAGP expired on December 
31, 2010, and in mid-2011 ranged from about 0.04 percent for banking 
organizations with less than $500 million in assets to about 3.1 
percent for banking organizations with at least $1 billion but less 
than $10 billion in assets. Participation rates were about 42.1 
percent and 100 percent for banking organizations with at least $50 
billion but less than $250 billion in assets and with $250 billion or 
more in assets, respectively, at that time. By mid-2012, only banking 
organizations with $50 billion or more were participating in DGP, 
which then expired at the end of 2012. 

Table 6: Participation Rates in DGP and TAGP and Average DGP-
Guaranteed Debt and TAGP-Guaranteed Deposits Outstanding as a 
Percentage of Assets at Quarter-End for Participating Banking 
Organizations, December 31, 2008, through December 31, 2012: 

A. Percent of banking organizations participating in DGP, TAGP, or both 
at quarter-end: 

Quarter: 2008q4; 
Assets Less than $500 million: 66.27%%; 
Assets more than or equal to $500 million, Less than $1 billion: 
84.87%; 
Assets more than or equal to $1 billion, Less than $10 billion: 92.86%; 
Assets more than or equal to $10 billion, Less than $50 billion: 
86.89%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
86.67%; 
Assets more than or equal to $250 billion: 87.50%. 

Quarter: 2009q2; 
Assets Less than $500 million: 66.98%; 
Assets more than or equal to $500 million, Less than $1 billion: 
89.79%; 
Assets more than or equal to $1 billion, Less than $10 billion: 93.14%; 
Assets more than or equal to $10 billion, Less than $50 billion: 
88.33%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
88.89%; 
Assets more than or equal to $250 billion: 100.00%. 

Quarter: 2009q4; 
Assets Less than $500 million: 70.46%; 
Assets more than or equal to $500 million, Less than $1 billion: 
90.60%; 
Assets more than or equal to $1 billion, Less than $10 billion: 93.89%; 
Assets more than or equal to $10 billion, Less than $50 billion: 
87.72%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
89.47%; 
Assets more than or equal to $250 billion: 100.00%. 

Quarter: 2010q2; 
Assets Less than $500 million: 66.56%; 
Assets more than or equal to $500 million, Less than $1 billion: 
86.74%; 
Assets more than or equal to $1 billion, Less than $10 billion: 87.12%; 
Assets more than or equal to $10 billion, Less than $50 billion: 
77.36%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
85.00%; 
Assets more than or equal to $250 billion: 100.00%. 

Quarter: 2010q4; 
Assets Less than $500 million: 65.33%; 
Assets more than or equal to $500 million, Less than $1 billion: 
81.48%; 
Assets more than or equal to $1 billion, Less than $10 billion: 80.77%; 
Assets more than or equal to $10 billion, Less than $50 billion: 
45.28%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
50.00%; 
Assets more than or equal to $250 billion: 100.00%. 

Quarter: 2011q2; 
Assets Less than $500 million: 0.04%; 
Assets more than or equal to $500 million, Less than $1 billion: 0.78%; 
Assets more than or equal to $1 billion, Less than $10 billion: 3.13%; 
Assets more than or equal to $10 billion, Less than $50 billion: 1.85%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
42.11%; 
Assets more than or equal to $250 billion: 100.00%. 

Quarter: 2011q4; 
Assets Less than $500 million: 0.04%; 
Assets more than or equal to $500 million, Less than $1 billion: 0.64%; 
Assets more than or equal to $1 billion, Less than $10 billion: 2.92%; 
Assets more than or equal to $10 billion, Less than $50 billion: 1.85%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
33.33%; 
Assets more than or equal to $250 billion: 100.00%. 

Quarter: 2012q2; 
Assets Less than $500 million: 0.00%; 
Assets more than or equal to $500 million, Less than $1 billion: 0.00%; 
Assets more than or equal to $1 billion, Less than $10 billion: 0.00%; 
Assets more than or equal to $10 billion, Less than $50 billion: 0.00%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
5.88%; 
Assets more than or equal to $250 billion: 27.27%. 

Quarter: 2012q4; 
Assets Less than $500 million: 0.00%; 
Assets more than or equal to $500 million, Less than $1 billion: 0.00%; 
Assets more than or equal to $1 billion, Less than $10 billion: 0.00%; 
Assets more than or equal to $10 billion, Less than $50 billion: 0.00%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
0.00%; 
Assets more than or equal to $250 billion: 20.00%. 

B. Average DGP-guaranteed debt and TAGP-guaranteed deposit amounts 
outstanding as a percent of assets for participating banking 
organizations at quarter end: 

Quarter: 2008q4%; 
Assets Less than $500 million: 2.30%; 
Assets more than or equal to $500 million, Less than $1 billion: 2.42%; 
Assets more than or equal to $1 billion, Less than $10 billion: 2.66%; 
Assets more than or equal to $10 billion, Less than $50 billion: 4.22%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
6.82%; 
Assets more than or equal to $250 billion: 8.81%. 

Quarter: 2009q2; 
Assets Less than $500 million: 2.34%; 
Assets more than or equal to $500 million, Less than $1 billion: 2.62%; 
Assets more than or equal to $1 billion, Less than $10 billion: 3.27%; 
Assets more than or equal to $10 billion, Less than $50 billion: 4.94%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
7.51%; 
Assets more than or equal to $250 billion: 6.34%. 

Quarter: 2009q4; 
Assets Less than $500 million: 2.67; 
Assets more than or equal to $500 million, Less than $1 billion: 3.01; 
Assets more than or equal to $1 billion, Less than $10 billion: 3.71; 
Assets more than or equal to $10 billion, Less than $50 billion: 5.96; 
Assets more than or equal to $50 billion, Less than $250 billion: 8.25; 
Assets more than or equal to $250 billion: 6.37%. 

Quarter: 2010q2; 
Assets Less than $500 million: 2.55%; 
Assets more than or equal to $500 million, Less than $1 billion: 3.29%; 
Assets more than or equal to $1 billion, Less than $10 billion: 3.73%; 
Assets more than or equal to $10 billion, Less than $50 billion: 6.67%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
6.16%; 
Assets more than or equal to $250 billion: 1.81%. 

Quarter: 2010q4; 
Assets Less than $500 million: 2.75%; 
Assets more than or equal to $500 million, Less than $1 billion: 3.51%; 
Assets more than or equal to $1 billion, Less than $10 billion: 3.93%; 
Assets more than or equal to $10 billion, Less than $50 billion: 5.56%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
2.88%; 
Assets more than or equal to $250 billion: 1.41%. 

Quarter: 2011q2; 
Assets Less than $500 million: 1.75%; 
Assets more than or equal to $500 million, Less than $1 billion: 2.12%; 
Assets more than or equal to $1 billion, Less than $10 billion: 1.61%; 
Assets more than or equal to $10 billion, Less than $50 billion: 1.48%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
1.99%; 
Assets more than or equal to $250 billion: 1.23%. 

Quarter: 2011q4; 
Assets Less than $500 million: 1.72%; 
Assets more than or equal to $500 million, Less than $1 billion: 1.72%; 
Assets more than or equal to $1 billion, Less than $10 billion: 1.58%; 
Assets more than or equal to $10 billion, Less than $50 billion: 0.21%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
1.37%; 
Assets more than or equal to $250 billion: 0.91%. 

Quarter: 2012q2; 
Assets Less than $500 million: 0.00%; 
Assets more than or equal to $500 million, Less than $1 billion: 0.00%; 
Assets more than or equal to $1 billion, Less than $10 billion: 0.00%; 
Assets more than or equal to $10 billion, Less than $50 billion: 0.00%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
4.14%; 
Assets more than or equal to $250 billion: 0.38%. 

Quarter: 2012q4; 
Assets Less than $500 million: 0.00%; 
Assets more than or equal to $500 million, Less than $1 billion: 0.00%; 
Assets more than or equal to $1 billion, Less than $10 billion: 0.00%; 
Assets more than or equal to $10 billion, Less than $50 billion: 0.00%; 
Assets more than or equal to $50 billion, Less than $250 billion: 
0.00%; 
Assets more than or equal to $250 billion: Less than 0.01%. 

