This is the accessible text file for GAO report number GAO-13-126R 
entitled 'Financial Audit: Office of Financial Stability (Troubled 
Asset Relief Program) Fiscal Years 2012 and 2011 Financial Statements' 
which was released on November 9, 2012. 

GAO-13-126R: 

United States Government Accountability Office: 
Washington, DC 20548: 

November 9, 2012:; 

Congressional Committees: 

Subject: Financial Audit: Office of Financial Stability (Troubled 
Asset Relief Program) Fiscal Years 2012 and 2011 Financial Statements: 

This report transmits the GAO auditor’s report on the results of our 
audit of the fiscal years 2012 and 2011 financial statements of the 
Office of Financial Stability (Troubled Asset Relief Program), which 
is incorporated in the enclosed Office of Financial Stability 
(Troubled Asset Relief Program) Agency Financial Report for Fiscal 
Year 2012. 

As discussed more fully in the auditor’s report that begins on page 41 
of the enclosed agency financial report, we found: 

* the financial statements are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles; 

* the Office of Financial Stability (OFS) maintained, in all material 
respects, effective internal control over financial reporting as of 
September 30, 2012; and; 

* no reportable noncompliance in fiscal year 2012 with provisions of 
laws and regulations we tested. 

The Emergency Economic Stabilization Act of 2008 (EESA)[Footnote 1] 
that authorized the Troubled Asset Relief Program (TARP) on October 3, 
2008, requires that TARP, which is implemented by OFS,[Footnote 2] 
annually prepare and submit to Congress and the public audited fiscal 
year financial statements that are prepared in accordance with U.S. 
generally accepted accounting principles.[Footnote 3] EESA further 
requires that GAO audit TARP’s financial statements annually.[Footnote 
4] We are also required under EESA to report at least every 60 days on 
the findings resulting from our oversight of the actions taken under 
TARP.[Footnote 5] This report responds to both of these requirements. 
We are sending copies of this report to the Secretary of the Treasury; 
the Assistant Secretary for Financial Stability; the Financial 
Stability Oversight Board; the Special Inspector General for TARP; the 
Acting Director of the Office of Management and Budget; interested 
congressional committees and members; and other interested parties. In 
addition, the report is available at no charge on the GAO website at 
[hyperlink, http://www.gao.gov]. 

If you have questions about this report, please contact me at (202) 
512-3406 or engelg@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. 

Signed by: 

Gary T. Engel: 
Director: 
Financial Management and Assurance: 

Enclosure: 

List of Committees: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Vice Chairman: 
Committee on Appropriations: 
United States Senate: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Richard C. Shelby: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Kent Conrad: 
Chairman: 
The Honorable Jeff Sessions: 
Ranking Member: 
Committee on the Budget: 
United States Senate: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Orrin G. Hatch: 
Ranking Member: 
Committee on Finance: 
United States Senate: 

The Honorable Harold Rogers: 
Chairman: 
The Honorable Norman D. Dicks: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Paul Ryan: 
Chairman: 
The Honorable Chris Van Hollen: 
Ranking Member: 
Committee on the Budget: 
House of Representatives: 

The Honorable Spencer Bachus: 
Chairman: 
The Honorable Barney Frank: 
Ranking Member: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Dave Camp: 
Chairman: 
The Honorable Sander Levin: 
Ranking Member: 
Committee on Ways and Means: 
House of Representatives: 

Footnotes: 

[1] Pub. L. No. 110-343, div. A, 122 Stat 3765 (Oct. 3, 2008), 
codified in part, as amended, at 12 U.S.C. §§ 5201-5261. 

[2] Section 101 of EESA, 12 U.S.C. § 5211, established OFS within the 
Department of the Treasury to implement TARP. 

[3] Section 116(b) of EESA, 12 U.S.C. § 5226(b). 

[4] Section 116(b) of EESA, 12 U.S.C. § 5226(b). 

[5] Section 116 of EESA, 12 U.S.C. § 5226, requires the Comptroller 
General to report at least every 60 days on findings under section 116. 

[End of section] 

The Department of The Treasury: 

Agency Financial Report: 

Office of Financial Stability - Troubled Asset Relief Program: 

Fiscal Year 2012: 

2011 Certificates of Excellence: 

Certificate of Excellence in Accountability Reporting: 
Best-In-Class Award: 
Presented to the U.S. Department of the Treasury, Office of Financial 
Stability. 

Certificate of Excellence in Accountability Reporting: 
Presented to the U.S. Department of the Treasury, Office of Financial 
Stability. 

