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GAO-11-906R:
United States Government Accountability Office:
Washington, DC 20548:
September 16, 2011:
Congressional Committees:
Subject: Troubled Asset Relief Program: Status of GAO Recommendations
to Treasury:
Nearly 3 years ago, the Emergency Economic Stabilization Act of 2008
(EESA) authorized the creation of the Troubled Asset Relief Program
(TARP) to address the most severe crisis that the financial system had
faced in decades.[Footnote 1] EESA provided GAO with broad oversight
authorities for actions taken under TARP and required that we report
at least every 60 days on TARP activities and performance. Our
oversight and reporting has resulted in 69 performance audit
recommendations and matters for congressional consideration to improve
TARP's accountability and transparency. Sixty of the performance audit
recommendations have been directed to the U.S. Department of the
Treasury (Treasury), the primary agency responsible for TARP programs.
[Footnote 2] While Treasury has taken a number of steps to address
many of our recommendations, some recommendations remain outstanding.
This 60-day report describes the status of our TARP performance audit
recommendations to Treasury as of September 2011.[Footnote 3] In
particular, this report discusses Treasury's implementation of our
recommendations, focusing particularly on two cross-cutting issues--
communications and staffing--and two major TARP programs, the Capital
Purchase Program (CPP), which supports certain U.S. financial
institutions, and Making Home Affordable (MHA), which is a collection
of housing programs designed to help certain homeowners avoid
foreclosure. Enclosure I provides the status of recommendations we
have made since 2008, by report.
To determine the status of Treasury's implementation of TARP
recommendations, we assessed public and internal documentation,
including data, policies, and procedures, and spoke with Treasury
officials. We conducted this performance audit from June 2011 through
September 2011 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:
Of the TARP recommendations we have made, some were program-specific
while others addressed cross-cutting issues like staffing and
communications. Our program-specific recommendations have focused on
the following TARP initiatives:[Footnote 4]
* American International Group (AIG) (formerly Systemically
Significant Failing Institutions Program), which provided support to
AIG to avoid disruptions to financial markets from its failure.
* Automotive Industry Financing Program (AIFP), which aimed to prevent
a significant disruption of the American automotive industry through
government investments in the major automakers.
* Capital Assessment Program (CAP), which was created to provide
capital to institutions not able to raise it privately to meet
Supervisory Capital Assessment Program (SCAP)--or "stress test"--
requirements. This program was never used.
* CPP, which was designed to provide capital to financially viable
financial institutions through the purchase of preferred shares and
subordinated debentures.
* Consumer and Business Lending Initiative, which consists of multiple
programs:
- The Community Development Capital Initiative (CDCI) provided capital
to Community Development Financial Institutions by purchasing
preferred stock.
- SBA 7(a) Securities Purchase Program provided liquidity to secondary
markets for government-guaranteed small business loans in SBA's 7(a)
loan program.
- Term Asset-backed Securities Loan Facility (TALF) provided liquidity
in securitization markets for various asset classes to improve access
to credit for consumers and businesses.
* MHA, which includes, among other housing programs:
- The Home Affordable Modification Program (HAMP), under which
Treasury shares the cost of reducing monthly payments on first-lien
mortgages with mortgage holders/investors and provides financial
incentives to servicers, borrowers, and mortgage holders/investors for
loans modified under the program.
- The Second-Lien Modification Program, which provides incentives for
second-lien holders to modify or extinguish a second-lien mortgage
when a HAMP modification has been initiated on the first-lien mortgage
for the same property.
- Home Affordable Foreclosure Alternatives provides incentives for
short sales and deeds-in-lieu of foreclosure as alternatives to
foreclosure for borrowers who are unable or unwilling to complete the
HAMP first-lien modification process.
Treasury Has Implemented Three-Quarters of Our TARP Recommendations,
but a Number Related to CPP and the Housing Programs Remain Open:
Treasury has addressed most TARP recommendations that we have made
since issuing our first report in 2008. Of 60 recommendations that
were directed to Treasury, 45 had been implemented as of September
2011, including those related to communication and staffing (see
figure 1).[Footnote 5] Treasury has partially implemented five of the
recommendations, meaning that it has taken some steps to implement the
recommendations but needs to take further actions to fully implement
them. Seven of our recommendations remain open--that is, Treasury has
not taken steps to implement the recommendations. Among these are
recommendations directed at CPP and the housing programs under MHA.
Another three recommendations are closed, but not implemented,
reflecting Treasury's decision not to take action. For example,
Treasury has indicated that it does not intend to assess whether
borrowers with high debt-to-income ratios actually receive housing
counseling required as a condition for MHA program participation or
establish specific criteria for servicers to use in determining
whether a borrower is in imminent danger of default during the MHA
eligibility assessment process.
Figure 1: Number and Status of TARP Recommendations to Treasury:
[Refer to PDF for image: 5 pie-charts]
Overall:
Closed (not implemented): 3;
Open: 7;
Partially implemented: 5;
Implemented: 45.
Select issues and programs:
Communication with stakeholders:
Implemented: 5.
Staffing:
Implemented: 5.
Capital Purchase Program (CPP):
Open: 2;
Implemented: 6.
Making Home Affordable (MHA):
Closed (not implemented): 2;
Open: 4;
Partially implemented: 4;
Implemented: 7.
Note: For communication and staffing recommendations that are program
specific, we categorized them under their respective programs.
Source: GAO.
