Tarp runs out at last
Funds from the Troubled Asset Relief Program (Tarp) have finally been exhausted, following three months of capital injections and loan facilities extended to a variety of institutions.
The Tarp took on a different character, however, on October 14, with the establishment of the Capital Purchase Program (CPP). The CPP would directly invest $250 billion of the Tarp into financial institutions.
According to the latest US Treasury figures, released on December 29, the CPP has so far invested $177.5 billion in 208 institutions, although more applications are pending. Deadlines for applications for aid have now passed.
The first wave of applicants were nine of the most prominent US banks, including former investment banks Morgan Stanley and Goldman Sachs, receiving a total of $125 billion in return for preferred stock in October 2008.
A long list of smaller banks received Treasury approval, but as panic permeated the markets, other entities looked to take advantage of the scheme.
In November, Genworth Financial, Lincoln Financial and Hartford Financial Services, three prominent insurers, converted themselves into bank holding companies and announced their intention to acquire federally regulated savings banks, thereby making themselves eligible for the CPP. Their requests for capital are still pending.
The credit card company American Express also converted itself into a bank holding company on November 10, and received preliminary approval for issuing $3.39 billion of stock to the Treasury under the CPP.
The remaining $100 billion of Tarp funds available without congressional approval have been dedicated to a variety of schemes.
On November 23, Citi received $20 billion, having already accepted $25 billion from the CPP in the first round of equity purchases (under the CPP, an institution cannot issue more than $25 billion of preferred stock to the Treasury).
Under the Systemically Significant Failing Institutions Program (SSFI), the Treasury bought $40 billion in preferred stock in AIG on November 10.
$20 billion of Tarp funds was also put towards the Federal Reserve's $200 billion Term Asset-Backed Securities Loan Facility (TALF).
In a report published on December 8, the Treasury stated the combination of the CPP, Citi bail-out, SSFI and TALF amounted to an allocation of $335 billion of the Tarp.
Meanwhile, an ailing US auto industry became an increasing concern. On December 19, Chrysler was extended a loan of up to $4 billion from the Tarp, while General Motors (GM) will receive up to $13.4 billion, although some of this is subject to approval from Congress.
The Treasury also purchased $5 billion of preferred stock in GMAC, the former financial arm of GM, under the Tarp on December 29. GM was also extended a $1 billion loan to participate in a rights offering at GMAC, which was granted bank holding company status on December 24.
"[The] Treasury effectively has allocated the first $350 billion from the Tarp," said Paulson on December 19. "It is clear, however, that Congress will need to release the remainder of the Tarp to support financial market stability."
See also: Treasury called to account for Tarp
$20 billion bail-out for Citi
Contenders queue up for Tarp funds
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Industry warns CFTC against rushing to regulate AI for trading
Vote on workplan pulled amid calls to avoid duplicating rules from other regulatory agencies
Bank of Communications moves early to meet TLAC requirements
China Construction Bank becomes last China G-Sib to release TLAC plans
Most read
- Top 10 operational risks for 2024
- Japanese megabanks shun internal models as FRTB bites
- LCH issued highest cash call in more than five years