Treasury released its Fourth Tranche Report and Appendix to Congress yesterday, representing TARP funding of approximately $266.9 billion. Since the release of the Third Tranche Report on December 2, 2009, Treasury closed $65.4 billion in transactions under the Capital Purchase Program (CPP), the Automotive Industry Financing Program, and the Targeted Investment Program.
Interim Assistant Secretary for Financial Stability Neel Kashkari provided a “comprehensive update” yesterday on Treasury’s implementation of TARP. In his discussion of the programs that Treasury has initiated under TARP, Mr. Kashkari defended the decision to use $250 billion to invest in healthy, viable financial institutions under the CPP rather than “saving” failing institutions. He stated that each “dollar invested in a healthy bank is far more likely to be used to promote lending to creditworthy borrowers than a dollar invested in a failing bank, which would more likely use it to stay afloat.” The statement also provided insight into certain of the methods Treasury is utilizing to measure the results of its actions in stabilizing the financial markets, increasing bank lending, and protecting taxpayers. Mr. Kashkari said that the “most important evidence” that Treasury’s strategy is working is that it has “stemmed a series of financial institution failures.” Among other measurement techniques, Treasury has been working with the federal banking regulators to track lending activity among banks that have received TARP funds. Treasury plans to use quarterly call report data to compare the balance sheets and intermediation activities of those banks that have received TARP funds with those banks that did not. Additionally, Treasury intends to augment that analysis with monthly data they plan to collect from the largest banks receiving TARP funds for a more frequent “snapshot” of lending activities.