The U.S. Department of Treasury has announced its intention to sell some of its preferred Capital Purchase Program (CPP) investments as part of the government's strategy to wind down the Troubled Asset Relief Program (TARP) and recover remaining CPP investments.
In order to sell the CPP investments, Treasury will conduct auctions for all of its preferred stock positions for the following four institutions: First United Corporation (Oakland, Maryland); Liberty Shares, Inc. (Hinesville, Georgia); Lone Star Bank (Houston, Texas); and Porter Bancorp, Inc. (Louisville, Kentucky). In all, Treasury has outstanding investments in 39 CPP institutions.
Treasury expects to begin the auctions on or about November 17 and close on November 20 at 6 p.m. Eastern Standard Time, and the auctions will be offered to principally to domestic qualified institutional buyers and certain domestic institutional accredited investors.
Signed into law by the Bush administration, TARP was created in 2008 at the height of the nation's financial crisis in order to implement programs to stabilize the financial system during the financial crisis of 2008. Treasury initially invested $245 billion in TARP's bank programs, and to date Treasury has recovered $275 billion through repayments, dividends, interest, and other income. The $30 billion overage has resulted in a significant profit for taxpayers. The Small Business Lending Fund (SLBF) has resulted in the repayment of about $2.2 billion in TARP funds by CPP institutions that refinanced their repayments under the SLBF. Congress created the SBLF as a way for CPP institutions to repay TARP funds.
TARP has also helped several other industries become financially stable, including credit, auto, housing, and the investment to bail out AIG. To date, about $420 billion has been disbursed for TARP, and Treasury has recovered 99.2 percent of that money, according to Treasury's web site. The only industry for which Treasury has not recovered more than 100 percent of the money disbursed is the auto industry, which is at 86.3 percent, according to Treasury's web site.
"The goal remains to protect taxpayer interests, promote financial stability, and preserve the strength of our nation’s community banks," Treasury said in a press release. "Treasury will continue to use a combination of repayments, restructurings, and sales to manage and recover those remaining investments."
TARP is expected to cost the government about $37.5 billion, far less than the $700 billion which Congress authorized for the program. Much of the cost has gone toward TARP to assist struggling homeowners avoid foreclosure.