Stimulus.org - Treasury

IRS Exempts Citigroup from Tax on Repurchase of TARP Assets

Jason Peuquet — Wed, 16 Dec 2009 19:26:28 +0000

Date:

December 11, 2009

Who:

IRS

Who:

Treasury

Policy Area:

Financial Sector Policy

Economic Target:

Citigroup

Action Type:

Tax Break

Maximum Amount:

38000000000

Amount Spent Special Symbol:

Deficit Impact Special Symbol:

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.

Following long-standing carryback loss rules, federal tax law permits companies to reduce their taxable incomes in profit-earning years by the amount of losses in bad years. Under the law, the IRS, which is part of the Treasury, restricts the transfer of these benefits to new ownership, in the case of a merger, as a way of preventing companies from buying unprofitable firms to evade taxes. As the law exists, Citi’s repurchase of assets held by the Treasury would qualify as a change in ownership, and thus exclude Citi from the tax benefit.

Since Citi has built up $38 billion in losses, the IRS notice exempts up to $38 billion in future Citi profits from taxable income.

This IRS ruling adds to the list of methods in which the Treasury, FDIC, and Fed have supported Citi. Click to see companion programs under TARP (Capital Purcahse Program and Targeted Investment Program), FDIC Gaurantee of Citigroup Assets, and Fed Guarantee of Citigroup Assets.

Source:

Washington Post article 12/16/2009

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.

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Supplemental Financing for IMF

Jason Peuquet — Thu, 01 Oct 2009 19:25:18 +0000

Date:

June 24, 2009

Who:

Treasury

Policy Area:

Monetary Policy

Economic Target:

Government and GSEs

Action Type:

Loans

Maximum Amount:

75000000000

Amount Spent:

75000000000

Deficit Impact:

4973000000

As part of the Supplemental Appropriations Act (H.R. 2346), signed into law on 6/24/2009, Congress and the President agreed to add $75 billion in Special Drawing Rights (SDRs) at the International Monetary Fund. The funds will remain "available until expended" to buffer the IMF's reserves.

Source:

Text of Supplemental Appropriations Act of 2009

Notes:

Deficit impact of $75 billion increase in SDRs is estimated to cost the U.S. government $4.973 billion.

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Purchase of Freddie Mortgage-Backed Securities

Jason Peuquet — Tue, 18 Aug 2009 18:01:29 +0000

Treasury Purchases of GSE Mortgage-Backed Securities

Date:

September 7, 2008

Who:

Treasury

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Government and GSEs

Action Type:

Equity Purchase

Amount Spent:

105900000000

Deficit Impact:

Program allows the Treasury Department to purchase government sponsored enterprise (GSE) mortgage-backed securities in the open market.

Source:

FHFA Release 8/6/09

Most Recent FHFA Report on Treasury and Federal Reserve Purchase Programs

Notes:

Maximum purchases of mortgage-backed securities are unlimited. Figure for amount spent is current as of 3/2/2010 (http://www.fhfa.gov/Default.aspx?Page=70). Since the purchase of Freddie Mac mortgage-backed securities from the general fund of the Treasury constitutes an intergovernmental transfer, the deficit impact is zero.

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Enhanced Consumer Protection for Credit Cards

Maya MacGuineas — Mon, 17 Aug 2009 14:04:40 +0000

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

Maximum Amount Special Symbol:

Amount Spent Special Symbol:

Deficit Impact Special Symbol:

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:

"Protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening and increases in the rate charged on pre-existing credit card balances.
Forbid banks from imposing interest charges using the "two-cycle" billing method.
Require that consumers receive a reasonable amount of time to make their credit card payments.
Prohibit the use of payment allocation methods that unfairly maximize interest charges.
Address subprime credit cards by limiting the fees that reduce the amount of available credit."

Source:

Federal Reserve Announcement 12/18/2008

Details of New Rules

Notes:

Associated costs, if any, are unknown.

