Targeted Investment Program
Treasury created the Targeted Investment Program (TIP) to stabilize the financial system by making investments in institutions that are critical to the functioning of the financial system. This program focuses on the complex relationships and reliance of institutions within the financial system. Investments made through the TIP seek to avoid significant market disruptions resulting from the deterioration of one financial institution that can threaten other financial institutions and impair broader financial markets and pose a threat to the overall economy. Through the TIP, Treasury is working to stabilize the financial system by reducing the chance that one firm’s distress will threaten otherwise financially-sound businesses, institutions, and municipalities, which could cause an adverse spillover effect on employment, output, and incomes.
Treasury will determine the form, terms, and conditions of any investment made pursuant to this program on a case-by-case basis in accordance with the considerations mandated in The Emergency Economic Stabilization Act of 2008 (EESA). Treasury may invest in any financial instrument, including debt, equity, or warrants, that the Secretary of the Treasury determines to be a troubled asset, after consultation with the Chairman of the Board of Governors of the Federal Reserve System and notice to Congress. Treasury will require any institution participating in this program to provide Treasury with warrants or alternative consideration, as necessary, to minimize the long-term costs and maximize the benefits to the taxpayers in accordance with EESA.
TIP's flexibility allows Treasury to be agile in using the most effective tools for a particular institution with the goal of further stabilizing the financial system.
Institutions that participate in the Targeted Investment Program are subject to stringent regulations regarding Executive Compensation. Click here for details on Executive Compensation.
Eligibility Considerations
In determining whether an institution is eligible for participation, Treasury may consider, among other things:
1. The extent to which destabilization of the institution could threaten the viability of creditors and counterparties exposed to the institution, whether directly or indirectly;
2. The extent to which an institution is at risk of a loss of confidence and the degree to which that stress is caused by a distressed or illiquid portfolio of assets;
3. The number and size of financial institutions that are similarly situated, or that would be likely to be affected by destabilization of the institution being considered for the program;
4. Whether the institution is sufficiently important to the nation’s financial and economic system that a loss of confidence in the firm’s financial position could potentially cause major disruptions to credit markets or payments and settlement systems, destabilize asset prices, significantly increase uncertainty, or lead to similar losses of confidence or financial market stability that could materially weaken overall economic performance; and
5. The extent to which the institution has access to alternative sources of capital and liquidity, whether from the private sector or from other sources of government funds.
In making these judgments, Treasury will obtain and consider information from a variety of sources, and will take into account recommendations received from the institution’s primary regulator, if applicable, or from other regulatory bodies and private parties that could provide insight into the potential consequences if confidence in a particular institution deteriorated.