Source: GAO analysis of data from BEA, FDIC, the Federal Reserve Board, 
the Federal Reserve Bank of Chicago, and Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Banking organizations are divided into groups each quarter 
using consolidated assets that were first adjusted for inflation and 
measured in fourth quarter 2012 dollars. The participation rate is the 
percentage of banking organizations with positive amounts of TAGP-
guaranteed deposits or DGP-guaranteed debt outstanding at quarter-end. 

[End of table] 

At the end of 2008, average DGP-guaranteed debt and TAGP-guaranteed 
deposit amounts outstanding were higher as a percentage of assets for 
larger participants than for smaller participants and ranged from 
about 2.3 percent for participants with less than $500 million in 
assets to about 8.8 percent for participants with $250 billion or more 
in assets (see Panel B of table 6). At the end of 2010, average DGP-
guaranteed debt and TAGP-guaranteed deposit amounts outstanding as a 
percentage of assets had fallen for banking organizations with $50 
billion or more in assets but not for smaller banking organizations. 
At that time, DGP-guaranteed debt and TAGP-guaranteed deposit amounts 
outstanding ranged from about 1.4 percent of assets on average for 
participants with $250 billion or more in assets to about 5.6 percent 
of assets on average for participants with $10-50 billion in assets. 
TAGP expired on December 31, 2010, and as of the end of 2011, DGP-
guaranteed debt amounts outstanding were less than 2 percent of assets 
on average for banking organizations of all sizes. DGP expired on 
December 31, 2012. 

Lastly, our analysis found that the six largest bank holding companies 
as of December 31, 2012--all with consolidated assets greater than 
$500 billion--used the emergency programs to varying degrees but had 
exited most by the end of 2009. Table 7 shows the percentage of 
consolidated assets funded by DGP-guaranteed debt, TAGP-guaranteed 
deposits, TAF loans, CPFF loans, PDCF loans, TSLF loans, and CPP and 
TIP equity investments for the largest bank holding companies at year-
end from 2008 to 2012. For comparison purposes we also show the 
average percent of assets funded by the same programs for the six 
banking organization size groups over the same period. 

Table 7: Average outstanding amounts of equity provided, loans 
provided, and liabilities guaranteed by emergency programs for select 
bank holding companies and for banking organizations by size at year 
end, 2008-2012. 

Select banking organizations as of December 31, 2008: 

Bank of America Corp.; 
DGP-guaranteed debt outstanding/assets: 2.44%; 
TAGP-guaranteed deposits outstanding/assets: 5.53%; 
TAF loans outstanding/assets: 2.47%; 
CPFF loans outstanding/assets: 0.82%; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.82%. 

Citigroup, Inc.; 
DGP-guaranteed debt outstanding/assets: 1.64; 
TAGP-guaranteed deposits outstanding/assets: 2.50%; 
TAF loans outstanding/assets: 0.77%; 
CPFF loans outstanding/assets: 0.64%; 
PDCF loans outstanding/assets: 0.71%; 
Market value of TSLF loans outstanding/assets: 1.87%; 
CPP and TIP investment amounts outstanding/assets: 2.32%. 

Goldman Sachs Group, Inc.[A]; 
DGP-guaranteed debt outstanding/assets (%): [Empty]; 
TAGP-guaranteed deposits outstanding/assets: [Empty]; 
TAF loans outstanding/assets: [Empty]; 
CPFF loans outstanding/assets: [Empty]; 
PDCF loans outstanding/assets: [Empty]; 
Market value of TSLF loans outstanding/assets: [Empty]; 
CPP and TIP investment amounts outstanding/assets: [Empty]. 

JPMorgan Chase & Co.; 
DGP-guaranteed debt outstanding/assets: 0.96; 
TAGP-guaranteed deposits outstanding/assets: 6.24%; 
TAF loans outstanding/assets: 1.38%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0.11%; 
CPP and TIP investment amounts outstanding/assets: 1.15%. 

Morgan Stanley[A]; 
DGP-guaranteed debt outstanding/assets: [Empty]; 
TAGP-guaranteed deposits outstanding/assets: [Empty]; 
TAF loans outstanding/assets: [Empty]; 
CPFF loans outstanding/assets: [Empty]; 
PDCF loans outstanding/assets: [Empty]; 
Market value of TSLF loans outstanding/assets: [Empty]; 
CPP and TIP investment amounts outstanding/assets: [Empty]. 

Wells Fargo & Co.; 
DGP-guaranteed debt outstanding/assets: 0.46; 
TAGP-guaranteed deposits outstanding/assets: 4.85%; 
TAF loans outstanding/assets: 5.54%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 1.91%. 

Average for banking organizations by size as of December 31, 2008: 

Assets more than or equal to $250 billion; 
DGP-guaranteed debt outstanding/assets: 0.86%; 
TAGP-guaranteed deposits outstanding/assets: 6.85%; 
TAF loans outstanding/assets: 1.38%; 
CPFF loans outstanding/assets: 0.24%; 
PDCF loans outstanding/assets: 0.09%; 
Market value of TSLF loans outstanding/assets: 0.25%; 
CPP and TIP investment amounts outstanding/assets: 1.57%. 

Assets more than or equal to 50 billion, less than $250 billion; 
DGP-guaranteed debt outstanding/assets: 0.40%; 
TAGP-guaranteed deposits outstanding/assets: 5.52%; 
TAF loans outstanding/assets: 2.21%; 
CPFF loans outstanding/assets: Select banking organizations 
as of December 31, 2008: 0.24%; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 1.91%. 

Assets more than or equal to $10 billion, less than $50 billion; 
DGP-guaranteed debt outstanding/assets: 0.05%; 
TAGP-guaranteed deposits outstanding/assets: 3.61%; 
TAF loans outstanding/assets: 0.81%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.88%. 

Assets more than or equal to $1 billion, less than $10 billion; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 2.47%; 
TAF loans outstanding/assets: 0.26%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.32%. 

Assets more than or equal to $500 million, less than $1 billion; 
DGP-guaranteed debt outstanding/assets: 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 2.04%; 
TAF loans outstanding/assets: 0.08%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.09%. 

Assets less than $500 million; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 1.52%; 
TAF loans outstanding/assets: 0.01%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.01%. 

Select banking organizations as of December 31, 2009: 

Bank of America Corp.; 
DGP-guaranteed debt outstanding/assets: 1.99%; 
TAGP-guaranteed deposits outstanding/assets: 7.22%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Citigroup, Inc.; 
DGP-guaranteed debt outstanding/assets: 3.52%; 
TAGP-guaranteed deposits outstanding/assets: 2.71%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Goldman Sachs Group, Inc.; 
DGP-guaranteed debt outstanding/assets: 2.42%; 
TAGP-guaranteed deposits outstanding/assets: 0.26%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

JPMorgan Chase & Co.; 
DGP-guaranteed debt outstanding/assets: 1.99%; 
TAGP-guaranteed deposits outstanding/assets: 5.53%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Morgan Stanley; 
DGP-guaranteed debt outstanding/assets: 3.08%; 
TAGP-guaranteed deposits outstanding/assets: 1.01%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Wells Fargo & Co.; 
DGP-guaranteed debt outstanding/assets: 0.77%; 
TAGP-guaranteed deposits outstanding/assets: 7.38%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Average for banking organizations by size as of December 31, 2009: 

Assets more than or equal to $250 billion; 
DGP-guaranteed debt outstanding/assets: 1.81%; 
TAGP-guaranteed deposits outstanding/assets: 4.56%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.31%. 

Assets more than or equal to $50 billion, less than $250 billion; 
DGP-guaranteed debt outstanding/assets: 1.07%; 
TAGP-guaranteed deposits outstanding/assets: 6.32%; 
TAF loans outstanding/assets: 0.22%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 1.52%. 

Assets more than or equal to $10 billion, less than $50 billion; 
DGP-guaranteed debt outstanding/assets: 0.03%; 
TAGP-guaranteed deposits outstanding/assets: 5.20%; 
TAF loans outstanding/assets: 0.20%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.83%. 

Assets more than or equal to $1 billion, less than $10 billion; 
DGP-guaranteed debt outstanding/assets: 0.05%; 
TAGP-guaranteed deposits outstanding/assets: 3.43%; 
TAF loans outstanding/assets: 0.22%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.54%. 

