Efficiently Managing and Overseeing the Troubled Asset Relief Program

The Emergency Economic Stabilization Act of 2008 was enacted in response to a severe tightening of the credit markets. The act created the Office of Financial Stability to implement the Troubled Asset Relief Program (TARP). This program provides Treasury with a broad set of tools ranging from purchasing troubled mortgages and securities backed by those mortgages to infusing capital into the financial system to stimulate credit markets and stabilize financial markets. TARP, which is in its early stages, will require both effective management and diligent oversight to ensure that it effectively fulfills the purposes of the act.

The act also provides a prominent role for GAO in the oversight of the TARP. Specifically, GAO is tasked with performing oversight of a wide range of issues, including TARP's performance in meeting the purposes of the act; the financial condition and internal controls of TARP; the characteristics of both asset purchases and the disposition of assets acquired, including any related commitments that are entered into; TARP's efficiency in using the funds appropriated for the program's operation; TARP's compliance with applicable laws and regulations; efforts to prevent, identify, and minimize conflicts of interest related to TARP's operations; and the efficacy of contracting procedures. GAO is responsible for submitting reports to Congress at least every 60 days regarding findings in these areas. GAO is also responsible for auditing the office's annual financial statements, issuing a report on leveraging and deleveraging, and issuing special reports that emerge from GAO's oversight.

^ Back to topWhat Needs to Be Done

While Treasury has taken action to address many of our recommendations over the last year, we have highlighted a number of areas that warrant Treasury's ongoing attention concerning TARP. Specifically, we have reiterated the importance of fully implementing past the recommendations where we recommend that Treasury take actions to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. As Treasury determines whether to extent TARP, Treasury will likely face ongoing challenges. Therefore, we recommend that Treasury take action to improve its ability to effectively manage the next phase of the program. Specifically,

• We continue to believe that Treasury should work with the Chairmen of the FDIC and Federal Reserve, the Comptroller of the Currency, and the Acting Director of OTS to help ensure that the primary federal regulators use generally consistent criteria when considering repurchase decisions under TARP.
• Treasury has yet to finalize its implementation of an oversight program for asset managers covering CPP and the other capital-based programs, such as TIP and AGP.
• Treasury should strengthen its efforts to help preserve homeownership and protect home values, including routinely updating projections of the number of homeowners who can be helped under HAMP and develop a means of systematically assessing servicers' capacity to make HAMP modifications and meet program requirements.
• Continue efforts to hire permanent staff for key positions including the Chief Homeownership Preservation Officer and Chief Investment Officer.
• And finally, as it determines whether to extend the program, Treasury should
• coordinate with the Board of Governors of the Federal Reserve System and Federal Deposit Insurance Corporation to help ensure that the decision to is considered in a broader market context and to develop a coordinated framework and analytical basis for making the decision. Also, if a decision is made to extend the program, the Secretary should clearly spell out what the objectives and measures of the extended program are, along with anticipated costs and safeguards.
• Document the analytical decision-making process and clearly communicate the results to Congress and the American people for determining whether an extension is needed.
• Update the projected use of TARP funds and, if the program is extended, continue to re-evaluate the use of such funds on a periodic basis.

^ Back to topKey Reports

Troubled Asset Relief Program

Troubled Asset Relief Program

Troubled Asset Relief Program

Troubled Asset Relief Program

Financial Markets Regulation

Financial Audit

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