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Highlights

This testimony discusses our work on the Troubled Asset Relief Program (TARP), which Congress established on October 3, 2008 in response to the financial crisis that threatened the stability of the U.S. financial system and the solvency of many financial institutions. Under the original TARP legislation, the Department of the Treasury (Treasury) had the authority to purchase or insure $700 billion in troubled assets held by financial institutions. As we have seen, since TARP's inception Treasury has chosen to use those funds for a variety of activities, including injecting capital into key financial institutions, implementing programs to address problems in the securitization markets, providing assistance to the automobile industry and American International Group, Inc. (AIG), and working to help homeowners struggling to keep their homes. Today, some of these programs have been discontinued and others are winding down, but others--such as homeownership preservation programs--may continue for some time. Treasury has also seen some participating institutions repay their TARP funds as they recover their financial health. The prospect for repayment from some other institutions, both large and small, remains unclear. The Emergency Economic Stabilization Act (the act) that authorized TARP required GAO to report at least every 60 days on findings from our oversight of actions taken under the programs. We have been monitoring TARP programs since their inception and our reports have highlighted challenges facing many of these programs. To date, we have issued over 25 reports and testimonies related to TARP and made over 50 recommendations to improve the transparency and accountability of its operations. This statement today draws primarily on 7 reports we have issued since October 2009. Specifically, this statement focuses on (1) the nature and purpose of activities that have been initiated under TARP and ongoing challenges, (2) the process for making decisions related to unwinding TARP programs, and (3) indicators of credit conditions in markets targeted by TARP programs. To do our work, we reviewed our prior reports and other documents provided by Treasury's Office of Financial Stability (OFS) and conducted interviews with Treasury and OFS officials. In addition, we have updated the program's receipts and disbursements through June 30, 2010, and indicators of credit markets as of July 1, 2010. We conducted these performance audits between July 2009 and June 2010 and updated information in July 2010 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.

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