Treasury Has Responded to Our Recommendations for Improving Its
Communication and Staffing Strategies:
When Treasury first created the Office of Financial Stability (OFS) to
administer TARP, the new office did not always clearly communicate its
goals and objectives for TARP to the public and to Congress. A number
of our early recommendations were directed specifically at improving
the way OFS communicates with external stakeholders, including
Congress. For example, in 2008 and 2009 we recommended that OFS
formalize its communication strategy and clearly articulate its vision
for TARP. OFS took steps to address these recommendations starting in
2009 and has now fully implemented all of them. In particular, in
March 2011 OFS hired its own senior liaison for legislative affairs to
focus on sharing TARP-specific information with Congress and to answer
questions about TARP programs. However, we will continue to monitor
this issue while Treasury carries out its housing-related programs and
unwinds remaining TARP programs.
Treasury has also enhanced its workforce planning to better anticipate
and address current and future staffing challenges. As we have
previously reported, Treasury initially staffed OFS with detailees
from other federal agencies and newly hired term appointments.
[Footnote 6] Now that OFS has become more established, it no longer
has detailees from other agencies and has been detailing some of its
staff to other Treasury programs, such as the Small Business Lending
Fund (SBLF).[Footnote 7] OFS staffing numbers have also generally
stabilized, although they have declined slightly since we last
reported on this issue. Specifically, as of July 2011, OFS had 207
employees compared to 219 in September 2010. More than half of OFS's
staff are in term appointments that will expire over the next 3 years.
[Footnote 8]
Given these characteristics of OFS staffing, we recommended that OFS
finalize its staffing plan to help ensure that it could retain and
attract the requisite expertise and that the plan address staffing
turnover for term-appointed employees, including key Senior Executive
Service (SES) positions. This year Treasury addressed this
recommendation by completing a staffing plan that considered the
potential challenges that OFS faces. For example, OFS has identified
critical personnel, including those in term appointments, and
potential successors for them. This plan should help Treasury prepare
for staff turnover as term appointments expire throughout the office.
The plan should also help OFS maintain important expertise for housing
programs and asset management as the remaining TARP programs wind
down. We will continue to review workforce planning documentation and
expect to issue a report in January 2012 with updates on OFS's
staffing.
Treasury Has Applied Lessons Learned from CPP but Has not Taken Action
to Monitor Regulators' CPP Repayment Decisions:
Treasury has implemented our recommendation to apply lessons learned
from CPP to SBLF but has not taken action to monitor regulators' CPP
repayment decisions. Our October 2010 report recommended that Treasury
apply lessons learned to programs containing elements similar to those
of CPP.[Footnote 9] Specifically, we recommended that when
implementing SBLF, Treasury should better ensure that similar
applicants are treated equitably by establishing a process for
collecting and evaluating information from bank regulators on all
applicants that withdraw from consideration in response to a
regulator's recommendation. For SBLF, the roles of Treasury and the
regulators have been modified: Treasury officials make the
recommendations for approval and withdrawal with final approval made
by the Treasury Deputy Assistant Secretary for Small Business,
Community Development, and Affordable Housing Policy. The role of the
regulators is to provide supervisory information and a viability
assessment to Treasury, with Treasury also independently conducting a
credit analysis of each applicant. To help ensure consistent treatment
of applicants, Treasury created an application review committee that
reviews all applicants when the federal regulator's input concluded
that the applicant was not viable for the program. Treasury's lead
role in recommending applicants for funding and this additional review
step should help to ensure that applicants receive consistent
treatment in investment decisions.[Footnote 10]
However, Treasury has no plans to review and provide feedback to
regulators on their CPP repayment decisions. Similar to the
recommendation in our June 2009 report, we recommended in October 2010
that Treasury periodically collect and review information on the
analysis supporting regulators' decisions on CPP repayment requests
and provide feedback for regulators' consideration on the extent to
which similar institutions are being evaluated consistently.[Footnote
11] Although Treasury agrees with the objectives of our
recommendation, it has not implemented this recommendation, citing
concerns that this recommendation raises questions about how to
balance the goals of consistency with the need to respect regulators'
independence. Treasury also stated that it does not have access to
confidential supervisory information that regulators may use in making
repayment decisions, potentially limiting the information collection
and review envisioned in our recommendation. But as we noted in our
2010 report, the two regulators with responsibility for most CPP
repayment requests document their analysis in much the same way that
they document the analysis they send to Treasury when recommending CPP
applicants. As a result, we recommended that Treasury collect and
review this type of documentation. We continue to believe that because
CPP is a TARP program, Treasury has a responsibility to help ensure
that participants are being treated equitably and that this can be
achieved in a way that balances the goals of consistency and respect
for the independence of regulators.
Continued Attention on Recommendations Intended to Improve the Housing
Programs Is Needed:
Since 2009, we have issued a series of reports and testimonies on MHA
programs, including four reports and testimonies that were issued this
year.[Footnote 12] Through these products, we have made 17
recommendations to improve Treasury's MHA programs. Treasury has taken
actions to implement some of our recommendations, including the
following:[Footnote 13]
* In 2010, we reported that some servicers that we contacted were not
systematically tracking HAMP complaints or their resolutions--
potentially resulting in inconsistent treatment of similarly situated
borrowers. Treasury subsequently revised its guidelines to servicers
for MHA programs on the types of borrower complaints they are to
track, including requirements related to the tracking and timeliness
of the handling and escalation process for these complaints.
