Stimulus.org - Equity Purchase

AIG Investment Program

Jason Peuquet — Tue, 03 Nov 2009 21:59:38 +0000

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

70000000000

Amount Spent:

16320000000

Deficit Impact:

22000000000

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.

Despite the Federal Reserve’s initial moves to shore up AIG through the $60 billion line of credit and a $37.8 billion loan, AIG’s condition continued to decline. The Treasury joined the Federal Reserve in its efforts to assist AIG on November 10, 2008, purchasing $40 billion in preferred equity shares to allow AIG to obtain new capital without adding any additional leverage, all in an effort to improve AIGs credit rating. Again in March 2009, the Treasury deemed AIG to be in need of further assistance given continued market declines and the difficulty AIG had experienced in finding potential buyers for various units, under the government’s divestiture plan. The Treasury provided AIG with a $30 billion Equity Capital Facility in exchange for 300,000 shared of Series F preferred stock. The U.S. government now has roughly an 80 percent ownership stake in AIG. As of June 30, 2009, AIG had roughly $830 billion in assets.

On 1/14/2011, Treasury made several moves in accordance with its AIG exit plan. AIG repaid the FRBNY credit facility and Treasury converted some of its assets to common stock (while receiving additional stock). These moves left Treasury with about 1.65 billion shares of AIG, giving it 92 percent ownership of the company. Treasury will now sell off these shares as they see fit.

On May 24, 2011, Treasury sold 200 million shares of common stock for $5.8 billion in proceeds. This move reduced Treasury's share of AIG common stock from 92 percent to 77 percent.

The program was originally titled "Systemically Important and Failing Institutions," but has since been renamed "American International Group Investment Program."

Source:

Government Accountability Office Report on AIG, Septmber 2009

January 14 Treasury Release

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.

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Targeted Investment Program

Jason Peuquet — Tue, 03 Nov 2009 21:33:01 +0000

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Equity Purchase

Maximum Amount:

40000000000

Amount Spent:

Deficit Impact:

-1250000000

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.

This purchase was on top of an initial $25 billion investment through the Capital Purchase Program, and followed by a multi-agency government guarantee of approximately $118 billion of its assets offered through the Department of Treasury, FDIC, and Federal Reserve.

In December 2009, both Bank of America and Citigroup repurchased $20 billion each in their held by TIP. Currently, there are no outstanding investments for this program.

Source:

January 16, 2009 Treasury Release

Troubled Asset Relief Program

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.

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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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Purchase of Freddie Mac Preferred Stock

suggp — Fri, 14 Aug 2009 19:04:37 +0000

Who:

FHFA

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Government and GSEs

Action Type:

Equity Purchase

Maximum Amount:

100000000000

Maximum Amount Special Symbol:

Amount Spent:

63700000000

Deficit Impact:

As part of conservatorship, the Treasury agreed to purchase up to $100 billion in stock from each GSE ($200 billion total) including an immediate receipt of $1 billion in senior preferred stock from each GSE as well as warrants to purchase 79.9% of each GSE's common stock. On 2/13/2009, the Treasury Department increased the maximum amount of GSE stock they would agree to purchase by $100 billion each, bringing the total to $400 billion. At the time, they estimated that, in total, they would be required to purchase $50 billion from Freddie Mac and $16 billion from Fannie Mae.

In a release on December 24, 2009, the Treasury announced that it has terminated the $200 million cap on purchases on Fannie Mae and Freddie Mac preferred stocks, stating thatsuch steps "are necessary for preserving the continued strength and stability of the mortgage market."

Source:

Bloomberg News Article 8/7/2009

Treasury Release 12/24/2009

Notes:

Since the purchase of Freddie Mac preferred stock by FHFA constituted an intergovernmental transfer of stock from a GSE to a federal agency, the deficit impact is zero. Amount spent as of 2/25/2011 (http://www.fhfa.gov/Default.aspx?Page=70).

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Purchase of Fannie Mae Preferred Stock

suggp — Tue, 11 Aug 2009 01:33:02 +0000

Date:

September 7, 2008

Who:

FHFA

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Government and GSEs

Action Type:

Equity Purchase

Maximum Amount:

100000000000

Maximum Amount Special Symbol:

Amount Spent:

98700000000

Deficit Impact:

As part of conservatorship, the Treasury agreed to purchase up to $100 billion in stock from each GSE ($200 billion total) including an immediate receipt of $1 billion in senior preferred stock from each GSE as well as warrants to purchase 79.9% of each GSE's common stock. On 2/13/2009, the Treasury Department increased the maximum amount of GSE stock they would agree to purchase by $100 billion each, bringing the total to $400 billion. They estimated that, in total, they would be required to purchase $50 billion from Freddie Mac and $16 billion from Fannie Mae.

In a release on December 24, 2009, the Treasury announced that it has terminated the $200 million cap on purchases on Fannie Mae and Freddie Mac preferred stocks, stating that such steps "are necessary for preserving the continued strength and stability of the mortgage market."