Assets more than or equal to $500 million, less than $1 billion; 
DGP-guaranteed debt outstanding/assets: 0.02%; 
TAGP-guaranteed deposits outstanding/assets: 2.71%; 
TAF loans outstanding/assets: 0.06%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.36%. 

Assets less than $500 million; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 1.88%; 
TAF loans outstanding/assets: 0.05%; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.12%. 

Select banking organizations as of December 31, 2010: 

Bank of America Corp.; 
DGP-guaranteed debt outstanding/assets: 1.21%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Citigroup, Inc.; 
DGP-guaranteed debt outstanding/assets: 3.04%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Goldman Sachs Group, Inc.; 
DGP-guaranteed debt outstanding/assets: 2.07%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

JPMorgan Chase & Co.; 
DGP-guaranteed debt outstanding/assets: 1.71%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Morgan Stanley; 
DGP-guaranteed debt outstanding/assets: 2.63%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Wells Fargo & Co.; 
DGP-guaranteed debt outstanding/assets: 0.76%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Average for banking organizations by size as of December 31, 2010: 

Assets more than or equal to $250 billion; 
DGP-guaranteed debt outstanding/assets: 1.41%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Assets more than or equal to $50 billion, less than $250 billion; 
DGP-guaranteed debt outstanding/assets: 0.85%; 
TAGP-guaranteed deposits outstanding/assets: 0.59%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.95%. 

Assets more than or equal to $10 billion, less than $50 billion; 
DGP-guaranteed debt outstanding/assets: 0.03%; 
TAGP-guaranteed deposits outstanding/assets: 2.49%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.45%. 

Assets more than or equal to $1 billion, less than $10 billion; 
DGP-guaranteed debt outstanding/assets: 0.05%; 
TAGP-guaranteed deposits outstanding/assets: 3.12%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.51%. 

Assets more than or equal to $500 million, less than $1 billion; 
DGP-guaranteed debt outstanding/assets: 0.02%; 
TAGP-guaranteed deposits outstanding/assets: 2.84%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.36%. 

Assets less than $500 million; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 1.80%; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.11%. 

Select banking organizations as of December 31, 2011: 

Bank of America Corp.; 
DGP-guaranteed debt outstanding/assets: 1.12%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Citigroup, Inc.; 
DGP-guaranteed debt outstanding/assets: 2.03%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Goldman Sachs Group, Inc.; 
DGP-guaranteed debt outstanding/assets: 0.92%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

JPMorgan Chase & Co.; 
DGP-guaranteed debt outstanding/assets: 0.89%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Morgan Stanley; 
DGP-guaranteed debt outstanding/assets: 1.75%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Wells Fargo & Co.; 
DGP-guaranteed debt outstanding/assets: 0.27%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Average for banking organizations by size as of December 31, 2011: 

Assets more than or equal to $250 billion; 
DGP-guaranteed debt outstanding/assets: 0.91%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Assets more than or equal to $50 billion, less than $250 billion; 
DGP-guaranteed debt outstanding/assets: 0.46%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.33%. 

Assets more than or equal to $10 billion, less than $50 billion; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.30%. 

Assets more than or equal to $1 billion, less than $10 billion; 
DGP-guaranteed debt outstanding/assets: 0.05%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.33%. 

Assets more than or equal to $500 million, less than $1 billion; 
DGP-guaranteed debt outstanding/assets: 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.24%. 

Assets less than $500 million; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.08%. 

Select banking organizations as of December 31, 2012: 

Bank of America Corp.; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Citigroup, Inc.; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Goldman Sachs Group, Inc.; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

JPMorgan Chase & Co.; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Morgan Stanley; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Wells Fargo & Co.; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Average for banking organizations by size as of December 31, 2012: 

Assets more than or equal to $250 billion; 
DGP-guaranteed debt outstanding/assets: less than 0.01%; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Assets more than or equal to $50 billion, less than $250 billion; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0. 

Assets more than or equal to $10 billion, less than $50 billion; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.16%. 

Assets more than or equal to $1 billion, less than $10 billion; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.17%. 

Assets more than or equal to $500 million, less than $1 billion; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.15%. 

Assets less than $500 million; 
DGP-guaranteed debt outstanding/assets: 0; 
TAGP-guaranteed deposits outstanding/assets: 0; 
TAF loans outstanding/assets: 0; 
CPFF loans outstanding/assets: 0; 
PDCF loans outstanding/assets: 0; 
Market value of TSLF loans outstanding/assets: 0; 
CPP and TIP investment amounts outstanding/assets: 0.06%. 

Source: GAO analysis of data from BEA, FDIC, the Federal Reserve Board, 
the Federal Reserve Bank of Chicago, SNL Financial, and Treasury. 

Note: Banking organizations include consolidated top-tier U.S. bank 
holding companies and standalone depository institutions. Assets for 
bank holding companies are consolidated assets for the top-tier bank 
holding company, which include the assets of consolidated 
subsidiaries. Assets for standalone depository institutions are 
consolidated assets for the institution. We exclude banking 
organizations for which we could not reliably calculate consolidated 
assets. Select bank holding companies are those with $500 billion or 
more in assets as of December 31, 2012. Banking organizations are 
divided into groups each quarter using consolidated assets that were 
first adjusted for inflation and measured in fourth quarter 2012 
dollars. 

[A] Goldman Sachs Group, Inc. and Morgan Stanley became bank holding 
companies in September 2008 but did not file form FR Y-9C, the source 
of our data on consolidated assets, for the fourth quarter of 2008. 

[End of table] 

[End of section] 

Appendix V: Comments from the Board of Governors of the Federal 
Reserve System: 

Board of Governors of The Federal Reserve System: 
Scott G. Alvarez: 
General Counsel: 
Washington, D.C. 20551: 

October 17,2013: 

Lawrance L. Evans, Jr. 
Director, Financial Markets and Community Investment: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Mr. Evans: 

Thank you for the opportunity to comment on your draft report numbered 
GAO-14-18. As the draft report notes, "During the financial crisis, 
the Federal Reserve System, Treasury and the FDIC introduced new 
programs with broad-based eligibility to provide general funding 
support to the financial sector and to stabilize the financial 
system."[Footnote 1] GAO further concludes that "collectively these 
interventions helped to improve financial stability by enhancing
confidence in financial institutions and the financial system overalL 
Bank holding companies and their subsidiaries, in addition to the 
financial sector and the economy as a whole, benefited from improved 
stability."{Footnote 2] Clearly, the assistance discussed in this 
report was broad based and not exclusive to bank. holding companies. 

As GAO knows, all of the Federal Reserve and FDIC assistance was fully 
repaid with interest. It would be helpful, perhaps in a future report, 
to add to the discussion of benefits to bank holding companies some 
analysis about the offsetting costs paid by bank holding companies and 
other financial institutions assisted through the emergency programs. 

The draft report includes one recommendation to the Federal Reserve 
Board: that the Chairman take steps to draft and finalize policies and 
procedures governing the use of emergency lending programs under 
Section 13(3) of the Federal Reserve Act. We accept this 
recommendation and are already working in this direction. The Chairman 
noted in testimony before Congress on July 17,2013, that the Board has 
made progress on a rule and is hopeful that a final product will be 
ready relatively soon, perhaps by the end of the year. In the 
meantime, as the Chairman noted in his testimony, the law is clear 
about what the Board of Governors can and cannot do. Your draft report 
also references the fact that the Board could, today, take decisive 
action, consistent with the new 13(3) language, in the event of another
financial crisis.[Footnote 3] In accordance with the recommendation in 
the draft report and the Chairman's intentions, the Board will 
continue to take steps to finalize the policies and procedures 
associated with the new 13(3) authority. 

Thank you again for providing us an opportunity to comment on your 
draft report. 

Sincerely, 

Signed by: 

Scott G. Alvarez: 

Appendix V Footnotes: 

[1] U.S. Government Accountability Office, "Government Support For 
Bank Holding Companies, Statutory Changes To Limit Future Support Are 
Not Fully Implemented" at 11 (Draft report 2013). 

[2] Id. at 16. 

[3] Id. at 45. 

[End of section] 

Appendix VI: Comments from the Department of the Treasury: 

Department of the Treasury: 
Under Secretary: 
Washington, D.C. 