[End of section] 

Table of Contents: 

Message From The Assistant Secretary For Financial Stability: 

Executive Summary: 

Part 1: Management’s Discussion and Analysis: 
 
Background, Mission, and OFS Organization Structure: 

Overview of TARP for Fiscal Year 2012: 

Key Trends/Factors Affecting TARP Future Activities and Ultimate Cost: 

Systems, Controls, and Legal Compliance: 

Limitations of the Financial Statements: 

Operational Goals: 

Operational Goal One: Ensure the Overall Stability and Liquidity of 
the Financial System: 
Capital Purchase Program: 
Targeted Investment Program: 
Asset Guarantee Program: 
Community Development Capital Initiative: 
Public-Private Investment Program: 
Term Asset-Backed Securities Loan Facility: 
Small Business Administration 7(a) Securities Purchase Program: 
Automotive Industry Financing Program: 
American International Group, Inc. (AIG) Investment Program: 

Operational Goal Two: Prevent Avoidable Foreclosures and Preserve 
Homeownership: 

Operational Goal Three: Protect Taxpayers’ Interests: 

Operational Goal Four: Promote Transparency: 

Part 2: Financial Section: 

Message From The Chief Financial Officer (CF0): 

Government Accountability Office Auditor’s Report: 

Appendix I: Management’s Report on Internal Control Over Financial 
Reporting: 

Appendix II: OFS Response to Auditor’s Report: 

Financial Statement: 

Notes To The Financial Statements: 

Required Supplementary Information: 

Other Accompanying Information – Schedule Of Spending: 

Part 3: Appendices: 

Appendix A: TARP Glossary: 

Appendix B: Abbreviations And Acronyms: 

Websites: 

[End of section] 

Message From The Assistant Secretary For Financial Stability: 

November 9, 201: 

I am pleased to present the Office of Financial Stability’s (OFS) 
Agency Financial Report for Fiscal Year (FY) 2012, which describes our 
financial and performance results for the fourth year of the Troubled 
Asset Relief Program (TARP). The report contains the financial 
statements for TARP and the Government Accountability Office (GAO) 
audit opinion on those financial statements, a separate opinion on OFS’
internal control over financial reporting, and results of GAO’s tests 
of OFS’ compliance with selected laws and regulations. 

The Emergency Economic Stabilization Act of 2008 (EESA) established 
OFS within the Office of Domestic Finance of the Department of the 
Treasury to implement TARP, the purpose of which was to “restore the 
liquidity and stability of the financial system”. 

By any reasonable objective standards, TARP worked: it helped stop 
widespread financial panic, it helped prevent what could have been a 
devastating collapse of our financial system, and it did so at a cost 
that is far less than what most people expected at the time the law 
was passed. 

Four years after TARP’s establishment, OFS has made substantial 
progress in withdrawing the extraordinary assistance that had to be 
provided during the financial crisis. OFS has moved quickly to reduce 
the dependence of the financial system on emergency assistance, 
replacing public support with private capital. 

As of September 30, 2012, OFS has collected 88.5 percent of the $417.6 
billion in program funds disbursed under TARP. During fiscal year 
2012, OFS has focused on winding down TARP overall and can report the 
following significant highlights: 

* Working with the Federal Reserve Bank of New York (FRBNY), we made 
substantial progress winding down the investments in American 
International Group. Inc. (AIG). The peak amount of assistance offered 
to AIG by the FRBNY and Treasury was $182.3 billion, a part of which 
was later canceled, and an amount in excess of the total disbursed has 
now been recovered through repayments, sales and other income. OFS 
disbursed a total of $67.8 billion to AIG and has collected $50.3 
billion to date. Treasury still holds 15.9 percent of AIG’s 
outstanding common stock of which OFS holds 10.5 percent. Further 
detail is provided in the Executive Summary. 

* We continued winding down the bank support programs. On May 3, 2012, 
we announced our exit strategy for the remaining investments in the 
Capital Purchase Program (CPP). That exit strategy uses a combination 
of repayments, restructurings, and auction sales. During fiscal year 
2012, we collected $8.9 billion in repayments, sales, and dividends on 
CPP investments. As of September 30, 2012, we had collected a total of 
$267.0 billion for all TARP bank support programs through repayments, 
sales, dividends, interest, and other income – compared to the $245.5 
billion that was initially invested. 

