Financial Sector Policy

Fed Purchase of AIG Collateralized Debt Obligations

Date: 
November 10, 2008
Policy Area: 
Financial Sector Policy
Economic Target: 
AIG
Action Type: 
Equity Purchase
Maximum Amount: 
$30.00 billion
Amount Spent: 
$23.34 billion

Federal Reserve agreed to provide $30 billion in loans to a limited liability company, 'Maiden Lane III,' formed to purchase collateralized debt obligations (CDOs) for which AIG had written credit-default swap contracts.

Notes: 

Amount spent represents loan outstanding as of 9/1/2010 (http://www.federalreserve.gov/releases/h41/Current/).  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.

Term Asset-Backed Securities Loan Facility

Date: 
November 25, 2008
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Loans
Maximum Amount: 
$720.00 billion
Amount Spent: 
$33.88 billion

Lending facility officially offers up to $1 trillion (originally set at $200 billion, but raised to $1 trillion on 2/10/2009 by the Obama administration) in liquidity to financial institutions that buy financial securities backed by small business loans, consumer lending for automobiles, students, credit cards and activities, as well as securities backed by loans on heavy machinery like agricultural equipment and car rental fleets. The Treasury Department has offered $100 billion in credit protection to the facility.

Notes: 

Maximum amount is the Fed's total exposure: $800 billion in loans minus $80 billion in credit protection from the Treasury.  Amount spent indicates outstanding loans as of 9/1/2010 (http://www.federalreserve.gov/releases/h41/Current/).  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.

FDIC Guarantee of Citigroup Assets

Date: 
November 23, 2008
Who: 
FDIC
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Government Guarantee
Maximum Amount: 
$10.00 billion

Part of a government guarantee of $301 billion in Citigroup assets by multiple entities (Treasury, FDIC, Federal Reserve).  After Citigroup absorbs the first $29 billion in losses, the remaining losses are split 90:10 between the government and Citigroup, with the first $5 billion absorbed by the Treasury with TARP funds, the next $10 billion paid by the FDIC, and remaining losses covered by the Federal Reserve with a non-recourse loan.

Notes: 

Amount spent updated as of 12/31/08.

On 1/16/2008, the Treasury revised its figure for total Citigroup guaranteed assets from $306 billion down to $301 billion.  

Deficit impact unknown.

FDIC Bank Liquidity Guarantee Program

Date: 
October 14, 2008
Who: 
FDIC
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Government Guarantee
Maximum Amount: 
$609.19 billion
Amount Spent: 
$313.07 billion

Establishement of Temporary Liquidity Guarantee Program (TLGP), under which the FDIC guarantees unsecured new loans issued by banks, thrifts, and selected holding companies.  Debt must be issued by June 30, 2009 and mature by June 30, 2012.   Program also fully insures certain of non-interest-bearing deposit transaction accounts, much of which exceeds the existing $250,000 deposit insurance limit.  Accounts guaranteed through December 31, 2009.

Notes: 

Maximum amount indicates market size of total debt potentially subject to guarantee, as reported on the FDIC's monthly report for the program.  Amount spent indicates total guarantees for unsecured new debt.  Both figures are as of 1/4/2010.  Deficit impact unknown.

Money Market Guarantees

Date: 
September 19, 2008
Who: 
Treasury
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Government Guarantee
Maximum Amount: 
$50.00 billion
Amount Spent: 
-$1.20 billion

One-year program guarantees funds in participating money market accounts to encourage market stability.  Treasury provides up to $50 billion in financing from the Exchange Stabilization Fund. The Treasury will charge mutual funds a small insurance coverage fee. As of March 31, 2009, all of the major mutual fund companies had joined the program.

Notes: 

Amount spent equals based on coverage fees paid to the Treasury as of 9/18/2009. Deficit impact unknown.

Student Loan Guarantees

Date: 
May 7, 2008
Who: 
Dept. of Educ.
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Government Guarantee
Maximum Amount: 
> $130.00 billion
Amount Spent: 
$63.72 billion

Purchase of student loans and participation interests in student loans from lenders in order to improve liquidity and ensure the continuation of student loans.