November 4, 2013: 

Lawrance L. Evans, Jr. 
Director:
Financial Markets and Community Investment: 
Government Accountability Office: 
441 G. Street, NW: 
Washington, DC 20548: 

Dear Mr. Evans: 

I am writing regarding the Government Accountability Office's (GAO) 
draft report GAO-14-18 (the Draft Report) on government support for 
bank holding companies during the 2007-2009 financial crisis. 

We appreciate the GAO's work in this area. The report found that the 
federal government's provision of funding support during the financial 
crisis to bank holding companies and their bank and nonbank financial 
subsidiaries helped to improve U.S. financial stability by enhancing
confidence in financial institutions and the financial system overall. 
The emergency programs introduced during the crisis were necessary to 
prevent a collapse of the financial system. In addition to averting a 
severe crisis, these actions created economic benefits not only for
individual firms large and small, but also for the financial system 
and the broader economy. As the GAO has previously noted, taxpayers 
have already recovered more from Treasury's Troubled Asset Relief 
Program than was disbursed, including Treasury's positive returns from 
its investment in American International Group, Inc. 

The emergency programs implemented during the crisis were not meant to 
be permanent and the Draft Report recognizes this. We appreciate the 
GAO's analysis and conclusion that the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Dodd-Frank) modifies and curtails
federal authorities to provide support to financial firms and 
strengthens regulatory oversight of the largest firms. The particular 
reforms cited in the Draft Report, among others in Dodd-Frank and 
under international agreements, were put in place to reduce the risk 
to the financial system that anyone firm can pose and to give 
regulators important tools that they lacked during the financial 
crisis to resolve a failing firm while limiting the fallout to the 
rest of the financial system and economy. These reforms are consistent 
with our commitment to ending "too big to fail," and also serve to 
level the playing field between the largest and smaller firms. 

Thank you again for the opportunity to review the Draft Report. We 
look forward to continuing to work with you and your team as we move 
forward. 

Sincerely, 

Signed by: 

Mary J. Miller: 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Lawrance L. Evans, Jr., (202) 512-4802, or EvansL@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, Karen Tremba (Assistant 
Director), Jordan Anderson, Bethany M. Benitez, Stephanie Cheng, John 
Fisher, Michael Hoffman, Risto Laboski, Courtney LaFountain, Jon 
Menaster, Marc Molino, Robert Rieke, and Jennifer Schwartz made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] Moral hazard can occur when market participants expect similar 
emergency actions in future crises, thereby weakening their incentives 
to properly manage risks. 

[2] Pub. L. No. 111-203, 124 Stat. 1376 (2010). 

[3] Pub. L. No. 63-43, § 23A, 38 Stat. 251, 272 (1913) (12 U.S.C. § 
371c). 

[4] Pub. L. No. 84-511, 70 Stat. 133 (codified at 12 U.S.C. §§ 1841-
1852). 

[5] § 4(c)(6), 70 Stat. at 137 (codified at 12 U.S.C. § 1843(k)(4)(F)). 

[6] Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified in scattered 
sections of 12, 15 U.S.C). In order to be a financial holding company: 
(1) all depository institutions controlled by the bank holding company 
must be and remain well capitalized; (2) all depository institutions 
controlled by the bank holding company must be and remain well 
managed; and (3) the bank holding company must have made an effective 
election to become a financial holding company. 12 C.F.R. § 225.81(b). 

[7] § 103(a), 113 Stat. at 1342 (codified at 12 U.S.C. § 1843(k)). The 
financial holding company can engage in activities that the Federal 
Reserve Board determines (1) are financial in nature or incidental to 
such financial activity, or (2) are complementary to a financial 
activity and do not pose a substantial risk to the safety and 
soundness of depository institutions or the financial system 
generally. Id. 

[8] An important factor contributing to merger activity was a 
statutory change removing barriers to geographic expansion by banks. 
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 
1994 authorized interstate mergers between adequately capitalized and 
managed banks starting in June 1997, regardless of whether the 
transaction would be prohibited by state law, though states had the 
right to opt out of that arrangement if they passed legislation prior 
to June 1997 prohibiting merger transactions with out-of-state banks. 
Pub. L. No. 103-328, 108 Stat. 2338 (codified at scattered sections of 
12 U.S.C.). Previously, most banks that wanted to operate across state 
lines had to establish a bank holding company and, with certain 
restrictions, acquire or charter a bank in each state in which they 
wanted to operate. With the advent of interstate branching, banks that 
previously were not permitted to expand across state lines could do so 
by acquiring existing banks, and some multistate bank holding 
companies could consolidate their operations into a single bank with 
multistate branches. 

[9] One limitation of this indicator is that some legal entities may 
be vehicles for tax purposes and therefore may not result in a 
significant increase in organizational complexity. 

[10] Pub. L. No. 111-203, § 165, 124 Stat. 1376, 1423 (2010) (codified 
at 12 U.S.C. § 5365). 

[11] This inherent vulnerability arises from the role of banks in 
using deposits that are available upon demand to fund long-term, 
illiquid loans. 

[12] The Federal Reserve System consists of the Federal Reserve Board-
-a federal agency--and 12 regional Reserve Banks. The Federal Reserve 
Board has delegated some of its responsibilities for supervision and 
regulation to the Reserve Banks. The Federal Reserve Act authorizes 
the Reserve Banks to make discount window loans to the extent 
authorized by the Federal Reserve Board. Pub. L. No. 63-43, §§ 10B, 
13, 38 Stat. 251 (codified at of 12 U.S.C. §§ 347b(a), 343). 

[13] 12 C.F.R. § 201.4(a)-(c). 

[14] 12 U.S.C. § 347b(a). 

[15] Pub. L. No. 73-66, 48 Stat. 162 (codified in scattered sections 
of 12 U.S.C.). The Banking Act of 1933 is also known as the Glass-
Steagall Act. 

[16] Pub. L. No. 111-203, §§ 331, 334-335, 124 Stat. 1376, 1538-40 
(2010). 

[17] §1101(a), 124 Stat. at 2113. 

[18] Pub. L. No. 63-43, § 13(3), 38 Stat. 251 (codified at 12 U.S.C. § 
343). 

[19] Pub. L. No. 102-242, § 141, 105 Stat. 2236, 2275 (codified at 12 
U.S.C. § 1823(c)(4)(G)). 

[20] Id. 

[21] Id. For more information about this the systemic risk exception, 
see GAO, Federal Deposit Insurance Act: Regulators' Use of Systemic 
Risk Exception Raises Moral Hazard Concerns and Opportunities Exist to 
Clarify the Provision, [hyperlink, 
http://www.gao.gov/products/GAO-10-100] (Washington, D.C.: Apr. 15, 
2010). 

[22] For a more detailed discussion of the economic losses associated 
with the 2007-2009 financial crisis, see GAO, Financial Regulatory 
Reform: Financial Crisis Losses and Potential Impacts of the Dodd-
Frank Act, [hyperlink, http://www.gao.gov/products/GAO-13-180] 
(Washington, D.C.: Jan. 16, 2013). 

[23] This report focuses on those emergency programs that provided the 
most significant direct funding support to bank holding companies or 
their subsidiaries. As a result, we do not include an analysis of the 
Term Asset-Backed Securities Loan Facility, or the Public-Private 
Investment Partnership, among others, because these programs did not 
provide significant direct support to bank holding companies or their 
subsidiaries. 

[24] For more information about TALF, see GAO, Troubled Asset Relief 
Program: Treasury Needs to Strengthen Its Decision-Making Process on 
the Term Asset-Backed Securities Loan Facility, [hyperlink, 
http://www.gao.gov/products/GAO-10-25] (Washington, D.C.: Feb. 5, 
2010). For more information about CPP and other TARP programs, see 
GAO, Troubled Asset Relief Program: One Year Later, Actions Are Needed 
to Address Remaining Transparency and Accountability Challenges, 
[hyperlink, http://www.gao.gov/products/GAO-10-16] (Washington, D.C.: 
Oct. 8, 2009). 

[25] To ease stresses in these markets, on August 17, 2007, the 
Federal Reserve Board approved two temporary changes to discount 
window terms: (1) a reduction of the discount rate--the interest rate 
at which the Reserve Banks extended collateralized loans at the 
discount window--by 50 basis points; and (2) an extension of the 
discount window lending term from overnight to up to 30 days, with the 
possibility of renewal. One basis point is equivalent to 0.01 percent 
or 1/100th of a percent. On March 16, 2008, the Federal Reserve Board 
further reduced the spread of the primary credit rate over the target 
federal funds rate to 25 basis points and increased the maximum 
maturity of discount window loans to 90 days. 