* In 2010, we found significant variations in servicers' quality
assurance programs for HAMP. Treasury has since issued program
guidelines that provided additional clarification on servicers'
responsibilities for developing and executing an effective internal
quality assurance program covering MHA activities.
* In 2010, we reported that Treasury had not formalized a policy to
assess remedies or established specific consequences or penalties for
servicer noncompliance with HAMP guidelines. Consequently, Treasury
has begun publishing quarterly assessments of the performance of
participating servicers in meeting the requirements for implementing
MHA programs and has imposed monetary sanctions on servicers that have
been identified as needing to substantially improve their performance
in meeting MHA program requirements.
While Treasury has implemented or partially implemented some of our
recommendations related to its MHA programs, continued attention to
our other MHA-related recommendations is needed. In March 2011 we
reported on the implementation of newer MHA programs, specifically the
TARP-funded second-lien modification, foreclosure alternatives, and
principal reduction programs. Similar to the problems we identified
with HAMP, we noted that Treasury has experienced challenges in
implementing the newer MHA programs. For example, we noted that
relatively few second liens had been modified under MHA and that more
could be done to inform potentially eligible borrowers about the
program. We also reported that the majority of servicers for which
readiness reviews had been conducted had not provided all the
documentation required to demonstrate that the key tasks needed to
support the newer MHA programs were in place, and consequently
recommended that Treasury ensure that these servicers have the
operational capacity and infrastructure in place to successfully
implement the newer MHA programs. Lastly, we reported that while
Treasury had begun reporting the outcomes for borrowers who had been
denied or canceled from HAMP trial modification, weaknesses in
Treasury's data collection hampered its ability to determine whether
borrowers were receiving effective assistance outside of HAMP and
whether additional actions may be needed to assist them. To date,
Treasury has agreed with the recommendations but has not yet
implemented any of these recommendations.
Agency Comments and Our Evaluation:
We provided Treasury a draft copy of this report for review and
comment and we received written comments from the Assistant Secretary
for Financial Stability, which are reprinted in enclosure II. In its
written comments, Treasury agreed with our characterization of the
progress Treasury has made implementing our recommendations to improve
the accountability and transparency of TARP. Treasury also noted that
it continues to work with the banking agencies regarding our
recommendation related to CPP. As we state in the report, we continue
to believe that Treasury can take steps to achieve greater consistency
while also respecting regulatory independence. Finally, Treasury
stated that it continues to work to address our MHA recommendations
that remain open. We will continue to evaluate information that
Treasury provides about its progress implementing the remaining open
recommendations.
We are sending copies of this report to the appropriate congressional
committees. This report will also be available at no charge on our Web
site at [hyperlink, http://www.gao.gov].
Should you or your staff have questions concerning this report, please
contact me at (202) 512-8678 or clowersa@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are
listed in enclosure III.
Signed by:
A. Nicole Clowers:
Director:
Financial Markets and Community Investment:
Enclosures:
List of Congressional Committees:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Tim Johnson:
Chairman:
The Honorable Richard C. Shelby:
Ranking Member:
Committee on Banking, Housing, and Urban Affairs:
United States Senate:
The Honorable Kent Conrad:
Chairman:
The Honorable Jeff Sessions:
Ranking Member:
Committee on the Budget:
United States Senate:
The Honorable Max Baucus:
Chairman:
The Honorable Orrin G. Hatch:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable Hal Rogers:
Chairman:
The Honorable Norm Dicks:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Paul Ryan:
Chairman:
The Honorable Chris Van Hollen:
Ranking Member:
Committee on the Budget House of Representatives:
The Honorable Spencer Bachus:
Chairman:
The Honorable Barney Frank:
Ranking Member:
Committee on Financial Services:
House of Representatives:
The Honorable Dave Camp:
Chairman:
The Honorable Sander Levin:
Ranking Member:
Committee on Ways and Means:
House of Representative:
[End of section]
Enclosure I:
Status of TARP Recommendations by Product, as of September 2011:
The following table summarizes the status of TARP recommendations that
we have made to date. We classify each recommendation as implemented,
partially implemented (the agency took steps to implement the
recommendation but more work remains), open (the agency has not taken
steps to implement the recommendation), and closed, not implemented
(the agency decided not to take action to implement the
recommendation).
Troubled Asset Relief Program: Additional Actions Needed to Better
Ensure Integrity, Accountability, and Transparency: GAO-09-161,
December 2, 2008:
GAO Recommendations: Work with the bank regulators to establish a
systematic means of determining and reporting in a timely manner
whether financial institutions' activities are generally consistent
with the purposes of the Capital Purchase Program (CPP) and help
ensure an appropriate level of accountability and transparency;
Status: Implemented.
GAO Recommendations: Develop a means to ensure that institutions
participating in CPP comply with key program requirements (for
example, executive compensation, dividend payments, and the repurchase
of stock);
Status: Implemented.
GAO Recommendations: Formalize the existing communication strategy to
ensure that external stakeholders, including Congress, are informed
about the program's current strategy and activities and understand the
rationale for changes in this strategy to avoid information gaps and
surprises;
Status: Implemented.
GAO Recommendations: Facilitate a smooth transition to the new
administration by building on and formalizing ongoing activities,
including ensuring that key Office of Financial Stability (OFS)
leadership positions are filled during and after the transition;
Status: Implemented.