Source:

Treasury/ FHFA Sept. 7 Announcement

Treasury Feb. 18 Statement

Wire Story 8/6/2009

Treasury Release 12/24/2009

Notes:

Since the purchase of Fannie Mae preferred stock by FHFA constituted an intergovernmental transfer of stock from a GSE to a federal agency, the deficit impact is zero. Amount spent as of 5/9/2011 (http://www.fhfa.gov/Default.aspx?Page=70).

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Capital Purchase Program

Maya MacGuineas — Mon, 20 Jul 2009 19:20:55 +0000

Capital Purchase Program

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Equity Purchase

Maximum Amount:

204940000000

Amount Spent:

9712000000

Deficit Impact:

-17000000000

Purchase of equity shares of banks by the Department of Treasury, in order to promote lending and market liquidity under the “Capital Purchase Program” of the Troubled Assets Relief Program.

The Capital Purchase Program was the first of the programs implemented under TARP. Through the program, the Treasury will invest up to $250 billion of senior preferred shares in U.S. banks, savings associations, and certain bank and loan holding companies. The maximum amount available for each financial institution is $25 billion or 3 percent of risk-weighted assets, with a mimumum subscription amount of 1 percent of risk-weighted assets. In the program's announcement, the Treasury stated that "companies participating in the program must adopt the Treasury Department's standards for executive compensation and corporate governance," applying to the CEO, CFO, and the next three highly compensated executive officers.

Hundreds of financial instutitions, including the country's largest banks, have participated in the program.

Source:

Troubled Asset Relief Program

Treasury Release 10/14/2008

Notes:

Original Treasury statements indicate that the maximum amount for CPP is $250 billion. However, in the report Special Inspector General on TARP report (http://www.sigtarp.gov/reports.shtml) the maximum was listed as $218 billion, although the Treasury could be authorized to spend up to $250 billion through the program. Since then, the Treasury has listed the maximum amount as $205 billion in its report on TARP (http://www.financialstability.gov/latest/reportsanddocs.html). Amount spent indicates loans and purchases minus loan repayments (but not dividends), as of 8/22/2012 (http://www.financialstability.gov/latest/index.html). Deficit impact based on CBO's estimate of CPP's cost as stated in their March 2011 Report on TARP.

Deficit impact is from CBO's March 2011 Report on TARP. Deficit impact for individual banks is either derived from CBO's subsidy rate for the Capital Purchase Program (-4%), as listed in CBO's January 2010 baseline or the amount of dispositions received if the bank has repaid Treasury in full.

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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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Purchase of Fannie/Freddie Discount Notes

Maya MacGuineas — Fri, 10 Jul 2009 19:38:29 +0000

Fed Purchases of GSE Discount Notes

Date:

September 19, 2008

Policy Area:

Financial Sector Policy

Economic Target:

Government and GSEs

Action Type:

Equity Purchase

Maximum Amount Special Symbol:

Amount Spent:

57501000000

Purchase of short-term debt obligations of Fannie Mae, Freddie Mac and Federal Home Loan. Banks from primary dealers.

Source:

Federal Reserve Sep. 19th Release

Federal Reserve Balance Sheet

Notes:

Maximum amount limited only by total GSE debt obligations. Amount spent is purchases reported on the Fed balance sheet as of 3/30/2010. 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.

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Fed Purchase of AIG Mortgage-Backed Securities

Maya MacGuineas — Fri, 10 Jul 2009 19:29:52 +0000

Fed Purchase of AIG Mortgage-Backed Securities

Date:

November 10, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

23000000000

Amount Spent:

61000000

Federal Reserve provides up to $23 billion in loans to a limited liability company, 'Maiden Lane II,' formed to purchase residential mortgage-backed securities in AIG's portfolio.

Source:

Federal Reserve Nov. 10 Release

Notes:

Amount spent indicates loans outstanding as of 1/23/2013 (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.

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Fed Purchase of AIG Collateralized Debt Obligations

Maya MacGuineas — Fri, 10 Jul 2009 19:28:05 +0000

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:

30000000000

Amount Spent:

23000000

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.

Source:

Federal Reserve Nov. 10 Release

Notes:

Amount spent represents loan outstanding as of 1/16/2013 (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.

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Purchase of Fannie/Freddie Debt

Maya MacGuineas — Fri, 10 Jul 2009 19:24:34 +0000

Purchase of Fannie / Freddie Debt

Date:

November 25, 2008

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Government and GSEs

Action Type:

Equity Purchase

Maximum Amount:

200000000000

Amount Spent:

75111000000

The Federal Reserve originally announced that it would purchase up to $100 billion in debt from Fannie Mae, Freddie Mac, and Federal Home Loan Bank, and up to and $500 billion in mortgage-backed securities from Fannie Mae, Freddie Mac, and Ginnie Mae. On March 18, 2009, the Federal Reserve raised its intended purchases of agency debt (Fannie, Freddie, Federal Home Loan Bank) to $200 billion (a $100 billion increase) and its intended purchases of agency mortgage-backed securities to $1.25 trillion (a $750 billion increase).

