Troubled Asset Relief Program: June 2009 Status of Efforts to Address Transparency and Accountability Issues
GAO-09-658 Published: Jun 17, 2009. Publicly Released: Jun 17, 2009.
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GAO's fifth report on the Troubled Asset Relief Program (TARP) follows up on prior recommendations. It also reviews (1) activities that had been initiated or completed under TARP as of June 12, 2009; (2) the Department of the Treasury's Office of Financial Stability's (OFS) hiring efforts and use of contractors; and (3) TARP performance indicators. To do this, GAO reviewed signed agreements and other relevant documentation and met with officials from OFS, contractors, and financial regulators.
Recommendations for Executive Action
|Department of the Treasury||While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should ensure that the warrant valuation process maximizes benefits to taxpayers and consider publicly disclosing additional details regarding the warrant repurchase process, such as the initial price offered by the issuing entity and Treasury's independent valuations, to demonstrate Treasury's attempts to maximize the benefit received for the warrants on behalf of the taxpayer.||
In response to our recommendation, OFS issued a Warrant Disposition Report on its web site in January 2010. The report provided additional details on OFS's warrant repurchase process as well as additional details on each individual warrant repurchase, including the initial price offered by the issuing entities, the final price of the warrants and warrant valuations by (i) third party asset managers, (ii) quotes from market participants, and (iii) OFS's financial models. OFS's Warrant Disposition Report improved the transparency of the warrant valuation and repurchase process. Further, by publicly disclosing additional warrant repurchase information, Treasury's process is now more transparent to the public and better enables Treasury to to maximize the extent of TARP program financial benefits to the taxpayers.
|Department of the Treasury||While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should, in consultation with the Chairmen of the Federal Deposit Insurance Corporation and the Federal Reserve, the Comptroller of the Currency, and the Acting Director of the Office of Thrift Supervision, ensure consideration of generally consistent criteria by the primary federal regulators when considering repurchase decisions under TARP.||
Treasury has not taken the necessary steps to help ensure that regulators' Capital Purchase Program (CPP) repayment decisions are based on generally consistent criteria. Treasury believes that this recommendation raises questions about how to balance the goals of consistency with the need to respect the independence of regulators. Treasury also has explained that it does not have access to confidential supervisory information that regulators may use in making repayment decisions, which would limit any information collection and review envisioned in our recommendation. However, as we noted in our 2010 report on CPP, the two regulators with responsibility for most CPP repayment requests document their analysis in a manner similar to what regulators provided Treasury when recommending CPP applicants and Treasury could use these documents in its review. Because Treasury continues to believe that its scope for action is limited to informal communication with the bank regulators, implementation of this recommendation cannot reasonably be expected.
|Department of the Treasury||While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should fully implement a communication strategy that ensures that all key congressional stakeholders are adequately informed and kept up to date about TARP.||
Treasury has taken several steps to improve its communication strategy for TARP, including launching its FinancialStability.gov Web site in March 2009 and forming a working group to help ensure that Treasury's communications strategy addresses both internal and external communications and is hiring appropriate staff to support the strategy. Treasury officials told us that key components of the strategy include (1) coordinating communication among OFS and Treasury's Office of Public Affairs and Office of Legislative Affairs to ensure that congressional and other external stakeholders receive timely information, (2) continuously improving the financial stability Web site, and (3) conducting outreach across the country on the homeownership preservation programs. To support these efforts, Treasury hired a communications director for OFS in June 2010 to support the communication strategy. In March 2011, OFS hired a senior liaison for Legislative Affairs to provide OFS-specific outreach to Congress and respond to requests for information. These actions will help Treasury to ensure congressional stakeholders are informed and updated on TARP programs in a timely manner.
|Department of the Treasury||While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should expedite efforts to conduct usability testing to measure the quality of users' experiences with the financial stability Web site and measure customer satisfaction with the site, using appropriate tools such as online surveys, focus groups, and e-mail feedback forms.||
Since we issued our June 2009 60-day report on TARP, Treasury began taking action to conduct testing to measure the quality of user experience with the financial stability Website. Specifically, as of August 21, 2009, Treasury made a usability survey publicly available on the website for visitors to complete. This survey elicited user input on the quality of their experience navigating the website and satisfaction with their experience. The survey also directed users to an e-mail feedback form on the website to provide additional comments.
|Department of the Treasury||While the Department of the Treasury has taken actions to address our previous recommendations, we continue to identify areas that warrant ongoing attention and focus. Therefore, as it continues to improve TARP and make it more accountable and transparent, Treasury should explore options for providing to the public more detailed information on the costs of TARP contracts and agreements, such as a dollar breakdown of obligations and/or expenses.||
Treasury reviewed the scope of information on contracts and agreements available to the public and intended to include descriptive information on its website. In December 2009, Treasury said it completed its Web site redesign as a key initiative in its communication and outreach efforts for TARP. As of April 2010, the redesign included the publication of Contracts and Financial Agency Agreements on the financialstability.gov Web site to provide enhanced information about TARP contracts and agreements with the private sector. Treasury added a table to its Web site with key details on contracts and financial agency agreements to include the name of the contractor, dollar value, performance period, and a category description. Also on the Web site is a description of procurement contracts and agreements, including competition and small business utilization information. Treasury has enhanced transparency and Congress and other interested stakeholders are now able to obtain details on individual contracts and agreements.
|Division of Banking Supervision and Regulation||To help improve the transparency of CAP--in particular the stress tests results, the Director of Supervision and Regulation of the Federal Reserve should consider periodically disclosing to the public the aggregate performance of the 19 bank holding companies against the more adverse scenario forecast numbers for the duration of the 2-year forecast period and whether or not the scenario needs to be revised. At a minimum, the Federal Reserve should provide the aggregate performance data to OFS program staff for any of the 19 institutions participating in CAP or CPP.||
The chairman and a governor of the Federal Reserve publicly disclosed in 2010 aggregate information about the performance of the 19 BHCs as compared to the estimated more adverse scenario for 2009 based on the agency's internal tracking. See Ben S. Bernanke, "The Supervisory Capital Assessment Program-One Year Later" speech delivered at the Federal Reserve Bank of Chicago 2010 46th Annual Conference on Bank Structure and Competition (Chicago, Illinois, May 6, 2010). Daniel K. Tarullo, "Lessons from the Crisis Stress Tests" speech delivered at the Federal Reserve Board 2010 International Research Forum on Monetary Policy (Washington, D.C., Mar. 26, 2010).