Program Purpose and Overview
When the Obama Administration took office, credit markets were all but frozen, meaning that it was extremely difficult for consumers and businesses to get loans. Availability of credit is critical for small businesses to grow and for consumers to make home improvements, buy a new car, or send their children to college.
There was a time when most Americans relied on local community banks to provide this type of consumer lending. Today however, it relies on complex secondary markets, which had nearly ground to a halt in the fall of 2008. Therefore, the government took action to jumpstart these crucial markets.
Three programs were launched: the Public-Private Investment Program (PPIP), the SBA 7(a) Securities Purchase Program, and the Term Asset‐Backed Securities Loan Facility (TALF). Although the specific goals and implementation methods of each program differed, the overall goal of these three programs was the same—to restart the flow of credit to meet the critical needs of small businesses and consumers.
- On January 24, 2012, Treasury closed the SBA 7(a) Securities Purchase Program. In total, Treasury recovered $376 million, representing a gain of approximately $8 million to taxpayers on Treasury’s original investment of $368 million.
- TALF closed to new lending on June 30, 2010. As of December 31, 2011, the balance of outstanding TALF loans was $9 billion, and Treasury estimates that taxpayers will earn a positive lifetime return of $430 million through the program.
- Treasury has received almost $9.8 billion in net cumulative equity distributions, approximately $350 million in cumulative interest payments, and $12.4 billion in cumulative debt principal payments from the PPIFs.
Programs at a Glance
- Public-Private Investment Program
The Legacy Securities Public-Private Investment Program (PPIP) is designed to support market functioning by bringing private capital back into the market for legacy securities (i.e., non-agency residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) that were central to the problems facing the U.S. financial system. Under the program, Treasury originally committed $22.1 billion in Public-Private Investment Funds (PPIFs) to purchase eligible assets. Private sector fund managers also committed capital to these funds. By restarting the market for these securities, the program has helped financial institutions begin to remove these assets from their balance sheets, allowing these institutions to re-deploy capital and extend new credit to households and businesses.
- SBA 7 (a) Securities Purchase Program
Treasury launched the SBA 7(a) Securities Purchase Program to help unlock credit for small businesses. Under this program, Treasury purchased securities backed by the government guaranteed portion of SBA 7(a) small business loans and provided additional liquidity to the market in order to increase overall small business lending. Securities purchased by Treasury included approximately 700 loans across 17 diverse industries including retail, food services, manufacturing, scientific and technical services, health care, and educational services.
Term Asset Backed Loan Facility
The Term Asset-Backed Securities Loan Facility (TALF) is a joint program with the Federal Reserve. The program was launched in March 2009 with the aim of helping to restart the asset-backed securitization (ABS) markets that provide credit to consumers and small businesses. The financial crisis severely impacted these markets. Under this program, the Federal Reserve Bank of New York made non‐recourse loans to buyers of AAA‐rated asset‐backed securities to help stimulate consumer and business lending. Treasury used TARP funds to provide credit support for these loans.