Financial Sector Policy
Reverse Repurchase Agreement Program
Date:
March 8, 2010
Policy Area:
Financial Sector Policy
Policy Area:
Monetary Policy
Economic Target:
Financial Institutions
Action Type:
Other The New York Federal Reserve announced a new Reverse Repurchase Agreement Program to reduce some of the liquidity in financial markets. Under the program, the Fed will sell securities from it's portfolio with agreements to repurchase them at later dates. This is an additional sign of tightening from the Fed, in light of last month's increase in the discount rate from 0.5 to 0.75 percent.
Notes:
FDIC Bank Takeovers in 2010
Policy Area:
Financial Sector Policy
Economic Target:
Depository Institutions
Action Type:
Bank Takeover
Maximum Amount:
$79.87 billion
Amount Spent:
$22.17 billion
Deficit Impact:
$22.17 billion This entry tracks FDIC takeovers of banks in 2010.
Notes:
Although FDIC costs are counted on-budget, official estimates assume that they should eventually be offset by proceeds from the sale of liquidated assets and higher premiums for deposit insurance. Maximum amount indicates value of all bank deposits. Amount spent represents FDIC-estimated cost to deposit insurance fund.
IRS Exempts Citigroup from Tax on Repurchase of TARP Assets
Date:
December 11, 2009
Who:
IRS
Who:
Treasury
Policy Area:
Financial Sector Policy
Economic Target:
Citigroup
Action Type:
Tax Break
Maximum Amount:
$38.00 billion The IRS agreed to give up billions in tax money in exchange for Citigroup’s repurchase of $20 billion of its assets held by TARP.
Notes:
According to a Washington Post article, the exact value of the IRS ruling will depend on Citi’s future profits and other factors. But accounting experts estimated that Citi will save at least several billion dollars. Some experts have also said that the lost tax revenue could easily outweigh the profits the Treasury will likely make in selling its ownership stake in Citi.
Prudent Commercial Real Estate Loan Workouts
Date:
October 30, 2009
Who:
Fed
Policy Area:
Financial Sector Policy
Economic Target:
Financial Institutions
Action Type:
Regulatory Change This policy statement, adopted by each of the financial regulators, provides guidance for examiners and financial institutions that are working with commercial real estate (CRE) borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties.
This policy statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decisionmaking.
Notes:
Associated costs, if any, are unknown.
AIG Investment Program
Policy Area:
Financial Sector Policy
Economic Target:
AIG
Action Type:
Equity Purchase
Maximum Amount:
$70.00 billion
Amount Spent:
$16.32 billion
Deficit Impact:
$22.00 billion In September 2008, the Federal Reserve and the Treasury determined that an AIG default could have placed enormous financial pressures and losses on AIGs creditors and counterparties, triggered disruptions in commercial paper markets, raised borrowing costs, and could have diminished the availability of credit, all undermining business and investor confidence.
Notes:
Amount spent indicates credit issued as of 12/7/2012 (http://www.ustreas.gov/initiatives/eesa/transactions.shtml). Deficit impact calculated by CRFB, using CBO's practice of estimating costs on a risk-adjusted present value basis. Maximum amount specified in Treasury term sheet.
Deficit impact is CBO's estimate of the total cost of the AIG program as last stated in the November 2010 Report on TARP.
Asset Guarantee Program
Policy Area:
Financial Sector Policy
Economic Target:
Financial Institutions
Action Type:
Government Guarantee
Maximum Amount:
$12.50 billion
Deficit Impact:
-$2.25 billion In addition to purchasing Bank of America and Citigroup stock, the TARP program participated in a multi-agency guarantee, in conjunction with the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), of around $425 billion in Citigroup and Bank of America assets. The terms of the guarantees stipulate that Citigroup and Bank of America would cover all portfolio losses up to $29 billion and $10 billion , respectively, while 90 percent of additional losses from both companies would be covered by the federal government.
Notes:
Maximum amount figure represents Treasury's share of total assets under guarantee. Deficit impact based on amount spent.
Deficit impact is derived from Treasury's reporting of TARP transactions.
Targeted Investment Program
Policy Area:
Financial Sector Policy
Economic Target:
Financial Institutions
Action Type:
Equity Purchase
Maximum Amount:
$40.00 billion
Deficit Impact:
-$1.25 billion In late 2008 the Treasury announced that it would provide “exceptional assistance” to three institutions—Bank of America, Citigroup, and AIG—deemed to be vital for financial markets and created three programs—the Targeted Investment Program, the Asset Guarantee Program, and Systemically Important and Failing Institutions—to provide the targeted assistance. Through the TIP, the Treasury purchased $20 billion in preferred shares from both Bank of American and Citigroup.
Notes:
Amount spent indicates investment made as of 12/7/2010 (http://www.ustreas.gov/initiatives/eesa/transactions.shtml). Budgetary impact calculated by CRFB using CBO's practice of estimating costs on a risk-adjusted present value basis.
Deficit impact is derived from CBO's estimated subsidy cost for the Targeted Investment Program investments in Bank of America and Citigroup, as listed in CBO's January 2010 baseline.
Fed Payment of Interest on Bank Reserves
Date:
October 6, 2008
Who:
Fed
Policy Area:
Financial Sector Policy
Economic Target:
Depository Institutions
Action Type:
Regulatory Change Federal Reserve will pay interest on depository institutions' required and excess cash reserves. Program originally slated to begin in October of 2011 was moved up to October 2008 because of the financial crisis. Objective is to compensate depository institutions for lost income they could derive by investing reserve funds elsewhere.
Source:
Notes:
Cost of paying interest is unknown. Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.
Raise Limit on Insured Deposits: $100K to $250K
Date:
October 3, 2008
Who:
FDIC
Policy Area:
Financial Sector Policy
Economic Target:
Consumers
Economic Target:
Depository Institutions
Action Type:
Regulatory Change
Maximum Amount:
$700.00 billion The Emergency Economic Stabilization Act of 2008 temporarily raised from $100,000 to $250,000 the amount of deposit and share insurance in FDIC and Federal Credit Union member organizations. Initially, this law stated that the increased limit on insured deposits would last until 12/31/2009. However, On 5/20/2009 President Obama signed the Helping Families Save Their Homes Act, extending the temporary deposit insurance limit of $250,000 untill 12/31/2013. After that date, the FDIC deposit insurance limit will return to $100,000 except for IRAs and other retirement accounts.
Notes:
Limit will return to $100,000 after Dec. 31, 2013. Maximum amount indicates total value of new insured deposits.
Enhanced Consumer Protection for Credit Cards
Date:
December 18, 2008
Who:
Fed
Who:
NCUA
Who:
Treasury
Policy Area:
Financial Sector Policy
Economic Target:
Consumers
Economic Target:
Financial Institutions
Action Type:
Regulatory Change New credit card regulations adopted under the Federal Trade Commission Act, in coordination with similar sets of new rules adopted by the Office of Thrift Supervision and the National Credit Union Administration.
The new regulations, as described on the Federal Reserve's website:
Notes:
Associated costs, if any, are unknown.