Notes: 

Maximum amount represents total market for student loans between 2003-2007 that were tied to eligible securities.  This amount may increase in succeeding years with demand for new student loans. Authority subject to a requirement that purchases not have any net costs (http://www.cbo.gov/ftpdocs/92xx/doc9213/hr5715.pdf). Amount spent current as of 11/20/2009. Deficit Impact unknown.

Conservatorship of U.S. Central and Western Corporate Federal Credit Unions

Date: 
March 20, 2009
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Government Conservatorship
Maximum Amount: 
$57.00 billion
Amount Spent: 
$5.90 billion
Deficit Impact: 
$5.90 billion

Takeover of two federal credit unions, US Central and Western Corporate, by regulators of the National Credit Union Administration.  On March 20, 2009, both credit unions were placed into conservatorship "to stabilize the corporate credit union system and resolve balance sheet issues."  Corporate credit unions do not directly serve customers, but rather play a supporting role for their membership of retail credit unions.

Notes: 

Maximum amount is total value of US Central ($34 billion) and WesCorp's ($23 billion) assets.  Amount spent and deficit impact are taken from the estimated liabilities of the National Credit Union System Insurance Fund for losses on mortgage-backed securities portfolios at US Central and Western Corporate, as detailed here.  Although it is expected that insurance fund losses will eventually be recouped through higher user fees for member credit unions, deficit impact reflects initial insurance fund losses.

Loans to Credit Unions

Date: 
December 11, 2008
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Loans
Maximum Amount: 
$41.00 billion
Amount Spent: 
$10.00 billion

Loans from the National Credit Union Administration’s Central Liquidity Facility to subsidize funding to help credit unions modify mortgages and to facilitate lending by financing corporate credit unions. Loans split equally between U.S. Central and WesCorp ($5 billion lent to each).

Notes: 

NCUA is the National Credit Union Administration.  Deficit impact is unknown.

Amount spent indicates money spent as of 8/7/2009.  See tables appended to CBO Director Douglas Elmendorf's Congressional testimony on 1/28/2009: http://budget.senate.gov/democratic/testimony/2009/01-28-FinancialMarkets_Testimony.pdf

US Central Federal Credit Union Capital Injection

Date: 
January 28, 2009
Policy Area: 
Financial Sector Policy
Economic Target: 
Financial Institutions
Action Type: 
Other
Maximum Amount: 
$1.00 billion
Amount Spent: 
* $1.00 billion

The National Credit Union Administration provided the U.S. Central Federal Credit Union with a $1 billion capital note to help cover anticipated losses on mortgage and asset-backed securities.  Funds for the note were obtained from the agency's National Credit Union Share Insurance Fund.

Notes: 

Deficit impact currently unknown, although regulators have stated they will increase insurance fees to cover the note's cost. 

Purchase of AIG Preferred Stock

Date: 
November 10, 2008
Policy Area: 
Financial Sector Policy
Economic Target: 
AIG
Action Type: 
Equity Purchase
Maximum Amount: 
$40.00 billion
Amount Spent: 
$40.00 billion
Deficit Impact: 
$10.90 billion

Purchase of $40 billion in newly-issued AIG preferred shares by Treasury Department under Trouble Asset Relief Program (TARP).

On 3/2/2009, the Treasury announced that it would exchange its "Series D" preferred stock for "Series E" non-cumulative perpetual preferred stock.  This change is intended to improve the quality of AIG's equity and thus its overall market position.

Notes: 

Amount spent indicates credit issued as of 3/15/2010 (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.

Deficit impact is derived from CBO's overall subsidy rate for assistance to AIG (13%), as listed in CBO's January 2010 baseline. However, in its Preliminary Analysis of the President's Budget, the CBO revised its total cost estimate for TARP up by $10 billion, stating that most of the revision comes from an updated estimate of support to AIG. Thus, the subsidy rate for AIG support is now closer to 27%.

 

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