GAO Recommendations: Expedite OFS's hiring efforts to ensure that the
Department of the Treasury (Treasury) has the personnel needed to
carry out and oversee the Troubled Asset Relief Program (TARP);
Status: Implemented.
GAO Recommendations: Ensure that sufficient personnel are assigned and
properly trained to oversee the performance of all contractors,
especially for contracts priced on a time-and-materials basis, and
move toward fixed-price arrangements whenever possible;
Status: Implemented.
GAO Recommendations: Continue to develop a comprehensive system of
internal control over TARP, including policies, procedures, and
guidance that are robust enough to protect taxpayers' interests and
ensure that the program objectives are being met;
Status: Implemented.
GAO Recommendations: Issue final regulations on conflicts of interest
involving Treasury's agents, contractors, and their employees and
related entities as expeditiously as possible and review and
renegotiate mitigation plans, as necessary, to enhance specificity and
compliance with the new regulations once they are issued;
Status: Implemented.
GAO Recommendations: Institute a system to effectively manage and
monitor the mitigation of conflicts of interest;
Status: Implemented.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues: GAO-09-296, January 30, 2009:
GAO Recommendations: Expand the scope of planned monthly CPP surveys
to include collecting at least some information from all institutions
participating in the program;
Status: Implemented.
GAO Recommendations: Ensure that future CPP agreements include a
mechanism that will better enable Treasury to track the use of the
capital infusions and seek to obtain similar information from existing
CPP participants;
Status: Implemented.
GAO Recommendations: Establish a process to ensure compliance with all
CPP requirements, including those associated with limitations on
dividends and stock repurchase restrictions;
Status: Implemented.
GAO Recommendations: Communicate a clearly articulated vision for TARP
and show how all individual programs are intended to work in concert
to achieve that vision. This vision should incorporate actions to
preserve homeownership. Once this vision is clearly articulated,
Treasury should document needed skills and competencies;
Status: Implemented.
GAO Recommendations: Continue to expeditiously hire personnel needed
to carry out and oversee TARP;
Status: Implemented.
GAO Recommendations: Expedite efforts to ensure that sufficient
personnel are assigned and properly trained to oversee the performance
of all contractors, especially for contracts priced on a time-and-
materials basis, and move toward fixed-price arrangements whenever
possible as program requirements are better defined over time;
Status: Implemented.
GAO Recommendations: Develop a comprehensive system of internal
control over TARP activities, including policies, procedures, and
guidance that are robust enough to ensure that the program's
objectives and requirements are met;
Status: Implemented.
GAO Recommendations: Develop and implement a well-defined and
disciplined risk-assessment process, as such a process is essential to
monitoring program status and identifying any risks of potential
inadequate funding of announced programs;
Status: Implemented.
GAO Recommendations: Review and renegotiate existing conflict-of-
interest mitigation plans, as necessary, to enhance specificity and
conformity with the new interim conflicts of interest regulation, and
take continued steps to manage and monitor conflicts of interest and
enforce mitigation plans;
Status: Implemented.
Troubled Asset Relief Program: March 2009 Status of Efforts to Address
Transparency and Accountability Issues: GAO-09-504, March 31, 2009:
GAO Recommendations: Develop a communication strategy that includes
building an understanding and support for the various components of
the program. Specific actions could include hiring a communications
officer, integrating communications into TARP operations, scheduling
regular and ongoing contact with congressional committees and members,
holding town hall meetings with the public across the country,
establishing a counsel of advisors, and leveraging available
technology;
Status: Implemented.
GAO Recommendations: Require that American International Group, Inc.
(AIG) seek concessions from stakeholders, such as management,
employees, and counterparties, including seeking to renegotiate
existing contracts, as appropriate, as it finalizes the agreement for
additional assistance;
Status: Closed, not implemented.
GAO Recommendations: Update OFS documentation of certain internal
control procedures and; the guidance available to the public on
determining warrant exercise prices to be consistent with actual
practices applied by OFS;
Status: Implemented.
GAO Recommendations: Improve transparency pertaining to TARP program
activities by reporting publicly the monies, such as dividends, paid
to Treasury by TARP participants;
Status: Implemented.
GAO Recommendations: Complete the review of, and as necessary
renegotiate, the four existing vendor conflicts-of-interest mitigation
plans to enhance specificity and;
conformity with the new interim conflicts-of-interest rule;
Status: Implemented.
GAO Recommendations: Issue guidance requiring that key communications
and decisions concerning potential or actual vendor-related conflicts
of interest be documented;
Status: Implemented.
Troubled Asset Relief Program: June 2009 Status of Efforts to Address
Transparency and Accountability Issues: GAO-09-658, June 17, 2009:
GAO Recommendations: Ensure that the warrant valuation process
maximizes benefits to taxpayers and consider publicly disclosing
additional details regarding the warrant repurchase process, such as
the initial price offered by the issuing entity and Treasury's
independent valuations, to demonstrate Treasury's attempts to maximize
the benefit received for the warrants on behalf of the taxpayer;
Status: Implemented.
GAO Recommendations: In consultation with the Chairmen of the Federal
Deposit Insurance Corporation (FDIC) and the Chairman of the Board of
Governors of the Federal Reserve System (Federal Reserve), the
Comptroller of the Currency, and the Acting Director of the Office of
Thrift Supervision, ensure consideration of generally consistent
criteria by the primary federal regulators when considering repurchase
decisions under TARP;
Status: Open.
