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Capital Purchase Program

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This article is part of the Real Economy Project. Take action at BanksterUSA.org.

The Capital Purchase Program is part of the Troubled Assets Relief Program, created by the Emergency Economic Stabilization Act of 2008. The Treasury loaned and invested billions ($218 billion was authorized) in banks and financial firms to give them enough cash to cover immediate obligations and keep them afloat. No more loans are being made, but many have yet to be repaid.

From the Special Inspector General for the Troubled Asset Relief Program's October 2009 report:

“Under CPP, TARP funds are used to purchase directly preferred stock or subordinated debentures in qualified as financial institutions. Treasury created CPP to provide funds to ‘stabilize and strengthen the U.S. financial system by increasing the capital base of an array of healthy, viable institutions, enabling them [to] lend to consumers and business[es].’ As of September 30, 2009, Treasury had invested $204.6 billion in institutions through CPP.31 This represents 94% of the maximum projected funding total of $218 billion under the program, of which $70.7 billion had been repaid as of September 30, 2009.”[1]

Wall Street Bailout Accounting
(back to main table)
CAPITAL PURCHASE PROGRAM
Balance Sheet
Disbursed*: $204.9B[2]
Current outstanding: $21.7B[3]
Public Funds
Maximum at-risk: $218B[4]
Current at-risk: $21.8B (outstanding)[5]

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the Treasury Department.

The funds were an investment/loan. Cash transfers were made to banks in exchange for preferred stock and other types of corporate debt, some of which bore dividends.

Who benefits

Banks. Injections of funds to keep them afloat.

Notes

The program was closed at the end of December, providing a total of 707 U.S. banks with $204.9B.[6]

One recipient of TARP funds through the CPP, CIT Group, Inc. (CIT), received $2.33 billion in December 2008.[7] CIT eventually filed for bankruptcy on November 2, 2009.[8]

The Community Development Capital Initiative, announced in February 2010, makes low-interest loans to smaller community banks, with certain strings attached, such as that the bank lend the funds out instead of hoarding them. The Treasury has converted some of the Capital Purchase Program loans into Community Development Capital Initiative loans for eligible institutions, though the CDCI has also made independent loans. The CDCI is considered a TARP program by Treasury. In its monthly TARP reports to Congress, Treasury lists these conversions from CPP to CDCI loans as disbursements under both programs.[9]

See also:

Articles and resources

Related SourceWatch articles

References

  1. SIGTARP's report to Congress, Oct. 2009.
  2. Accounting released by Treasury on June. 23, 2011, “6-23-11 Transactions Report as of 6-22-11 Convenience Copy”. Available at http://www.financialstability.gov/latest/reportsanddocs.html . The Monthly 105(a) Report to Congress made by the Treasury (available at the same link) can also be used for CPP accounting.
  3. "Troubled Assets Relief Program (TARP) Monthly 105(a) Report – June 2011" from the U.S. Treasury, available at http://www.financialstability.gov/latest/reportsanddocs.html .
  4. Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), “Quarterly Report to Congress October 21, 2009”, p. 41.
  5. Program is drawing down, so current at-risk is equal to remaining outstanding. See notes for "outstanding."
  6. Meena Thiruvengadam, "Treasury Ends TARP Bank Investments,", Dec. 31, 2009.
  7. Letter from Jeffrey M. Peek, CEO, CIT Group, Inc., to Neil M. Barofsky, SIGTARP, March 6, 2009
  8. Tiffany Kary & Dawn McCarty, "CIT Group Files Bankruptcy, Seeks to Reduce Debt," Bloomberg, November 2, 2009.
  9. "Troubled Asset Relief Program (TARP), Monthly 105(a) Report - June 2011," U.S. Treasury, July 11, 2011. Available at http://www.treasury.gov/initiatives/financial-stability/briefing-room/reports/105/Pages/default.aspx . See Figure 1 on page 3 and note 5 on page 6.

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