[26] In March 2008, U.S. bank holding companies with primary dealer 
subsidiaries included Citigroup, Inc., Bank of America Corporation, 
and JP Morgan Chase & Co. Morgan Stanley and Goldman Sachs Group Inc. 
also had subsidiaries that were primary dealers and in September 2008, 
both firms converted to bank holding companies. 

[27] On September 14, 2008, the Federal Reserve Board announced that 
TSLF-eligible collateral would be expanded to include all investment-
grade debt securities and PDCF-eligible collateral would be expanded 
to include all securities eligible to be pledged in the triparty 
repurchase agreements system, including noninvestment-grade securities 
and equities. On September 29, 2008, the Federal Reserve Board also 
announced expanded support through TAF by doubling the amount of funds 
that would be available in each TAF auction cycle from $150 billion to 
$300 billion. 

[28] In September 2008, following the failure of Lehman Brothers 
Holdings Inc., many money market mutual funds faced severe liquidity 
pressures as redemption requests from their investors increased 
significantly. Treasury and Federal Reserve Board officials became 
concerned that pressures on these funds could further exacerbate 
turmoil in the markets, as these funds were significant investors in 
many money market instruments, such as commercial paper and 
certificates of deposit. On September 19, 2008, Treasury announced 
that it would insure the holdings of any publicly offered eligible 
money market mutual fund--both retail and institutional--that paid a 
fee to participate in the program. On the same day, the Federal 
Reserve Board authorized the creation of a new program--the AMLF--to 
provide liquidity support to money market mutual funds and to promote 
liquidity in the ABCP markets. AMLF provided loans to U.S. depository 
institutions, their holding companies, and affiliates that used the 
proceeds of these loans to purchase ABCP from money market mutual 
funds. For more information about AMLF, see GAO, Federal Reserve 
System: Opportunities Exist to Strengthen Policies and Processes for 
Managing Emergency Assistance, [hyperlink, 
http://www.gao.gov/products/GAO-11-696] (Washington, D.C.: July 21, 
2011). 

[29] Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-
343, Div. A, 122 Stat. 3765 (12 U.S.C. §§ 5201-5261). 

[30] In prior work, we found that TARP, along with other efforts by 
the Federal Reserve System and FDIC, made important contributions to 
helping stabilize credit markets. For example, the TED spread--a key 
indicator of credit risk that gauges the willingness of banks to lend 
to other banks--had narrowed to precrisis levels within a year of the 
October 2008 announcements of TARP, TLGP, CPFF, and other government 
actions. 

[31] This pricing was intended to encourage program participants to 
exit the programs as market conditions normalized. 

[32] Because of the perceived stigma associated with borrowing from 
the discount window, banks that participated in TAF might have been 
reluctant to turn to the discount window for funding support. 

[33] In our analysis, we discarded values of spreads between program 
pricing and market alternatives when they were zero or negative--
negative spreads are unlikely to capture the benefits that accrued to 
participants. For example, we excluded 15 observations (or 40 percent 
of auctions) in our analysis of TSLF when the schedule 1 auction rate 
was equal to or above the private cost for similar borrowing but did 
not exclude any observations in our analysis of DGP because the DGP 
fee never exceeded the weighted-average private cost for similar 
guarantees during the time period we analyzed. If these truly 
reflected market alternatives for the pool of potential participants 
then there would be no participation, or the participation would have 
been based on other considerations. Participation by itself suggests 
that program prices and/or terms were relatively attractive in 
comparison to available alternatives--benefits could arise from price, 
quantity available, or other nonprice characteristics of the 
assistance (loan term, eligible collateral, etc.). 

[34] We are aware that concerns about LIBOR manipulation could affect 
its usefulness as an indicator of potential market alternatives for 
banks. We discussed this issue with Federal Reserve Bank of New York 
officials who indicated that it was still among the best available 
indicators despite these concerns. In addition, GAO has found in 
previous work that LIBOR reflected significant financial market stress 
during the 2007-2009 financial crisis. See [hyperlink, 
http://www.gao.gov/products/GAO-10-16]. 

[35] In addition, there can be uncertainty about the assets underlying 
ABCP or limited liquidity support from sponsors. 

[36] Triparty repurchase agreement transactions are intermediated by a 
third party (a clearing bank) that stands between the borrower and 
lender. 

[37] Interest rates are another important term for repurchase loans. 
However, we were unable to compare PDCF interest rates to market 
alternatives for all eligible collateral types because available data 
for repurchase agreement market interest rates are limited to higher 
quality and more liquid collateral types (such as Treasury 
securities). While repurchase agreement lenders generally require 
higher interest rates for riskier and less liquid collateral types, 
PDCF offered loans at the same interest rate for all collateral types. 

[38] As a result, many financial institutions increasingly had to rely 
on higher quality collateral, such as Treasury securities, to obtain 
cash in these markets, and a shortage of such high-quality collateral 
emerged. 

[39] As a result we could only compare market repurchase agreement 
interest rates with interest rates from the Schedule 1 auctions. 

[40] Researchers at the Federal Reserve Bank of New York also found 
that TSLF was priced below estimated market rates, although the size 
of the difference they estimated was smaller than our results. 

[41] Through TIP, Treasury sought to foster market stability and 
strengthen the economy by making case-by-case investments in 
institutions that it deemed critical to the functioning of the 
financial system. Bank of America Corporation and Citigroup Inc. were 
the only two institutions that participated in this program. 

[42] Because private market participants might have charged a price 
based on a comparable net present value analysis, banks would have 
benefited to the extent that the prices offered by Treasury for their 
equity exceed what they were likely to receive based on the net 
present value. We used the earliest available estimates from the 
Congressional Budget Office and Treasury as they were closest to 
market conditions at the time that programs were initiated. Estimates 
of these subsidy rates depended on timing and market conditions and 
the size of these subsidy rates likely fell over time as market 
conditions improved. 

[43] For more details on their respective methodologies, see 
Congressional Budget Office, The Troubled Asset Relief Program: Report 
on Transactions Through December 31, 2008 (Washington, D.C.: January 
2009); [hyperlink, http://www.gao.gov/products/GAO-10-301]; and 
Congressional Oversight Panel, February Oversight Report: Valuing 
Treasury's Acquisitions (Washington, D.C.: February 2009). 

[44] For debt issued on or after April 1, 2009, FDIC included an 
additional surcharge of between 10 and 50 basis points for debt with a 
maturity of 1 year or more. Most DGP-guaranteed debt with a maturity 
of 1 year or more was issued prior to April 1, 2009. 

[45] We created a weighted average of 1-year CDS prices with weights 
based on the largest bank holding company users of DGP. Our results 
may not reflect the relative price of DGP for DGP participants that 
were not included in the weighted average. 

[46] Our analysis focuses on use of emergency programs by banking 
organizations. However, emergency programs also provided funding for 
some nonbank financial institutions, such as broker-dealers, and for 
some nonfinancial companies, such as McDonald's Corp. and Harley-
Davidson. 

[47] In addition, TAF program terms stated that a depository 
institution's TAF loans outstanding with terms greater than 28 days 
could not exceed 75 percent of the value of collateral it had pledged 
to the discount window. 

[48] For example, in October 2008, nine of the largest financial 
institutions agreed to accept TARP capital investments in part to 
signal the importance of the program to the stability of the financial 
system. 

[49] Pub. L. No. 63-43, § 23A, 38 Stat. 251, 272 (12 U.S.C. § 371c). 

[50] Section 23A requirements--and the associated concerns about 
transfer of the subsidy arising from the depository institution's 
access to federal safety nets--apply to depository institutions of all 
sizes. 

[51] 12 U.S.C. § 371c(f)(2). 

[52] The Federal Reserve Board's letters granting these exemptions 
noted that these banks would channel these credit transactions through 
their affiliated broker-dealers "for operational reasons." The 
transactions between each bank and broker-dealer would take the form 
of either reverse repurchase agreements or securities borrowing 
transactions and would be on the same terms as each transaction 
between the broker-dealer and unaffiliated market participant. 

