Stimulus.org - Government Guarantee

Asset Guarantee Program

Jason Peuquet — Tue, 03 Nov 2009 21:48:44 +0000

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

12500000000

Amount Spent:

Deficit Impact:

-2250000000

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.

See the companion guarantess of Bank of America assets by the Fed and FDIC.

See the companion guarantees of Citigroup assets by the Fed and FDIC.

Source:

January 16, 2009 Treasury Release

Treasury Nov. 23 Release

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.

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Public-Private Investment Fund: FDIC Guarantees

suggp — Fri, 10 Jul 2009 19:42:16 +0000

Date:

February 10, 2009

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

600000000000

Amount Spent:

727770000

Deficit Impact Special Symbol:

See the companion TARP entry for the Public-Private Investment Program (PPIP) and the Fed entry for PPIP.

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.

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.

On July 8, 2009 the Treasury, FDIC, and Fed released details concerning the Legacy Securities program of PPIP. According to the release , the "Treasury will invest up to $30 billion of equity and debt in PPIFs [Public-Private Investment Funds] established with private sector fund managers and private investors for the purpose of purchasing legacy securities. Thus, Legacy Securities PPIP allows the Treasury to partner with leading investment management firms in a way that increases the flow of private capital into these markets while maintaining equity “upside” for US taxpayers."

On September 16, 2009 the FDIC announced a pilot sale of receivership assets to test the Legacy Loans Program. A total of 12 consortiums bid in a competitive process for a portfolio of $1.3 billion in residential mortgage loans owned by the FDIC as Receiver of Franklin Bank, LLC in Houston, Texas. Residential Credit Solutions (RCS), the winning bidder, will pay $64.2 million for a 50 percent equity stake in the LLC, and the LLC will issue a $727.8 million note to the FDIC.

Source:

Treasury Term Sheet 3/23/2009

Treasury Release 7/8/2009

Notes:

Maximum risk is value of all debt that could possibly be guaranteed by FDIC under the current restrictions of a 6:1 debt-equity ratio. Amount spent as of 9/16/2009 (http://www.fdic.gov/news/news/press/2009/pr09172.html). Deficit impact unknown.

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Fed Guarantee of Bank of America Assets

suggp — Fri, 10 Jul 2009 19:37:42 +0000

Date:

January 16, 2009

Who:

Fed

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

87000000000

Amount Spent:

Part of multi-agency government guarantee of approximately $118 billion in Bank of America assets, most of which it acquired through the purchase of investment bank Merrill Lynch. Under the terms of the agreement, Bank of America is responsible for the first $10 billion in losses on the assets. Remaining losses are divided 90/10 between the government and Bank of America. For the next $10 billion in losses, the Treasury and FDIC split the government’s 90% share. 90% of the remaining losses are covered by the Fed through a non-recourse loan.

See the companion guarantees of Bank of America assets by the Treasury and the FDIC.

Source:

Treasury Jan. 16th Release

Term Sheet for Bank of America Asset Guarantee

Notes:

Maximum amount figure represents total potential liabilities.

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Fed Guarantee of Citigroup Assets

suggp — Fri, 10 Jul 2009 19:29:08 +0000

Date:

November 23, 2008

Who:

Fed

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

230000000000

Amount Spent:

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 the remaining losses covered by the Federal Reserve with a non-recourse loan.

See the companion guarantees of Citigroup assets by the Treasury and FDIC.

Source:

Treasury Nov. 23 Release

Term Sheet for Citigroup Asset Guarantee

Notes:

Maximum amount figure represents total potential liabilities.

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

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FDIC Guarantee of Citigroup Assets

suggp — Fri, 10 Jul 2009 19:23:19 +0000

Date:

November 23, 2008

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

10000000000

Amount Spent:

Deficit Impact Special Symbol:

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.

See the companion guarantee of Citigroup assets by the Fed and Treasury.

Source:

Treasury Nov. 23 Release

Term Sheet for Citigroup Asset Guarantee

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.

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Credit Union Guarantee Program

suggp — Fri, 10 Jul 2009 19:21:40 +0000

Date:

October 16, 2008

Who:

NCUA

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount Special Symbol:

Amount Spent Special Symbol:

Deficit Impact Special Symbol:

Establishment of Temporary Corporate Credit Union Liquidity Guarantee Program, which guarantees debt obligations for eligible corporate credit unions for up to 100% of their maximum secured debt as of September 30, 2008.

Source:

Corporate Credit Union Guidance Letter No. 2008-02

Notes:

NCUA is the National Credit Union Administration. Fiscal implications unknown.

Deficit impact unknown.

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FDIC Bank Liquidity Guarantee Program

suggp — Fri, 10 Jul 2009 19:17:47 +0000

FDIC Liquidity Guarantee Program

Date:

October 14, 2008

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

609187000000

Amount Spent:

313071000000

Deficit Impact Special Symbol:

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.

On 3/19/2009, the FDIC announced that it would extend its liquidity guarantee program through October 31, 2009, with "a surcharge on debt issued with a maturity of one-year or more beginning in the second quarter to gradually phase-out the program."

Source:

FDIC Oct. 14 Press Release

FDIC Oct 19 Press Release on Extension of Liquidity Program

Monthly Report Ending 4/30/2009

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.

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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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Student Loan Guarantees

suggp — Fri, 10 Jul 2009 19:13:11 +0000

Date:

May 7, 2008

Who:

Dept. of Educ.

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

130000000000

Maximum Amount Special Symbol:

Amount Spent:

63719000000

Deficit Impact Special Symbol:

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

Source:

Monthly Treasury October 2009

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.