GAO Recommendations: Fully implement a communication strategy that
ensures that all key congressional stakeholders are adequately
informed and kept up to date about TARP;
Status: Implemented.
GAO Recommendations: Expedite efforts to conduct usability testing to
measure the quality of users' experiences with the financial stability
Web site and measure customer satisfaction with the site, using
appropriate tools such as online surveys, focus groups, and e-mail
feedback forms;
Status: Implemented.
GAO Recommendations: Explore options for providing to the public more
detailed information on the costs of TARP contracts and agreements,
such as a dollar breakdown of obligations and/or expenses;
Status: Implemented.
GAO Recommendations: To help improve the transparency of the Capital
Assistance Program (CAP)--in particular the stress tests results--we
recommend that the Director of Supervision and Regulation of the
Federal Reserve consider periodically disclosing to the public the
aggregate performance of the largest 19 U.S. bank holding companies
against the more adverse scenario forecast numbers for the duration of
the 2-year forecast period and whether or not the scenario needs to be
revised. At a minimum, the Federal Reserve should provide the
aggregate performance data to OFS program staff for any of the 19
institutions participating in CAP or CPP;
Status: Implemented[A].
Troubled Asset Relief Program: Treasury Actions Needed to Make the
Home Affordable Modification Program More Transparent and Accountable:
GAO-09-837, July 23, 2009:
GAO Recommendations: Consider methods of monitoring whether borrowers
with total household debt of more than 55 percent of their income who
have been told that they must obtain housing counseling do so, and
assess how this counseling affects the performance of modified loans
to see if the requirement is having its intended effect of limiting
redefaults;
Status: Closed, not implemented.
GAO Recommendations: Re-evaluate the basis and design of the Home
Price Decline Protection (HPDP) program to ensure that Home Affordable
Modification Program (HAMP) funds are being used efficiently to
maximize the number of borrowers who are helped under HAMP and to
maximize overall benefits of utilizing taxpayer dollars;
Status: Implemented.
GAO Recommendations: Institute a system to routinely review and update
key assumptions and projections about the housing market and the
behavior of mortgage holders, borrowers, and servicers that underlie
Treasury's projection of the number of borrowers whose loans are
likely to be modified under HAMP and revise the projection as
necessary in order to assess the program's effectiveness and structure;
Status: Implemented.
GAO Recommendations: Place a high priority on fully staffing vacant
positions in the Homeownership Preservation Office (HPO)--including
filling the position of Chief Homeownership Preservation Officer with
a permanent placement--and evaluate HPO's staffing levels and
competencies to determine whether they are sufficient and appropriate
to effectively fulfill its HAMP governance responsibilities;
Status: Partially implemented.
GAO Recommendations: Expeditiously finalize a comprehensive system of
internal control over HAMP, including policies, procedures, and
guidance for program activities, to ensure that the interests of both
the government and taxpayer are protected and that the program
objectives and requirements are being met once loan modifications and
incentive payments begin;
Status: Implemented.
GAO Recommendations: Expeditiously develop a means of systematically
assessing servicers' capacity to meet program requirements during
program admission so that Treasury can understand and address any
risks associated with individual servicers' abilities to fulfill
program requirements, including those related to data reporting and
collection;
Status: Implemented.
Troubled Asset Relief Program: One Year Later, Actions Are Needed to
Address Remaining Transparency and Accountability Challenges: GAO-10-
16, October 8, 2009:
GAO Recommendations: Consider TARP in a broad market context, and as
part of determining whether to extend TARP, work with the Chairmen of
the Federal Reserve and FDIC to develop a coordinated framework and
analytical basis to determine whether an extension is needed. And if
so, clearly spell out what objectives and measures of any extended
programs would be, along with anticipated costs and safeguards;
Status: Implemented.
GAO Recommendations: Document its analytical decision-making process
and clearly communicate the results to Congress and the American
people for determining whether an extension is needed;
Status: Implemented.
GAO Recommendations: Update its projected use of funds and if the
program is extended, continue to re-evaluate them on a periodic basis;
Status: Implemented.
Troubled Asset Relief Program: Continued Stewardship Needed as
Treasury Develops Strategies for Monitoring and Divesting Financial
Interests in Chrysler and GM: GAO-10-151, November 2, 2009:
GAO Recommendations: Ensure that Treasury has the expertise needed to
adequately monitor and divest the government's investment in Chrysler
Group LLC (Chrysler) and General Motors Company (GM), and obtain
needed expertise in areas where gaps are identified (either through in-
house or external means);
Status: Implemented.
GAO Recommendations: Report to Congress on Treasury's plans to assess
and monitor the auto companies' performance and ability to repay their
loans. When reporting, balance the need for transparency with need to
protect proprietary information;
Status: Implemented.
GAO Recommendations: Develop criteria for evaluating the optimal
method and timing for divesting the government's ownership stake in
Chrysler and GM, including evaluating the full range of available
options, such as initial public offerings or private sales;
Status: Implemented.
Troubled Asset Relief Program: Treasury Needs to Strengthen Its
Decision-Making Process on the Term Asset-Backed Securities Loan
Facility: GAO-10-25, February 5, 2010:
GAO Recommendations: To enable GAO to audit TARP support for the Term
Asset-Backed Securities Loan Facility (TALF) most effectively,
Congress may wish to provide GAO with audit authority over all Federal
Reserve operational and administrative actions taken with respect to
TALF, together with appropriate access authority;
Status: Implemented [B].
