On December 31, 2009, the program was  closed to new investments. CPP Largely Has Wound Down and Program Income Surpassed Original Investments

Treasury largely has wound down its CPP investments, and as of  February 29, 2016, had received $226.7 billion in repayments and income  from its CPP investments, exceeding the amount originally disbursed by  almost $22 billion. Treasury’s most  recent estimate of lifetime income for CPP (as of Nov. 30, 2015) was  about $16 billion. As of February 29, 2016, 16 of the 707 institutions that originally  participated in CPP remained in the program (see fig. Most of the Remaining CPP Institutions Continue to Exhibit Signs of Financial Weakness

Our analysis of financial condition metrics over the past 4 years indicates  that among the 16 institutions remaining in CPP as of February 29, 2016,  several have continued to face challenges. Although the median return  on average assets—a key indicator of a company’s profitability—was  higher in the fourth quarter of 2015 than in 2011, 9 of the 16 institutions  had negative returns in 2015. Furthermore, 6 of the 16 institutions had a  lower return on assets in 2015 than they did at the end of 2011. Treasury officials stated that the remaining CPP institutions generally had  weaker capital levels and worse asset quality relative to institutions that  had exited the program. Of the 16 CPP institutions remaining as of February 29, 2016, 1 of the 14  required to pay dividends made the most recent scheduled dividend or  interest payment. Treasury Expects Most Remaining Institutions to Exit through Restructurings

Treasury officials expect most of the remaining CPP institutions to exit  through restructurings but do not have a specific end date for exiting all  their CPP investments and winding down the CPP program. Restructurings allow troubled financial institutions to  negotiate new terms or discounted redemptions for their investments. With this option, Treasury receives  cash or other securities that generally can be sold more easily than  preferred stock, but the restructured investments are sometimes sold  at a discount to par value. The method by which institutions have exited the program has varied over  time. From 2012 to 2014, auctions were the  predominant exit strategy. Treasury expects to rely on restructurings and auctions  because the overall financial condition of the remaining institutions makes  full repayment unlikely. Agency Comments

We provided Treasury with a draft copy of this report for review and  comment. Treasury provided technical comments that we have  incorporated as appropriate. We are sending copies of this report to the appropriate congressional  committees.
Why GAO Did This Study

CPP was established as the primary means of restoring stability to the financial system under the Troubled Asset Relief Program (TARP). Under CPP, Treasury invested almost $205 billion in 707 eligible financial institutions between October 2008 and December 2009. CPP recipients have made dividend and interest payments to Treasury on the investments. The Emergency Economic Stabilization Act of 2008 includes a provision that GAO report at least every 60 days on TARP activities. This report examines (1) the status of CPP, (2) the financial condition of institutions remaining in the program, and (3) Treasury's strategy for winding down the program.
To assess the program's status, GAO reviewed Treasury reports on the status of CPP. In addition, GAO used financial and regulatory data to assess the financial condition of institutions remaining in CPP. Finally, GAO interviewed Treasury officials to examine the agency's exit strategy for the program.
GAO provided a draft of this report to Treasury for its review and comment. Treasury provided technical comments that GAO incorporated as appropriate.

What GAO Found

The Capital Purchase Program (CPP) largely has wound down and the Department of the Treasury's (Treasury) returns on CPP investments surpassed the original amount disbursed. As of February 29, 2016, Treasury had received $226.7 billion in repayments and income from its CPP investments, exceeding the amount originally disbursed by almost $22 billion. As of the same date, 16 of the 707 institutions remained in the program. Treasury's most recent estimate of lifetime income for CPP (as of Nov. 30, 2015) was about $16 billion.
Most of the remaining CPP institutions have continued to exhibit signs of financial weakness. Specifically, 9 of the 16 institutions had negative returns on average assets (a common measure of profitability) in 2015. Also, 6 institutions had a lower return on assets in 2015 than they did at the end of 2011. Treasury officials stated that the remaining CPP firms generally had weaker capital levels and worse asset quality than firms that had exited the program. Also, nearly all the firms that are required to pay dividends have continued to miss payments.
Treasury expects most remaining CPP institutions to exit through restructurings but has not set time frames for winding down the program. Over the past 6 years, repayment of Treasury's investment and Treasury's auction of CPP securities to interested investors were the primary means by which institutions exited CPP. Restructurings—the expected exit method for the remaining firms—allow institutions to negotiate terms for their investments and require institutions to raise new capital or merge with another institution. With this option, Treasury agrees to receive cash or other securities, typically at a discount. Treasury officials expect to rely primarily on restructurings because the overall financial condition of the remaining institutions makes full repayment unlikely.