[53] As of December 31, 2008, BB&T Corp., Fifth Third Bancorp, and 
Northern Trust Corp had total consolidated assets of $147.5 billion, 
$69.5 billion, and $70.4 billion, respectively. Wachovia Corporation 
was the fourth largest U.S. bank holding company, with total 
consolidated assets of $635.5 billion. On January 1, 2009, Wells Fargo 
& Company completed its acquisition of Wachovia Corporation. 

[54] Auction-rate securities are long-term bonds or preferred stocks 
whose interest rates or dividends are periodically reset through 
auctions. Until its collapse, the auction-rate securities market had 
been an important and growing source of funds for municipalities and 
other issuers. Variable rate demand notes are floating-rate debt 
instruments with a maturity of usually 20 or 30 years. 

[55] Transactions Between Member Banks and Their Affiliates: Exemption 
for Certain Purchases of Asset-Backed Commercial Paper by a Member 
Bank from an Affiliate, 73 Fed. Reg. 55708 (Sept. 26, 2008) (amending 
12 C.F.R. § 223.42 and adding § 223.56). 

[56] Section 23B of the Federal Reserve Act generally requires that 
certain transactions between a bank and its affiliates occur on market 
terms--that is, on terms and under circumstances that are 
substantially the same, or at least as favorable to the bank, as those 
prevailing at the time for comparable transactions with unaffiliated 
companies. 12 U.S.C. § 371c-1(a)(1)(A). Section 23B applies to any 
transaction by a bank with a third party if an affiliate has a 
financial interest in the third party or if an affiliate is a 
participant in the transaction. Id. at (a)(2)(E). 

[57] See Saule T. Omarova, "From Gramm-Leach-Bliley to Dodd-Frank: The 
Unfulfilled Promise of Section 23A of the Federal Reserve Act," North 
Carolina Law Review, Vol. 89, pgs. 1684-1769. The shadow banking 
system refers to a web of financial institutions that channel funds 
from savers to borrowers through a range of securitization and secured 
funding techniques. Unlike traditional banks, shadow banking 
institutions lack explicit access to the federal safety nets, such as 
the discount window and deposit insurance. 

[58] Bear Stearns was one of the largest primary dealers and engaged 
in a broad range of activities, including investment banking, 
securities and derivatives trading, brokerage services, and 
origination and securitization of mortgage loans. 

[59] The Housing and Economic Recovery Act of 2008, Pub. L. No. 110-
289, 122 Stat. 2654, established the Federal Housing Finance Agency, 
which was authorized to be appointed conservator for the government-
sponsored enterprises. §§ 1101, 1145, 122 Stat. at 2661, 2734. 

[60] Under the Senior Preferred Stock Purchase Agreements program, 
Treasury has made funding advances to Fannie Mae and Freddie Mac to 
ensure that they have sufficient assets to support their liabilities. 

[61] AIG is a multinational insurer that was also a significant 
participant in the financial derivatives market. 

[62] For more information about the federal government's actions to 
assist AIG and the restructuring and repayment of this assistance over 
time, see GAO, Troubled Asset Relief Program: Government's Exposure to 
AIG Lessens as Equity Investments are Sold, [hyperlink, 
http://www.gao.gov/products/GAO-12-574] (Washington, D.C.: May 7, 
2012). 

[63] See [hyperlink, http://www.gao.gov/products/GAO-10-100]. 

[64] In December 2010, Treasury sold its remaining shares of Citigroup 
common stock. 

[65] Pub. L. No. 84-511, 70 Stat. 133 (codified at 12 U.S.C. §§ 1841-
1852). 

[66] For various reasons, the Bank Holding Company Act exempts from 
regulation certain companies that own depository institutions; these 
subsidiaries are not defined as banks for purposes of the act and thus 
the companies that own them are not considered bank holding companies 
and are not required to comply with the act's restrictions. 12 U.S.C. 
§ 1841(c)(2). One type of these companies is the ILC. Id. at § 
1841(c)(2)(H). ILCs are limited-service financial institutions that 
make loans and raise funds by selling certificates called "investment 
shares" and by accepting deposits. ILCs are distinguished from finance 
companies because ILCs accept deposits in addition to making consumer 
loans. ILCs also differ from commercial banks because most ILCs do not 
offer demand deposit (checking) accounts. For more information about 
ILCs and other exempt companies, see GAO, Bank Holding Company Act: 
Characteristics and Regulation of Exempt Institutions and the 
Implications of Removing the Exemptions, [hyperlink, 
http://www.gao.gov/products/GAO-12-160] (Washington, D.C.: Jan. 19, 
2012). 

[67] On that same day, Bank of America had agreed to acquire Merrill 
Lynch & Co., which would become part of a bank holding company pending 
completion of its merger with Bank of America, a bank holding company 
supervised by the Federal Reserve System upon completion of the 
acquisition. 

[68] See generally Pub. L. No. 111-203, 124 Stat. 1376 (2010). 

[69] §§ 204, 210, 124 Stat. at 1454-56, 1460. 

[70] §335, 124 Stat. at 1540. 

[71] Deposit Insurance Regulations; Permanent Increase in Standard 
Coverage Amount, 75 Fed. Reg. 49363 (Aug. 13, 2010). 

[72] §343(a), 124 Stat. at 1544. 

[73] Id. 

[74] §331(b), 124 Stat. at 1538. 

[75] Assessments, Large Bank Pricing, 76 Fed. Reg. 10672 (Feb. 25, 
2011). 

[76] For more information on this rule, see GAO, Dodd-Frank Act 
Regulations: Implementation Could Benefit from Additional Analyses and 
Coordination, [hyperlink, http://www.gao.gov/products/GAO-12-151] 
(Washington, D.C.: Nov. 10, 2011). 

[77] § 1103(b), 124 Stat. at 2118. 

[78] Section 23A of the Federal Reserve Act restricts the ability of 
banks to provide funding to their nonbank affiliates above a certain 
limit, and imposes collateral and other requirements for those 
transactions. The goals of Section 23A are to protect federally 
insured banks from too much exposure to riskier nonbank affiliates and 
to prevent the transfer of the federal subsidy to nondepository 
institutions. 

[79] § 608(a), 124 Stat. at 1609-10. 

[80] § 608(a)(1)(A), 124 Stat. at 1608. Section 23B generally requires 
that certain transactions between a bank and its affiliates occur on 
market terms; that is, on terms and under circumstances that are 
substantially the same, or at least as favorable to the bank, as those 
prevailing at the time for comparable transactions with unaffiliated 
companies. Section 23B applies to any transaction by a bank with a 
third party if an affiliate has a financial interest in the third 
party or if an affiliate is a participant in the transaction. 

[81] § 608(a)(2), 124 Stat. at 1608. 

[82] Prohibitions and Restrictions on Proprietary Trading and Certain 
Interests in, and Relationships With, Hedge Funds and Covered Funds; 
Proposed Rule, 77 Fed. Reg. 8332 (Feb. 14, 2012); Prohibitions and 
Restrictions on Proprietary Trading and Certain Interests in, and 
Relationships With, Hedge Funds and Private Equity Funds; Proposed 
Rule, 76 Fed. Reg. 68846 (Nov. 7, 2011). 

[83] § 716(a), 124 Stat. at 1648. A swap is a type of derivative that 
involves an ongoing exchange of one or more assets, liabilities, or 
payments for a specified period. Financial and nonfinancial firms use 
swaps and other derivatives to hedge risk, or speculate, or for other 
purposes. Swaps include interest rate swaps, commodity-based swaps, 
and broad-based credit default swaps. Security-based swaps include 
single-name and narrow-based credit default swaps and equity-based 
swaps. Certain insured depository institutions are excluded from the 
definition of "swaps entity" and are therefore exempt from Section 716 
restrictions. § 716(b)(2)(B). 

[84] §§ 1105(a), 1106(b), 124 Stat. at 2121, 2125. 

[85] For more information about the systemic risk exception, see GAO, 
Federal Deposit Insurance Act: Regulators' Use of Systemic Risk 
Exception Raises Moral Hazard Concerns and Opportunities Exist to 
Clarify the Provision, [hyperlink, 
http://www.gao.gov/products/GAO-10-100] (Washington, D.C.: Apr. 15, 
2010). A systemic risk determination exempts FDIC from the Federal 
Deposit Insurance Act's least-cost rule, which requires FDIC to use 
the least costly method when assisting an insured institution and 
prohibits FDIC from increasing losses to the Deposit Insurance Fund by 
protecting creditors and uninsured depositors of an insured 
institution. 