GAO Recommendations: To improve transparency of decision making on the
use of TARP funds for TALF and to ensure adequate monitoring of risks
related to TALF collateral, given the distressed conditions in the
commercial real estate market, as part of its ongoing monitoring of
TALF collateral, the Secretary of the Treasury should direct OFS to
continue to give greater attention to reviewing risks posed by
commercial mortgage-backed securities;
Status: Implemented.
GAO Recommendations: To improve transparency of decision making on the
use of TARP funds for TALF and to ensure adequate monitoring of risks
related to TALF collateral, the Secretary of the Treasury should
direct OFS to strengthen the process for making major program
decisions for TALF and document how it arrives at final decisions with
the Federal Reserve and the Federal Reserve Bank of New York (FRBNY).
Such decisions should include how Treasury considers expert and
contractor recommendations and resolves those recommendations that
differ from those of the Federal Reserve and FRBNY;
Status: Implemented.
GAO Recommendations: To improve transparency of decision making on the
use of TARP funds for TALF and to ensure adequate monitoring of risks
related to TALF collateral, the Secretary of the Treasury should
direct OFS to conduct a review of what data to track and metrics to
disclose to the public in the event that TALF LLC purchases
surrendered assets from FRBNY. Such data and metrics should relate to
the purchase, management, and sale of assets in TALF LLC that
potentially impact TARP funds. Metrics related to TALF LLC could
include periodic reports on the date and purchase price of assets;
fluctuations in the market value of assets held; the date, price, and
rationale when assets are sold; and the total amount of loans
outstanding to Treasury;
Status: Implemented.
Troubled Asset Relief Program: Further Actions Needed to Fully and
Equitably Implement Foreclosure Mitigation Programs: GAO-10-634, June
24, 2010:
GAO Recommendations: Establish clear and specific criteria for
determining whether a borrower is in imminent default to ensure
greater consistency across servicers;
Status: Closed, not implemented.
GAO Recommendations: Develop additional guidance for servicers on
their quality assurance programs for HAMP, including greater
specificity on how to categorize loans for sampling and what servicers
should be evaluating in their reviews;
Status: Implemented.
GAO Recommendations: Specify which complaints servicers should track
to ensure consistency and to facilitate program oversight and
compliance;
Status: Implemented.
GAO Recommendations: More clearly inform borrowers that the HOPE
Hotline may also be used if they are having difficulty with their HAMP
application or servicer or feel that they have been incorrectly denied
HAMP, monitor the effectiveness of the HOPE Hotline as an escalation
process for handling borrower concerns about potentially incorrect
HAMP denials, and develop an improved escalation mechanism if the HOPE
Hotline is not sufficiently effective;
Status: Partially implemented.
GAO Recommendations: Finalize and issue consequences for servicer
noncompliance with HAMP requirements as soon as possible;
Status: Implemented.
GAO Recommendations: Report activity under the principal reduction
program, including the extent to which servicers determined that
principal reduction was beneficial to investors but did not offer it,
to ensure transparency in the implementation of this program feature
across servicers;
Status: Partially implemented.
GAO Recommendations: Finalize and implement benchmarks for performance
measures under the first-lien modification program, as well as develop
measures and benchmarks for the recently announced TARP-funded
homeowner assistance programs;
Status: Partially implemented.
GAO Recommendations: Implement a prudent design for remaining TARP-
funded housing programs;
Status: Open.
Troubled Asset Relief Program: Treasury's Framework for Deciding to
Extend TARP Was Sufficient, but Could be Strengthened for Future
Decisions: GAO-10-531, June 30, 2010:
GAO Recommendations: Formalize and document coordination with the
Chairman of the FDIC for decisions associated with the expiration of
TARP (1) by including the Chairman at relevant FinSOB meetings, (2)
through formal bilateral meetings, or (3) by utilizing other forums
that accommodate more structured dialogue;
Status: Partially implemented.
GAO Recommendations: Publicly identify clear program objectives, the
expected impact of programs, and the level of additional resources
needed to meet those objectives. Set quantitative program objectives
for its small business lending programs and identify any additional
data needed to make program decisions;
Status: Open.
Troubled Asset Relief Program: Bank Stress Test Offers Lessons as
Regulators Take Further Actions to Strengthen Supervisory Oversight:
GAO-10-861,September 29, 2010:
GAO Recommendations: To gain a better understanding of the Supervisory
Capital Assistance Program (SCAP) and inform the use of similar stress
tests in the future, the Federal Reserve should compare the
performance of the 19 largest bank holding companies against the more
adverse scenario projections following the completion of the 2-year
period covered in the SCAP stress test ending December 31, 2010, and
disclose the results of the analysis to the public;
Status: Open[A].
GAO Recommendations: The Federal Reserve, in consultation with the
other banking regulators, should develop a plan that reconciles the
divergent views on transparency and allows for increased transparency
in the regular supervisory process. Such a plan should, at a minimum,
outline steps for releasing supervisory methodologies and analytical
results for stress testing;
Status: Open[A].
GAO Recommendations: The Federal Reserve, in consultation with the
other banking regulators, should develop more specific criteria to
include in its guidance to examiners for assessing the quality of
stress tests and how these tests inform bank holding companies'
capital adequacy planning. These guidelines should clarify the stress
testing procedures already incorporated into banking regulations and
incorporate lessons learned from SCAP;
Status: Open[A].
