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Transparency & Accountability

Updated: October 8, 2009

The Department of the Treasury is committed to transparency and accountability in all of its programs and policies, including all programs established under the Emergency Economic Stabilization Act (EESA). Under the new Financial Stability Plan, Treasury will implement new enhanced measures to ensure greater transparency and accountability for all of its programs under the EESA. In addition to these actions, Treasury has developed a productive working relationship with TARP oversight bodies including the Government Accountability Office, the TARP Special Inspector General, the Congressional Oversight Panel, and the Financial Stability Oversight Board.

Contracts: As part of Treasury’s effort to keep taxpayers informed about TARP activities, Treasury announced on January 28, 2009, that it will begin posting redacted investment contracts for future transactions on Treasury’s web site within five to ten business days of a transaction’s closing. For transactions that have already closed, Treasury will publicly post contracts on a rolling basis until all investment agreements are available on the web site. Click here to visit the contracts section of FinancialStability.gov

Measuring the Impact of CAP: Recipients of Treasury investment under the CAP will be required to show how every dollar of capital they receive is enabling them to preserve or generate new lending compared to what would have been possible without government capital assistance.

Intended Use of CAP Funds: All CAP participants must submit a plan for how they intend to use that capital to preserve and strengthen their lending capacity. This plan will be submitted during the application process, and the Treasury Department will make these reports public upon completion of the capital investment in the firm.
Impact on Lending: CAP recipients must detail in monthly reports submitted to the Treasury Department their lending broken out by category, showing how many new loans they provided to businesses and consumers and how many asset-backed and mortgage-backed securities they purchased, accompanied by a description of the lending environment in the communities and markets they serve. This report will also include a comparison to their most rigorous estimate of what their lending would have been in the absence of government support. For public companies, similar reports will be filed on an 8K simultaneous with the filing of their 10-Q or 10-K reports. Additionally, the Treasury Department will – in collaboration with federal banking agencies – publish and regularly update key metrics showing the impact of the Financial Stability Plan on credit markets. These reports will be put on the Treasury FinancialStability.gov website so that they can be subject to scrutiny by outside and independent experts.

Mortgage Foreclosure Mitigation: All recipients of capital investments under the Financial Stability Plan will be required to commit to participate in mortgage foreclosure mitigation programs consistent with guidelines Treasury released as part of its Making Home Affordable mortgage modification program.

Restricting Dividends, Stock Repurchases and Acquisitions: Limiting common dividends, stock repurchases and acquisitions provides assurance to taxpayers that all of the capital invested by the government under the Financial Stability Plan will go to improving banks’ capital bases and promoting lending. All banks that receive new capital assistance under the FSP will be:

Restricted from Paying Quarterly Common Dividend Payments in Excess Of $0.01: Until the Government Investment Is Repaid: Banks that receive exceptional assistance can only pay $0.01 quarterly. That presumption will be the same for firms that receive generally available capital unless the Treasury Department and their primary regulator approve more based on their assessment that it is consistent with reaching their capital planning objectives.
Restricted from Repurchasing Shares: All banks that receive funding from the new Capital Assistance Program are restricted from repurchasing any privately-held shares, subject to approval by the Treasury Department and their primary regulator, until the government’s investment is repaid.
Restricted from Pursuing Acquisitions: All banks that receive capital assistance are restricted from pursuing cash acquisitions of healthy firms until the government investment is repaid. Exceptions will be made for explicit supervisor-approved restructuring plans.

Executive Compensation: Treasury is in the process of drafting new and appropriate restrictions on executive compensation for financial institutions that are receiving assistance under the EESA.

Prohibiting Political Interference in Investment Decisions: All of Treasury’s investment decisions are based solely on the merit of the individual case, per the recommendations of the regulators. In addition, in January 2009, Treasury announced additional voluntary actions to bolster transparency and ensure that TARP investment decisions are protected from lobbyist influence. For example, under one measure, Treasury will certify monthly to Congress that each TARP investment decision is based solely on objective investment criteria.

Lending Snapshot: In January 2009, Treasury launched a monthly bank lending survey as part of its commitment to Congress and the public to greater communication and transparency about its programs to stabilize the financial system. The survey captures data from the 21 largest recipients of funds under the Capital Purchase Program (CPP) and helps the public easily assess the lending and other intermediation activities of these banks during this unprecedented financial markets crisis and economic downturn. On February 17, 2009, Treasury published the results of this initial survey in a Snapshot, covering the period between October and December 2008 (the first three months of the CPP program). Treasury is conducting this survey on a monthly basis and will publish monthly Snapshots on Treasury’s Web site, reflecting data from the previous month.

The Snapshot contains quantitative information on three major categories of lending – consumer, commercial, and other activities – based on banks’ internal reporting, as well as commentary to explain changes in lending levels for each category. In addition, the Snapshot contains a qualitative section that provides market color on lending demand and credit standards generally to help Treasury and the public meaningfully and accurately interpret the quantitative data. In addition, efforts will be taken under the FSP to further enhance the public’s understanding of banks’ lending by requiring companies receiving future government funds under new programs to report to Treasury how the capital they receive preserves or generates new lending and their plans to strengthen their lending capacity.

Instructions for Communications with Registered Lobbyists and Others about EESA Funds: On January 27, 2009, Secretary Geithner announced new principles designed to limit outside influence on the Emergency Economic Stabilization Act (EESA) process and ensure that investment decisions are guided by objective assessments in the best interest of the health and stability of the financial system. Treasury has followed these principles since they were announced and will continue to do so.

In addition, on July 24th, 2009, the Office of Management and Budget issued updated guidance to enhance merit-based decision making with respect to the American Recovery and Reinvestment Act (ARRA) funds and to require transparency for contacts between lobbyists and government officials concerning Recovery Act funding. That guidance supersedes the original ARRA guidance which was issued on April 24th, 2009.

In order to preserve consistency between the guidance issued regarding Recovery Act and EESA funds, Treasury has issued written guidance based on the final July 24th OMB materials. This new Treasury guidance outlines the actions that Treasury employees are required to take whenever they receive or participate in oral or written communications with any outside persons or entities regarding EESA funding determinations.