Congress created the Troubled Asset Relief Program (TARP) to restore liquidity and stability in the financial system. The Department of the Treasury (Treasury), among other actions, established the Capital Purchase Program (CPP) as its primary initiative to accomplish these goals by making capital investments in eligible financial institutions. This report examines (1) the characteristics of financial institutions that received CPP funding and (2) how Treasury implemented CPP with the assistance of federal bank regulators. GAO analyzed data obtained from Treasury case files, reviewed program documents, and interviewed officials from Treasury and federal bank regulators.
Recommendations for Executive Action
|Department of the Treasury||If Treasury administers programs containing elements similar to those of CPP, such as the Small Business Lending Fund (SBLF), Treasury should apply lessons learned from the implementation of CPP and enhance procedural controls for addressing the risk of inconsistency in regulators' decisions on withdrawals. Specifically, the Secretary of the Treasury should direct the program office responsible for implementing SBLF to establish a process for collecting information from bank regulators on all applicants that withdraw from consideration in response to a regulator's recommendation, including the reasons behind the recommendation. The program office should also 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.||
Closed – Implemented
|Department of the Treasury||As part of its consultation with regulators on their decisions to allow institutions to repay their CPP investments to Treasury, and to improve monitoring of these decisions, the Secretary of the Treasury should direct Office of Financial Stability (OFS) to periodically collect and review certain information from the 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.||
Closed – Not Implemented