GAO Recommendations: The Federal Reserve, in consultation with the
other banking regulators, should fully develop its plan for
maintaining and improving the use of data, risk identification and
assessment infrastructure, and requisite systems in implementing its
supervisory functions and new responsibilities under the Dodd-Frank
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). This
plan should also ensure the dissemination of these enhancements
throughout the Federal Reserve System and other financial regulators,
as well as new organizations established in the Dodd-Frank Act;
Status: Open[A].
GAO Recommendations: The Federal Reserve, in consultation with the
other banking regulators, should take further steps to more
effectively coordinate and communicate among the banking regulators,
including that all applicable agencies are included in discussions and
decisions regarding multi-agency activities, such as horizontal
examinations of financial institutions;
Status: Open[A].
Troubled Asset Relief Program: Opportunities Exist to Apply Lessons
Learned from the Capital Purchase Program to Similarly Designed
Programs and to Improve the Repayment Process: GAO-11-47, October 4,
2010:
GAO Recommendations: Apply lessons learned from the implementation of
CPP to similar programs, such as Small business Lending Fund (SBLF),
and enhance procedural controls for addressing the risk of
inconsistency in regulators' decisions on withdrawals. Specifically,
establish a process for collecting information from federal bank
regulators on all applicants that withdraw from consideration in
response to a regulator's recommendation, including the reasons behind
the recommendation. Evaluate the information to identify trends or
patterns that may indicate whether similar applicants were treated
inconsistently across different regulators and take action, if
necessary, to help ensure a more consistent treatment;
Status: Implemented.
GAO Recommendations: Periodically collect and review certain
information from federal bank regulators on the analysis and
conclusions supporting their decisions on CPP repayment requests and
provide feedback for the regulators' consideration on the extent to
which regulators are evaluating similar institutions consistently;
Status: Open.
Troubled Asset Relief Program: Status of Programs and Implementation
of GAO Recommendations: GAO-11-74, January 12, 2011:
GAO Recommendations: OFS should finalize a plan for addressing how it
will manage its workforce, in particular term-appointed employees and
key SES positions, including plans for various staffing scenarios;
Status: Implemented.
Troubled Asset Relief Program: Treasury Continues to Face
Implementation Challenges and Data Weaknesses in Its Making Home
Affordable Program: GAO-11-288, March 17, 2011:
GAO Recommendations: Require servicers to advise borrowers to notify
their second-lien servicers once a first lien has been modified under
HAMP to reduce the risk that borrowers with modified first liens are
not captured in the Lender Processing Services (LPS) matching database
and, therefore, are not offered second-lien modifications;
Status: Open.
GAO Recommendations: Ensure that servicers demonstrate they have the
operational capacity and infrastructure in place to successfully
implement the requirements of the Second-Lien Modification (2MP), Home
Affordable Foreclosure Alternatives (HAFA), and Principal Reduction
Alternative (PRA) programs;
Status: Open.
GAO Recommendations: Consider methods for better capturing outcomes
for borrowers who are denied, canceled, or redefaulted from HAMP,
including more accurately reflecting what actions are completed or
pending and allowing for the reporting of multiple concurrent
outcomes, in order to determine whether borrowers are receiving
effective assistance outside of HAMP and whether additional actions
may be needed to assist them;
Status: Open.
Source: GAO.
Notes: This table does not include the 29 recommendations related to
the fiscal year 2009 and 2010 financial audits as detailed in GAO-11-
434R. Nor does the table include a recommendation directed at the
Secretary of Labor, along with a matter for congressional
consideration, from the TARP report on AIFP (GAO-11-471).
[A] These recommendations were made to the Board of Governors of the
Federal Reserve System.
[B] This is a matter for Congressional consideration related to the
TALF program.
[End of table]
[End of enclosure]
Enclosure II:
Comments from the Department of the Treasury:
Department Of The Treasury:
Assistant Secretary:
Washington, D.C. 20220:
September 13, 2011:
A. Nicole Clowers:
Director:
Financial Markets and Community Investment:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Clowers:
Thank you for providing the Department of the Treasury ("Treasury") an
opportunity to review your draft report on the Troubled Asset Relief
Program (TARP) titled, Status of GAO Recommendations to Treasury
("Draft Report"). We welcome GAO's recognition that Treasury has
implemented, or is in the process of implementing, most of the TARP-
related recommendations that GAO has made since it issued its first
TARP report in 2008. We also appreciate the Draft Report's specific
acknowledgment that the Office of Financial Stability ("OFS") has
fully implemented recommendations to improve its communication
strategy and enhance its workforce planning.
In addition, Treasury welcomes its ongoing dialogue with GAO regarding
GAO's remaining recommendations, including on the Capital Purchase
Program ("CPP") and the Making Home Affordable ("MHA") program. As you
acknowledge in the report, we have had certain concerns with respect
to these remaining recommendations. These include, in the case of the
CPP recommendation, how to insure consistency with the need to respect
regulators' independence. Nevertheless, Treasury continues to work
with the banking agencies to achieve the objective of this
recommendation. In the case of the MHA recommendations, which pertain
primarily to newer initiatives, we are continuing to assess the
operational challenges, impact to borrowers, and available resources
in determining implementation feasibility. We look forward to updating
you on our progress.