In a statement from the FOMC on 9/23/2009, the Fed will "gradually slow the pace" of its purchases of agency debt in order to promote a smooth market transition. In addition, the FOMC stated that such purchases should expire by the end of Q1 2010.

Source:

Federal Reserve 3/18/2009 Release

Federal Reserve 11/25/2008 Release

Notes:

Amount spent indicates holdings of agency debt and mortgage backed securities as of 1/16/2013. See 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.

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Purchase of AIG Preferred Stock

suggp — Fri, 10 Jul 2009 18:09:06 +0000

Date:

November 10, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

40000000000

Amount Spent:

8780000000

Deficit Impact:

10900000000

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.

On 1/14/2011, Treasury exchanged the $40 billion of preferred stock for an equivalent amount of common stock, equal to 925 million shares of AIG.

Source:

Troubled Assets Relief Program

January 14 Treasury Release

Notes:

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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Purchase of Citigroup Preferred Stock

Maya MacGuineas — Fri, 10 Jul 2009 18:06:38 +0000

Date:

November 23, 2008

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Equity Purchase

Maximum Amount:

20000000000

Amount Spent:

Deficit Impact:

-1700000000

In November of 2008, the Department of Treasury purchased $20 billion in preferred stock from Citigroup under the "Targeted Investment Program" of TARP.

This purchase was on top of an initial $25 billion investment through the Capital Purchase Program, and followed by a multi-agency government guarantee of approximately $306 billion of its assets offered through the Department of Treasury, FDIC, and Federal Reserve.

On December 23, 2009, Citigroup repurchased the full $20 billion in assets held by TARP through TIP.

Source:

Troubled Assets Relief Program

Notes:

Amount spent indicates equities purchased as of 2/1/2010 ( http://www.financialstability.gov/docs/transaction-reports/transaction_report_04-20-2009.pdf ).

Deficit impact is derived from CBO's subsidy rate for the investment in Citigroup under the Targeted Investment Program, as detailed in CBO's January 2010 baseline.

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Purchase of Bank of America Preferred Stock

Maya MacGuineas — Fri, 10 Jul 2009 17:45:08 +0000

Date:

January 16, 2009

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Equity Purchase

Maximum Amount:

20000000000

Amount Spent:

Deficit Impact:

-1300000000

In January of 2009, the Department of Treasury purchased $20 billion in preferred stock from Bank of America under the "Targeted Investment Program" of TARP.

On December 9, 2009, Bank of America repurchased the full $20 billion in assets held by TARP through TIP.

On March 3, 2010 Bank of America repurchased $1.255 worth of warrants.

Source:

Treasury January 16th Release

Notes:

Amount spent indicates investment made as of 4/10/2010 (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.

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Capital Assistance Program

Maya MacGuineas — Fri, 10 Jul 2009 17:15:59 +0000

Date:

February 10, 2009

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Equity Purchase

Maximum Amount Special Symbol:

Amount Spent:

Deficit Impact:

Program first announced by Treasury Secretary Timothy Geithner on 2/10/2009. When implemented, it will provide capital to banks and bank holding companies that demonstrate a need for further capital to support lending activities and survive further economic downturns. Banks that participate will receive preferred securities that are convertible into common equity if necessary.

In a press release on November 9, 2009, the Treasury announced the end of the Capital Assistance Program, closing with no investments made to date. The closing came at the same time that the Federal Reserve announced that of the 10 banks shown to be in need of additional capital buffers, in the face of larger than expected losses, from stress tests conducted in May 2009, 9 had sufficiently raised enough capital. GMAC remained as the only bank holding company to be in need of further capital increases, which TARP will provide through the Automotive Industry Financing Program.

Source:

Treasury Information on Capital Assistance Program

Treasury Release 11/09/2009

Federal Reserve Release 11/09/2009

Notes:

Maximum amount and deficit impact unknown. Program closed on 11/09/2009.

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AIG Equity Capital Facility

Maya MacGuineas — Fri, 10 Jul 2009 17:11:08 +0000

Date:

March 2, 2009

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

29835000000

Amount Spent:

7535000000

Deficit Impact:

8100000000

The Treasury will allow AIG to receive up $30 billion dollars in exchange for AIG preferred stock. Actions taken in coordination with a restructuring of the Fed's line of credit to AIG.

On 1/14/2011, after AIG repaid the New York Fed's credit facility, Treasury transferred part of this facility into 167 million shares of common stock, using the remaining money to hold $20 billion in AIG subsidiaries.

Source:

Treasury March 2 Term Sheet

Fed March 2 Release

Treasury January 14 Release

Notes:

Maximum amount specified in Treasury term sheet. Amount spent current as of 3/21/2012, as reported in Treasury transaction reports.

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 November 2010 Report on TARP, CBO estimated that the total cost of AIG assistance would be $14 billion. It is unclear how the deficit impact breaks down between the two types of assistance.

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