[86] § 1105(e), 124 Stat. at 2124. 

[87] § 1105(c)-(d), 124 Stat. at 2121-2122. 

[88] During the financial crisis, several large financial institutions 
became insolvent and filed for bankruptcy when no private-sector 
solution was found. For example, Lehman Brothers filed for Chapter 11 
bankruptcy on the morning of September 15, 2008. Lehman had $639 
billion in total assets and $613 billion in total liabilities as of 
May 31, 2008. The bankruptcy proceedings highlighted inconsistencies 
in laws and regulations across countries and limitations on the 
ability of countries to coordinate effectively during the 
reorganization or liquidation of international financial institutions. 
Bankruptcy is a federal court procedure conducted under rules and 
requirements of the U.S. Bankruptcy Code. The goal of bankruptcy is to 
give individuals and businesses a "fresh start" from burdensome debts 
by eliminating or restructuring debts they cannot repay and help 
creditors receive some payment in an equitable manner through 
liquidation or reorganization of the debtor. 

[89] § 204, 124 Stat. at 1454-1456. 

[90] § 204(b), 124 Stat. at 1455. The factors to be addressed are set 
forth in Section 203(b) of the Dodd-Frank Act. § 203(b), 124 Stat. at 
1451. Before the Secretary of the Treasury, in consultation with the 
President, makes a decision to appoint FDIC as receiver of a covered 
financial company, at least two-thirds of those serving on the Board 
of Governors of the Federal Reserve System and at least two-thirds of 
those serving on the Board of Directors of FDIC must vote to make a 
written recommendation to the Secretary of the Treasury to appoint 
FDIC as receiver. § 203(a), 124 Stat. at 1450. In the case of a broker-
dealer, the recommendation must come from the Federal Reserve Board 
and the Securities and Exchange Commission, in consultation with FDIC, 
and in the case of an insurance company from the Federal Reserve Board 
and the Director of the Federal Insurance Office, in consultation with 
FDIC. 

[91] § 204(a)(2), 124 Stat. at 1454. 

[92] § 210(n), 124 Stat. at 1506. 

[93] § 210(o)(1), 124 Stat. at 1509. 

[94] Certain Orderly Liquidation Authority Provisions under Title II 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 76 
Fed. Reg. 41626 (July 15, 2011). 

[95] Bipartisan Policy Center, Too Big to Fail: The Path to a Solution 
(Washington, D.C.: May 2013), The Clearing House, Report on the 
Orderly Liquidation Authority Resolution Symposium and Simulation (New 
York, N.Y.: January 2013). 

[96] See Pub. L. No. 111-203, § 210(h)(5)(E), 124 Stat. 1376, 1499 
(2010); 12 U.S.C. § 5390(b)(4)(A)(ii); 12 CFR 380.27. 

[97] Barclays, TBTF: The $83bn Question (New York, N.Y.: July 1, 2013). 

[98] § 165(d)(1), 124 Stat. at 1426. 

[99] Living Wills Required, 76 Fed. Reg. 67323 (Nov. 1, 2011). 

[100] In October 2013, the Federal Reserve Board and FDIC released the 
public sections of filed annual resolution plans for 11 firms. Federal 
Reserve Board and FDIC, Agencies Release Public Sections of the Second 
Submission of Resolution Plans for 11 Institutions, accessed on 
November 7, 2013, [hyperlink, 
http://www.federalreserve.gov/newsevents/press/bcreg/20131003a.htm]. 

[101] § 1101(a), 124 Stat. at 2113. 

[102] § 1101(a)(6), 124 Stat. at 2114 (codified at 12 U.S.C. § 
343(B)(ii)-(iii)). 

[103] §§ 1101-1103, 124 Stat. at 2113-20. These requirements include a 
requirement for the Federal Reserve Board to report to Congress on any 
loan or financial assistance authorized under Section 13(3), including 
the justification for the exercise of authority; the identity of the 
recipient; the date, amount, and form of the assistance; and the 
material terms of the assistance. § 1101(a)(6) (codified at 12 U.S.C. 
§ 343(C)(i)). 

[104] § 1101(a)(6)(B)(i), 124 Stat. at 2113-14. (codified at 12 U.S.C. 
§ 343(B)). 

[105] § 1101(a)(6)(B)(i), 124 Stat. at 2113. (codified at 12 U.S.C. § 
343(B)(i)). 

[106] [hyperlink, http://www.gao.gov/products/GAO-11-696]. 

[107] See [hyperlink, http://www.gao.gov/products/GAO-11-696]. 

[108] §§ 165-166, 124 Stat. at 1423-32. 

[109] §165(a)(1), 124 Stat. at 1423. 

[110] §165(b)(1)(A)(i), 124 Stat. at 1424; Enhanced Prudential 
Standards and Early Remediation Requirements for Covered Companies; 
Proposed Rule, 77 Fed. Reg. 594 (Jan. 5, 2012). 

[111] §165(b)(1)(A)(ii), 124 Stat. at 1424: Enhanced Prudential 
Standards and Early Remediation Requirements for Covered Companies; 
Proposed Rule, 77 Fed. Reg. 594 (Jan. 5, 2012). 

[112] §165(e)(2), 124 Stat. at 1427. 

[113] §165(h), 124 Stat. at 1429. 

[114] §165(i)(1), 124 Stat. at 1430. Companies subject to enhanced 
prudential standards also must conduct annual or semiannual stress 
tests of their own, depending on their size. § 165(i)(2), 124 Stat. at 
1430-31. 

[115] §165(j), 124 Stat. at 1431. 

[116] §166, 124 Stat. at 1432. 

[117] Supervisory and Company-Run Stress Test Requirements for Covered 
Companies, 77 Fed. Reg. 62378 (Oct. 12, 2012); 12 C.F.R. §§ 252.131-
136, 252.141-138. 

[118] Enhanced Prudential Standards and Early Remediation Requirements 
for Foreign Banking Organizations and Foreign Nonbank Financial 
Companies, 77 Fed. Reg. 76628 (Dec. 28, 2012). Additionally, rules 
regarding single-counterparty credit limits and risk management have 
been proposed but not finalized. Enhanced Prudential Standards and 
Early Remediation Requirements for Covered Companies; Proposed Rule, 
77 Fed. Reg. 594 (Jan. 5, 2012). 

[119] Regulatory Capital Rules: Regulatory Capital, Implementation of 
Basel III, Capital Adequacy, Transition Provisions, Prompt Corrective 
Action, Standardized Approach for Risk-Weighted Assets, Market 
Discipline and Disclosure Requirements, Advanced Approaches Risk-Based 
Capital Rule, and Market Risk Capital Rule, 78 Fed. Reg. 62018 (Oct. 
11, 2013); 78 Fed. Reg. 55340 (Sept. 10, 2013). 

[120] Id. National banking regulators classify capital as either Tier 
1--currently the highest-quality form of capital and includes common 
equity--or Tier 2, which is weaker in absorbing losses. Tier 1, or 
core, capital consists primarily of common equity. Tier 2 is 
supplementary capital and includes limited amounts of subordinated 
debt, loan loss reserves, and certain other instruments. 

[121] Regulatory Capital Rules: Regulatory Capital, Enhanced 
Supplementary Leverage Ratio Standards for Certain Bank Holding 
Companies and Their Subsidiary Insured Depository Institutions, 78 
Fed. Reg. 51101 (Aug. 20, 2013). 

[122] Id. The Federal Deposit Insurance Corporation Improvement Act of 
1991, Pub. L. No. 102-242, 105 Stat. 2236, created Sections 38 and 39 
of the Federal Deposit Insurance Act to improve the ability of 
regulators to identify and promptly address deficiencies at depository 
institutions--banks and thrifts--and better safeguard and minimize 
losses to the deposit insurance fund. Section 38 requires regulators 
to classify banks into one of five capital categories and take 
increasingly severe actions, known as prompt corrective action, as a 
bank's capital deteriorates. Section 38 primarily focuses on capital 
as an indicator of bank health; therefore, supervisory actions under 
it are designed to address a bank's deteriorating capital level. 
Section 39 requires the banking regulators to prescribe safety and 
soundness standards related to noncapital criteria, including 
operations and management; compensation; and asset quality, earnings, 
and stock valuation. Section 39 allows the regulators to take action 
if a bank fails to meet one or more of these standards. 