Treasury values GAO's recommendations as we continue our efforts to
promote financial stability.
Sincerely,
Signed by:
Timothy G. Massed:
Assistant Secretary for Financial Stability:
[End of enclosure]
Enclosure III:
GAO Contact and Staff Acknowledgments:
GAO Contact:
A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Daniel Garcia-Diaz, Kay
Kuhlman, Harry Medina, Raymond Sendejas, and Karen Tremba (Lead
Assistant Directors), along with Kevin Averyt, Emily Chalmers, John
Forrester, Christopher Forys, Heather Krause, Robert Lee, Marc Molino,
and Emily Owens made key contributions to this report.
[End of enclosure]
Footnotes:
[1] EESA, Pub. L. No. 110-343, 122 Stat. 3765 (2008), codified at 12
U.S.C. §§ 5201 et seq. EESA was enacted on October 3, 2008.
[2] Six recommendations, for the Capital Assessment Program and the
Supervisory Capital Assessment Program, were directed to the Board of
Governors of the Federal Reserve System (see reports [hyperlink,
http://www.gao.gov/products/GAO-09-658] and [hyperlink,
http://www.gao.gov/products/GAO-10-861] in enclosure I). Another
recommendation, for the Automotive Industry Financing Program (AIFP),
was directed to the Department of Labor (see [hyperlink,
http://www.gao.gov/products/GAO-11-471]). In addition, we made two
matters for congressional consideration related to the Term Asset-
Backed Securities Loan Facility and AIFP (see [hyperlink,
http://www.gao.gov/products/GAO-10-25] and [hyperlink,
http://www.gao.gov/products/GAO-11-471]).
[3] Our financial audit recommendations will be updated in a separate
product.
[4] This list includes TARP programs for which we have made
recommendations. Comprehensive information on all TARP programs can be
found in our two previous anniversary reports: GAO, Troubled Asset
Relief Program: Status of Programs and Implementation of GAO
Recommendations, [hyperlink, http://www.gao.gov/products/GAO-11-74]
(Washington, D.C.: Jan. 12, 2011) and 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).
[5] In addition to our 69 performance audit recommendations and
matters for congressional consideration, we made 29 recommendations to
Treasury in our financial audits. Of the 29 financial audit
recommendations, 16 have been implemented (as reported in Management
Report: Improvements Are Needed in Internal Control Over Financial
Reporting for the Troubled Asset Relief Program, [hyperlink,
http://www.gao.gov/products/GAO-11-434R] [Washington, D.C.: Apr. 18,
2011]) and 13 remain open and are being reassessed as part of our 2011
financial statement audit.
[6] [hyperlink, http://www.gao.gov/products/GAO-11-74].
[7] SBLF was created by the Small Business Jobs Act of 2010, Pub. L.
No. 111-240, 124 Stat. 2504 (2010), enacted on September 27, 2010.
SBLF is a $30 billion capital support program that encourages small
and midsize banks and community development loan funds to lend to
small businesses.
[8] [hyperlink, http://www.gao.gov/products/GAO-11-74] includes more
detailed information on staffing trends from November 2008 through
September 2010. According to Treasury officials, OFS had 207 staff as
of July 6, 2011, with 115 term appointments.
[9] GAO, Troubled Asset Relief Program: Opportunities Exist to Apply
Lessons Learned from the Capital Purchase Program to Similarly
Designed Programs and to Improve the Repayment Process, [hyperlink,
http://www.gao.gov/products/GAO-11-47] (Washington, D.C.: Oct. 4,
2010).
[10] The Small Business Jobs Act of 2010 requires that GAO annually
report on the SBLF program. We anticipate issuing a report on this
program later this year that will assess the internal controls that
Treasury put in place to ensure compliance with program rules and
consistent treatment of applicants.
[11] See GAO, Troubled Asset Relief Program: June 2009 Status of
Efforts to Address Transparency and Accountability Issues, [hyperlink,
http://www.gao.gov/products/GAO-09-658] (Washington, D.C.: June 17,
2009), and [hyperlink, http://www.gao.gov/products/GAO-11-47].
[12] See GAO, Troubled Asset Relief Program: Treasury Actions Needed
to Make the Home Affordable Modification Program More Transparent and
Accountable, [hyperlink, http://www.gao.gov/products/GAO-09-837]
(Washington, D.C.: July 23, 2009); Troubled Asset Relief Program:
Further Actions Needed to Fully and Equitably Implement Foreclosure
Mitigation Programs, [hyperlink,
http://www.gao.gov/products/GAO-10-634] (Washington, D.C.: June 24,
2010); Troubled Asset Relief Program: Actions Needed by Treasury to
Address Challenges in Implementing Making Home Affordable Programs,
[hyperlink, http://www.gao.gov/products/GAO-11-338T] (Washington,
D.C.: Mar. 2, 2011); and GAO-11-288. Additionally, we reported on
results of a survey we conducted of housing counselors as part of our
oversight of Treasury's MHA program implementation. See GAO, Troubled
Asset Relief Program: Results of Housing Counselors Survey on
Borrowers' Experiences with the Home Affordable Modification Program,
[hyperlink, http://www.gao.gov/products/GAO-11-367R] (Washington,
D.C.: May 26, 2011) and corresponding e-supplement, [hyperlink,
http://www.gao.gov/products/GAO-11-368SP].
[13] [hyperlink, http://www.gao.gov/products/GAO-10-634].
[End of section]
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