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Home Affordable Refinance Program

Maya MacGuineas — Mon, 17 Aug 2009 14:01:37 +0000

Date:

February 18, 2009

Who:

Treasury

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Consumers

Economic Target:

Housing

Action Type:

Regulatory Change

Maximum Amount Special Symbol:

Amount Spent Special Symbol:

Deficit Impact Special Symbol:

Mortgage owners will be allowed to refinance with less home equity than what was permitted by previous regulations. Program applies to loans owned or guaranteed by Fannie Mae and Freddie Mac and is one of two principle programs under the Treasury's Making Home Affordable program.

Source:

Treasury March 4 Term Sheet

Notes:

Budgetary impact of program is not known. Maximum and current costs also unknown.

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Purchase of Fannie Mortgage-Backed Securities

Maya MacGuineas — Fri, 10 Jul 2009 20:03:23 +0000

Treasury Purchases of GSE Mortgage-Backed Securities

Date:

September 7, 2008

Who:

Treasury

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Government and GSEs

Action Type:

Equity Purchase

Maximum Amount Special Symbol:

Amount Spent:

114800000000

Deficit Impact:

Program allows the Treasury Department to purchase government sponsored enterprise (GSE) mortgage-backed securities in the open market.

Source:

FHFA Release 8/6/09

Most Recent FHFA Report on Treasury and Federal Reserve Purchase Programs

Notes:

Maximum purchases of mortgage-backed securities are unlimited. Figure for amount spent is current as of 3/2/2010 (http://www.fhfa.gov/Default.aspx?Page=70). Since the purchase of Fannie Mae mortgage-backed securities from the general fund of the Treasury constitutes an intergovernmental transfer, the deficit impact is zero.

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Money Market Guarantees

suggp — Fri, 10 Jul 2009 19:14:38 +0000

Date:

September 19, 2008

Who:

Treasury

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

50000000000

Amount Spent:

-1200000000

Deficit Impact Special Symbol:

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.

The Guarantee Program was put in place after one of the country's largest funds, the Reserve Fund, suffered a run on assets after the Lehman Brothers collapse. The Treasury voiced concerns over mutual funds shares falling below $1 per share, or "breaking the buck." At the time of the program's creation in Sept. 2008, mutual funds accounted for over $3.4 trillion in investor funds.

On 3/31/2009, the Treasury announced this program's extension through September 18, 2009.

On 9/18/2009, the Treasury released a statement announcing that the program is over, providing over $1.2 billion in revenue from coverage fees for the Treasury.

Source:

Treasury Sept. 9 Release

New York Times Article Sept. 19, 2008

March 31 Extension Agreement

Treasury Sept. 18 Release

Notes:

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

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Supplemental Financing Program to Federal Reserve

suggp — Fri, 10 Jul 2009 18:37:13 +0000

Supplemental Financing Program

Date:

September 17, 2008

Who:

Treasury

Policy Area:

Monetary Policy

Economic Target:

Government and GSEs

Action Type:

Other

Maximum Amount Special Symbol:

Amount Spent:

5000000000

At the request of the Federal Reserve, The Treasury will market a separate, new line of Treasury bills (short term securities) to help fund the Federal Reserve's actions taken in response to the economic and financial crisis.

In a release on 2/23/2010, the Treasury announced that the Treasury will increase the balance of the program from the current $5 billion to $200 billion, a level maintained between February and September 2009.

Source:

Monthly Treasury Statement for March 2009

Treasury Release 2/23/2010

Treasury Release 9/17/2008

Notes:

Maximum amount is unlimited. Amount spent reflects value of bills outstanding as of 2/17/2010. Deficit impact unknown.

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Public-Private Investment Fund

Maya MacGuineas — Fri, 10 Jul 2009 17:41:26 +0000

Date:

February 10, 2009

Who:

Treasury

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Loans

Maximum Amount:

Amount Spent:

Deficit Impact:

See the companion FDIC entry for the Public-Private Investment Fund

Program first announced by Treasury Secretary Geithner on 2/10/2009.

Program is run by the Treasury in conjunction with the Federal Reserve and Federal Deposit Insurance Corporation. It will enlist "$75 to $100 billion" of TARP capital to create up to $500 billion in total public-private asset purchasing power. The program may eventually expand to $1 trillion in total leveraged purchasing capacity. On April 21, 2009, Geithner announced that $75 billion of the program's funds would come from TARP, with another $25 billion coming from the Treasury's existing support (also through TARP) of the TALF program.