[123] The Federal Reserve System consists of the Board of Governors of 
the Federal Reserve System--a federal agency--and 12 regional Reserve 
Banks. The Federal Reserve Board has delegated some of its 
responsibilities for supervision and regulation to the Reserve Banks. 
The Federal Reserve Act authorizes the Reserve Banks to make discount 
window loans to the extent authorized by the Federal Reserve Board. 
Pub. L. No. 63-43, §§ 10B, 13, 38 Stat. 251 (codified at 12 U.S.C. §§ 
347b(a), 343). 

[124] We reviewed prior GAO work on other emergency government 
programs that may have provided benefits to bank holding companies or 
their subsidiaries. For example, Treasury's Money Market Mutual Fund 
Guarantee Program and the Federal Reserve System's AMLF provided 
support to money market mutual funds. In the absence of these 
programs, money market mutual funds might have reduced their purchases 
of money market instruments issued by bank holding companies, their 
subsidiaries, and other firms, thereby exacerbating funding pressures 
on these firms. Other significant government programs included the 
Term Asset-Backed Securities Loan Facility (TALF), which was created 
by the Federal Reserve System and Treasury to support certain 
securitization markets, and other programs created by Treasury under 
TARP authority. For more information about TALF, see GAO, Troubled 
Asset Relief Program: Treasury Needs to Strengthen Its Decision-Making 
Process on the Term Asset-Backed Securities Loan Facility, [hyperlink, 
http://www.gao.gov/products/GAO-10-25] (Washington, D.C.: Feb. 5, 
2010). For more information about CPP and other TARP programs, see 
GAO, Troubled Asset Relief Program: One Year Later, Actions Are Needed 
to Address Remaining Transparency and Accountability Challenges, 
[hyperlink, http://www.gao.gov/products/GAO-10-16] (Washington, D.C.: 
Oct. 8, 2009). 

[125] Pub. L. No. 63-43, § 23A, 38 Stat. 251, 272 (1913) (12 U.S.C. § 
371c). 

[126] See generally Pub. L. No. 111-203, 124 Stat. 1376 (2010). 

[127] This report focuses on the Federal Reserve System's programs 
that provided the most significant direct funding support to bank 
holding companies and their subsidiaries. For a broader discussion of 
the Federal Reserve System's emergency actions during the crisis, see 
GAO, Federal Reserve System: Opportunities Exist to Strengthen 
Policies and Processes for Managing Emergency Assistance, [hyperlink, 
http://www.gao.gov/products/GAO-11-696] (Washington, D.C.: July 21, 
2011). 

[128] The sudden spike in the cost of term funding followed the August 
9, 2007, announcement by BNP Paribas, a large banking organization 
based in France, that it could not value certain mortgage-related 
assets in three of its investment funds because of a lack of liquidity 
in U.S. securitization markets. Greater reliance on overnight 
borrowing increased the volatility of banks' funding costs and 
increased "rollover" risk, or the risk that banks would not be able to 
renew their funding as loans matured. 

[129] One basis point is equivalent to 0.01 percent or 1/100th of a 
percent. The Federal Reserve Board later approved further reductions 
in the discount rate and increased the maximum maturity of discount 
window loans to 90 days. In addition to the discount window changes, 
starting in September 2007, the Federal Open Market Committee (FOMC) 
announced a series of reductions in the target federal funds rate--the 
FOMC-established target interest rate that banks charge each other for 
loans. 

[130] The Federal Reserve Board authorized Reserve Banks to extend 
credit through TAF by revising the regulations governing Reserve Bank 
discount window lending. 

[131] Section 10B of the Federal Reserve Act provides the Reserve 
Banks broad authority to extend credit to depository institutions. 12 
U.S.C. § 347b. 

[132] Under a repurchase agreement, a borrowing institution generally 
acquires funds by selling securities to a lending institution and 
agreeing to repurchase the securities after a specified time at a 
given price. The securities, in effect, are collateral provided by the 
borrower to the lender. In the event of a borrower’s default on the 
repurchase transaction, the lender would be able to take (and sell) 
the collateral provided by the borrower. Lenders typically will not 
provide a loan for the full market value of the posted securities, and 
the difference between the values of the securities and the loan is 
called a margin or haircut. This deduction is intended to protect the 
lenders against a decline in the price of the securities provided as 
collateral. When the market value of assets used to secure or 
collateralize repurchase transactions declines, borrowers are usually 
required to post additional collateral. 

[133] The Federal Reserve System conducts open market operations to 
influence the amount of money and credit available in the economy. 
FRBNY carries out directives from the Federal Open Market Committee--
which consists of members of the Board of Governors and the FRBNY 
president, and four other Reserve Bank presidents who serve on a 
rotating basis--by engaging in purchase or sales of certain 
securities, typically U.S. government securities, in the secondary 
market. FRBNY conducts these transactions through the primary dealers. 

[134] Federal Reserve Board officials noted that although TSLF was 
announced to address market tensions impacting many firms, some market 
participants concluded that its establishment was driven by specific 
concerns about Bear Stearns. 

[136] As discussed later in this section, the Federal Reserve Board 
used its emergency authority to authorize an emergency overnight loan 
and other assistance to avoid a disorderly failure of Bear Stearns. 

[137] For TSLF, previously, only Treasury securities, agency 
securities, and AAA-rated mortgage-backed and asset-backed securities 
could be pledged. For PDCF, previously, eligible collateral had to 
have at least an investment-grade rating. Tri-party repurchase 
agreements include three parties: the borrower, the lender, and a tri-
party agent that facilitates the repurchase agreement transaction by 
providing custody of the securities posted as collateral and valuing 
the collateral, among other services. 

[138] There are two main types of commercial paper: unsecured and 
asset-backed. Unsecured paper is not backed by collateral and the 
credit rating of the issuing institution is a key variable in 
determining the cost of its issuance. In contrast, Asset Backed 
Commercial Paper is collateralized by assets and therefore is a 
secured form of borrowing. 

[139] These programs included the AMLF and the Term Asset-Backed 
Securities Loan Facility. For more information about these programs, 
see [hyperlink, http://www.gao.gov/products/GAO-11-696]. 

[140] Pub. L. No. 110-343, Div. A, 122 Stat. 3765 (codified at 12 
U.S.C. §§ 5201-5261). EESA established the Office of Financial 
Stability within Treasury and provided it with broad, flexible 
authorities to buy or guarantee troubled mortgage-related assets or 
any other financial instruments necessary to stabilize the financial 
markets. Id. at § 101 (12 U.S.C. § 5211). 

[141] A warrant is an option to buy shares of common stock or 
preferred stock at a predetermined price on or before a specified date. 

[142] TLGP's authorization required a systemic risk determination by 
the Secretary of the Treasury. For more information about this 
determination, see GAO, Federal Deposit Insurance Act: Regulators' Use 
of Systemic Risk Exception Raises Moral Hazard Concerns and 
Opportunities Exist to Clarify the Provision, [hyperlink, 
http://www.gao.gov/products/GAO-10-100] (Washington, D.C.: April 15, 
2010). 

[143] However, the quantity of funds made available in the auction 
could also reduce prices in the alternative market, which would 
provide benefits to participants and nonparticipants alike. The size 
of the benefit in this instance would also be difficult to measure. 

[144] Our analysis focuses on the use of emergency programs by banking 
organizations. However, emergency programs also provided funding for 
some nonbank financial institutions, such as standalone broker-
dealers, and for some nonfinancial companies, such as McDonald's Corp. 
and Harley-Davidson. 

[145] The final TAF auction was held in March 2010. However, credit 
extended under that auction did not mature until April 2010. 

[146] Treasury made TIP investments in two banking organizations, Bank 
of America Corporation and Citigroup, Inc., both of which are in the 
group of banking organizations with $250 billion or more in assets in 
every quarter. 

[147] Some small banks repaid their CPP investments with funds from 
Treasury's Small Business Lending Fund (SBLF). As a result, their 
liability to Treasury remained following their repayment of CPP funds. 
SBLF is a capital support program that encourages small and midsize 
banks and community development loan funds to lend to small businesses. 

[End of section] 

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