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Auto Supplier Support Program

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

Date:

March 19, 2009

Policy Area:

Sector Policy (Non-Financial)

Economic Target:

Manufacturers

Action Type:

Government Guarantee

Maximum Amount:

5000000000

Amount Spent:

Deficit Impact:

-101100000

Program announced by the Treasury Department on March 19, 2009 that provides government guarantees for payments to suppliers from participating auto companies. General Motors and Chrysler have already agreed to partcipate in the program. The program has two components:

Automobile part manufacturers/suppliers that sell products to participating auto companies are eligible to receive a guarantee on the payments the auto companies owe them for their products. This programs is available to suppliers for a "modest" fee.
Suppliers may also choose to sell any debt owed to them by auto companies (i.e., "receivables") to a third-party purchaser arranged by the auto companies and U.S. government. This gives the suppliers immediate funds to increase their liquidity position.

The Treasury says it will provide up to $5 billion in total financing for the program.

On 4/8/2009, the Treasury Department announced that Chrysler and GM had officially begun the Supplier Support Program "to any receivable created with respect to goods shipped after March 19, 2009 made on qualifying commercial terms."

As of 4/7/2010, due to a series of repayments, the outstanding investment in the Auto Supplier Support Program fell to $413 million.

Loans under the Auto Supplier Program have been fully repaid.

Source:

Treasury Fact Sheet 3/19/2009

Treasury Announcement 4/8/2009

Notes:

Amount spent taken from Transaction Reports, current as of 10/15/2010. Maximum amount is maximum financing as stated by Treasury. Amount spent equals loan amount, which will be incrementally funded.

Deficit impact is derived from CBO's subsidy rate for the all assistance given to the automotive industry (60%), as listed in the CBO's January 2010 baseline.

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Treasury Guarantee of Citigroup Assets

Maya MacGuineas — Fri, 10 Jul 2009 18:05:05 +0000

Date:

November 23, 2008

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

5000000000

Amount Spent:

Deficit Impact:

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.

On December 23, 2009, Citigroup terminated the asset guarantee agreement.

See the companion guarantee of Citigroup assets by the Fed and FDIC.

Source:

Treasury Nov. 23 Release

Term Sheet for Citigroup Asset Guarantee

Notes:

Amount spent current as of 1/4/2010 (http://www.financialstability.gov/docs/transaction-reports/transaction_report_04-20-2009.pdf).

Deficit impact is derived from CBO's calculated subsidy rate for Citigroup's guaranteed assets (0%), as detailed in the CBO's January 2010 baseline.

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Credit Protection For Fed TALF Loan Programs

Maya MacGuineas — Fri, 10 Jul 2009 18:02:07 +0000

Date:

November 25, 2008

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

30000000000

Amount Spent:

4300000000

Deficit Impact:

215000000

Originally up to $100 billion of credit protection from the Treasury's Troubled Asset Relief Program to the Federal Reserve for its Term Asset Backed Securities Loan Facility, which provides up to $1 trillion in liquidity to financial institutions that provide small business loans and consumer lending such as auto loans, student loans and credit cards.

On April 2nd, the Wall Street Journal reported that Treasury had stated that its maximum committment was reduced to $55 billion. The Congressional Oversight Panel's Six-Month TARP Report also cites $55 billion as the program's maximum committment.

In a letter released on April 20, 2009, Secretary Geithner released a letter stating that TALF's "projected allocation" would be $80 billion dollars: $20 billion of this amount would support the original asset classes announced at the program's inception, $35 billion would support the expanded class of assets announced on March 19, 2009, and $25 billion would go to the purchase of legacy securities within the Public-Private Investment Program.

On July 19th, 2010, Treasury, the Federal Reserve Bank of New York, and TALF amended the original agreement to reduce the maximum loan amount to $4.3 billion.

Source:

Troubled Assets Relief Program

Congressional Oversight Panel Six Month TARP Report

Geithner Letter 4/20/2009

Notes:

Maximum amount indicates maximum as reported by the Special Inspector General for TARP in the quarterly report to Congress in January 2010 (http://www.sigtarp.gov/reports/congress/2010/January2010_Quarterly_Report_to_Congress.pdf). However, the report noted that this number may be subject to change if TALF reaches $200 billion. Amount spent as of 4/27/2011 (http://www.financialstability.gov/latest/index.html).

Deficit impact is derived from CBO's subsidy rate for the $4.3 billion in currently committed funds for the Term Asset-Backed Securities Loan Facility (5%), as listed in CBO's January 2010 baseline.

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Treasury Guarantee of Bank of America Assets

Maya MacGuineas — Fri, 10 Jul 2009 17:57:23 +0000

Date:

January 16, 2009

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

7500000000

Amount Spent:

Deficit Impact:

-2500000000

Part of multi-agency government guarantee of approximately $118 billion in Bank of America assets, most of which it acquired through the purchase of investment bank Merrill Lynch. Under the terms of the agreement, Bank of America is responsible for the first $10 billion in losses on the assets. Remaining losses are divided 90/10 between the government and Bank of America. For the next $10 billion in losses, the Treasury (through the Troubled Asset Relief Program) and FDIC split the government’s 90% share with the Treasury covering up to $7.5 billion and FDIC covering up to $2.5 billion. 90% of the remaining losses are covered by the Federal Reserve through a non-recourse loan.

See the companion guarantess of Bank of America assets by the Fed and FDIC.

Source:

Treasury Jan. 16th Release

Term Sheet for Bank of America Asset Guarantee

Notes:

Maximum amount figure represents Treasury's share of total assets under guarantee. Deficit impact based on amount spent.

Deficit impact is derived from CBO's estimated subsidy cost for the Treasury (TARP-funded) portion of the Bank of America asset guarantees (-$1 billion), as listed in CBO's January 2010 baseline.

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