Congressional Oversight Panel March 16, 2011 MARCH OVERSIGHT REPORT* The Final Report of the Congressional Oversight REPORTPanel * *Submitted under Section 125(b)(1) of Title 1 of the Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343 Table of Contents Glossary of Terms ................................................................................................................7 Executive Summary .............................................................................................................9 Section One: I. Introduction ..................................................................................................................13 A. Key Events of the Financial Crisis .........................................................................14 1. Events Leading up to Enactment of EESA .......................................................14 2. Initial TARP Investments in the Largest Institutions .......................................23 B. Overview of Government Efforts ..........................................................................25 1. Federal Reserve .................................................................................................25 2. FDIC .................................................................................................................29 3. Treasury Department ........................................................................................30 4. Coordinated Action ...........................................................................................32 II. Banks............................................................................................................................38 A. Capital Infusions and Bank Balance Sheets...........................................................38 1. Summary of COP Reports and Findings ...........................................................38 2. Panel Recommendations and Updates ..............................................................46 3. Lessons Learned................................................................................................63 B. Guarantees and Contingent Payments ...................................................................65 1. Background .......................................................................................................65 2. Summary of COP Report and Findings ............................................................66 3. Panel Recommendations and Updates ..............................................................67 4. Lessons Learned................................................................................................67 2 C. Global Context and International Effects of the TARP .........................................68 1. Background .......................................................................................................68 2. Summary of COP Report and Findings ............................................................70 3. Panel Recommendations and Updates ..............................................................70 4. Lessons Learned................................................................................................71 III. Credit Markets: Small Business and Consumer Lending ............................................72 A. Background ............................................................................................................72 1. Small Business Lending ....................................................................................72 2. Consumer Lending ............................................................................................75 3. Government Efforts to Stimulate Small Business and Consumer Lending ......76 B. Summary of COP Reports and Findings ................................................................81 C. Panel Recommendations and Updates ...................................................................83 1. Current State of Commercial and Industrial Lending .......................................83 2. Consideration of Alternatives ...........................................................................84 3. Small Business Lending Fund ..........................................................................84 D. Lessons Learned.....................................................................................................85 IV. Foreclosure Mitigation .................................................................................................86 A. Background ............................................................................................................87 B. Summary of COP Reports and Findings ................................................................91 C. Panel Recommendations and Program Updates ....................................................95 1. Transparency .....................................................................................................95 2. Compliance .......................................................................................................97 3. Goals .................................................................................................................98 4. Streamlining ......................................................................................................99 5. Program Structure ...........................................................................................100 3 6. Document Irregularities ..................................................................................104 D. Data Updates ........................................................................................................105 1. Treasury‘s Foreclosure Mitigation Programs .................................................105 2. Housing Market ..............................................................................................109 E. Lessons Learned...................................................................................................115 V. Automotive Industry Assistance ................................................................................117 A. Background ..........................................................................................................117 1. Initial Treasury Action ....................................................................................119 2. Additional Initiatives and Actions ..................................................................121 B. Summary of COP Reports and Findings ..............................................................122 C. Panel Recommendations and Updates .................................................................126 1. Transparency ...................................................................................................126 2. Accountability .................................................................................................127 3. Improved Balance among Treasury‘s Roles ...................................................128 4. Continued Oversight .......................................................................................128 5. Updates ...........................................................................................................129 D. Lessons Learned...................................................................................................129 VI. AIG ............................................................................................................................130 A. Background ..........................................................................................................130 1. Government Assistance ..................................................................................132 B. Summary of COP Report and Findings ...............................................................138 1. AIG Changed a Fundamental Market Relationship ........................................138 2. The Powerful Role of Credit Rating Agencies ...............................................139 3. The Options Available to the Government .....................................................139 4. The Government‘s Authorities in a Financial Crisis ......................................141 4 5. Conflicts ..........................................................................................................141 C. Panel Recommendations ......................................................................................142 1. Government Exit Strategy/Equity Market Risk Mitigation ............................142 2. Status of COP Recommendations ...................................................................143 D. Updates ................................................................................................................143 1. Recent Developments .....................................................................................143 2. Outlook ...........................................................................................................151 E. Lessons Learned...................................................................................................156 VII. Administration of the TARP ................................................................................157 A. Treasury‘s Use of Its Contracting Authority .......................................................157 1. Background .....................................................................................................157 2. Summary of COP Report and Findings ..........................................................158