Troubled Asset Relief Program: Treasury's Framework for Deciding to Extend TARP Was Sufficient, but Could be Strengthened for Future Decisions
Highlights
The Department of the Treasury's (Treasury) authority to purchase, commit to purchase, or commit to guarantee troubled assets was set to expire on December 31, 2009. This important authority has allowed Treasury to undertake a number of programs to help stabilize the financial system. In December 2009, the Secretary of the Treasury extended the authority to October 3, 2010. In our October 2009 report on the Troubled Asset Relief Program (TARP), GAO suggested as part of a framework for decision making that Treasury should coordinate with relevant federal agencies, communicate with Congress and the public, and link the decisions related to the next phase of the TARP program to quantitative analysis. This report discusses (1) the process Treasury used to decide to extend TARP and the extent of coordination with relevant agencies and (2) the analytical framework and quantitative indicators Treasury used to decide to extend TARP. To meet the report objectives, GAO reviewed key documents related to the decision to extend TARP, interviewed agency officials and analyzed financial data.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Treasury | To effectively conduct a coordinated exit from TARP and other government financial assistance, the Secretary of Treasury should 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. |
Closed – Implemented
In its 60-day letter, Treasury stated that it "will continue to consult extensively on TARP matters with the FDIC as well as with other agencies where appropriate." While Treasury did it did not address the extent to which was that it would formalize and document coordination with FDIC, Treasury did commit to consult with FDIC on key TARP decisions which is consistent with our recommendation.
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| Department of the Treasury | To improve the transparency and analytical basis for program decisions made before TARP's expiration, the Secretary of the Treasury should publicly identify clear program objectives, the expected impact of programs, and the level of additional resources needed to meet those objectives. In particular, Treasury should set quantitative program objectives for its small business lending programs and identify any additional data needed to make program decisions. |
Closed – Not Implemented
Treasury has publicly identified clear program objectives and addressed the recommendation broadly by articulating the objectives and purposes of individual TARP programs. For example, Treasury has written blogs about the wind down of the Capital Purchase Program. However, to the extent the recommendation focuses on specific small business lending programs such as the Community Development Capital Initiative, Treasury does not believe specifying a "target" number of institutions or dollar amount to be expended is appropriate. Treasury said that it has instituted a thorough application and review process for qualification, and to prejudge the results of that application and review process would be unwise. As such, we consider the recommendation not implemented.
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