The Treasury released details of the program on March 23, 2009. Its aim is to use public money to entice private purchase of distressed bank loans and illiquid securities. The program has two main components:

1) The "legacy loans" program uses public financing (via TARP) to help private entities purchase pools of bank loan assets.

The FDIC is charged with guaranteeing the purchase of loans once they are sold, and the Treasury provides half of the initital financing required to purchase the loan. Under the terms of the program, banks determine the loans they consider distressed and put these loans up for auction to other private market participants.

The FDIC determines the eligibility of the proposed loans, and specifies how much leverage it will allow for the initial purchase.

The maximum potential leverage is a 6:1 ratio, meaning that any party that purchases a loan can make the purchase at a debt to equity ratio of no greater than 6:1.

For example, if a pool of loan assets costs $42, an initial payout ("equity") of $6 would be required, creating $6 in equity and $36 in debt.

The bidder that wins the auction for the loan is allowed to draw on the public-private investment fund for half of its equity cost.

In the case of the previous example, the bidder could take $3 from the public-private partnership, and would be required to provide the other $3 itself.

The buyer issues debt that is guaranteed by the FDIC to fund the remaining cost of purchasing the loan.

The FDIC is then charged with managing and overseeing the servicing of this remaining debt.

2) The "legacy securities" program has two components:

a) The government will choose five "asset managers" (selected from an open application process) that agree to raise some amount of private capital to buy legacy securities.

The government matches whatever funds these asset managers manage to raise (via TARP).

The private funds are matched at least one to one, although the Treasury has indicated that it may provide as much as two or even three dollars for every dollar of private capital raised.

The fund manager has substantial discretion in how he/she invests the funds.

b) The Fed's recently-started Term Asset Backed Securities Lending Facility (TALF) will be expanded to include asset classes of non-agency residential mortgage-backed securities, commercial mortgage-backed securities, and other classes of asset-backed securities. Asset managers who take part in the public-private investment fund (see above) will be allowed to participate jointly in TALF.

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Troubled Assets Relief Program (TARP)

suggp — Thu, 09 Jul 2009 18:51:34 +0000

Troubled Asset Relief Program Total

Who:

Treasury

Maximum Amount:

475000000000

Amount Spent:

110580000000

Deficit Impact:

32000000000

The Troubled Assets Relief Program (TARP) was created on October 3, 2008 as part of the Emergency Economic Stabilization Act of 2008. TARP was intended to preserve the US financial sector and avoid future structural collapse by allowing the Department of the Treasury to purchase so-called "troubled assets," although different approaches were taken once the program was put into place. The program originally allowed for $700 billion in spending, including three "tranches" of $250 billion, $100 billion, and $350 billion (available upon request from the President and approval from Congress).

The Treasury Departments under both the Bush and Obama administrations have used TARP in a number of ways, including for the following programs: The Making Home Affordable Mortgage Program, Capital Purchase Program, Consumer and Business Lending Initiative, Public Private Investment Program, Capital Assistance Program, Asset Guarantee Program, Targeted Investment Program, and Automotive Industry Financing Program.

Of the $700 approved for the program, the Treasury has announced plans to provide $644 billion to specific TARP programs. Of that amount, a total of $444 billion have been formalized through commitments.

Source:

Troubled Assets Relief Program

Notes:

Amount spent as of 8/22/2012. Maximum amount based on quarterly report by Special Inspector General for TARP (http://www.sigtarp.gov/reports/congress/2009/October2009_Quarterly_Report_to_Congress.pdf). Deficit impact comes from CBO's December 2011 Report on TARP.

In its 2010 August Budget and Economic Update, CBO estimated that over the life of the program, TARP would cost $66 billion.

In November 2010, CBO revised its estimate of the program downward further to $25 billion.

In March 2011, CBO once again lowered its cost estimate of the program to $19 billion.

In December 2011, CBO raised its estimate of TARP to $34 billion.

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