* We also reduced the overall amount that remains outstanding in OFS’ 
credit market programs. On January 24, 2012, we completed the wind 
down of the SBA 7(a) Securities Purchase Program, collecting $9 
million more than we disbursed. Progress was also made winding down 
the Term Asset Backed Securities Loan Facility (TALF), when Treasury 
and the Federal Reserve agreed in June 2012 to further reduce the 
credit protection Treasury provides the TALF LLC from $4.3 billion to 
$1.4 billion because the outstanding TALF loan balances declined. In 
addition, OFS collected a total of $8.9 billion in fiscal year 2012 
through loan repayments, interest and equity distributions under the 
Public Private Investment Program (PPIP). 

The financial and performance data included in this report are 
reliable and complete. For the fourth consecutive year, OFS has earned 
unqualified opinions on its financial statements and its internal 
control over financial reporting from the U.S. Government 
Accountability Office. In addition, OFS successfully resolved its one 
fiscal year 2011 significant deficiency relating to internal control 
surrounding financial reporting. 

OFS’ authority to make new commitments expired on October 3, 2010. 
Since that time, our focus has been managing the remaining TARP 
investments to protect taxpayers’ interests while maintaining 
financial stability. We continue to achieve these measures while 
maintaining comprehensive financial and performance accountability and 
transparency standards. OFS also continues to implement the housing 
programs funded under TARP, which are designed to prevent avoidable 
foreclosures, primarily by helping homeowners achieve mortgage 
modifications. There will be a cost related to our assistance to 
helping people avoid foreclosure, which is money that was never 
expected to be returned, but these efforts have directly helped more 
than one million people avoid foreclosure and indirectly helped 
millions more by setting new standards throughout the mortgage 
servicing industry. 

Sincerely, 

Signed by: 

Timothy G. Massad: 
Assistant Secretary: 
Office of Financial Stability: 

[End of section] 

Executive Summary: 

Treasury’s Office of Financial Stability (OFS) presents to the reader 
the Fiscal Year 2012 Agency Financial Report for the Troubled Asset 
Relief Program (TARP), established by the Department of the Treasury 
(Treasury) pursuant to the Emergency Economic Stabilization Act of 
2008 (EESA). Four years after TARP’s establishment, substantial 
progress has been made in stabilizing the financial system and OFS has 
recovered most of the assistance that was provided during the crisis. 

Four years ago, the U.S. financial system was at risk of collapse and 
many major financial institutions were at risk of failure. Markets had 
ceased to function. Without immediate and forceful government action, 
our country faced the possibility of a second Great Depression, which 
would have had profound consequences for all Americans. 

In this environment of fear and panic, TARP was created as a central 
part of a series of emergency measures. The goal of TARP, along with 
other federal government actions, was to stop the panic and prevent a 
collapse of the U.S. financial system, and restore stability and 
liquidity to the system. TARP, in conjunction with other federal 
government actions, helped to prevent that collapse by helping 
stabilize the banking sector and unfreeze the markets for credit and 
capital, bringing down the cost of borrowing for businesses, 
individuals, and state and local governments, restoring confidence in 
the financial system and restarting economic growth. TARP’s 
initiatives were done faster, and at a much lower cost, than many 
anticipated. For a more comprehensive overview on the impact of the 
combined actions of the Treasury, the Federal Reserve, and the Federal 
Deposit Insurance Corporation (FDIC), please see “The Financial Crisis 
Response in Charts, [hyperlink, http://www.treasury.gov/resource-
enter/datachartcenter/Documents/20120413_FinancialCrisisResponse.pdf]. 

As of October 3, 2010, OFS’ authority to make new commitments under 
TARP expired. Throughout fiscal year 2012, OFS focused principally on 
(i) exiting remaining investments in a timely and orderly manner 
consistent with the duty to promote financial stability and protect 
taxpayers’ interests that maximizes the return for taxpayers, and (ii) 
continuing to help homeowners avoid preventable foreclosures. 

OFS has taken several steps toward executing its strategy for winding 
down the TARP and exiting the remaining TARP programs. 

* Treasury, including OFS, and the FRBNY made substantial progress in 
winding down the investments related to the AIG, such that the total 
amounts collected now exceed the combined disbursements since 
inception. The peak amount of assistance offered to AIG by the FRBNY 
and Treasury was $182.3 billion, a part of which was later canceled, 
and an amount in excess of the total disbursed has now been recovered 
through repayments, sales and other income. Of these amounts, OFS 
disbursed a total of $67.8 billion to AIG and collected $50.3 billion 
to date. During fiscal year 2012, Treasury, including OFS, 
substantially reduced its common stock investment in AIG through 
several sales with $38.2 billion[Footnote 1] in collections. As of 
September 30, 2012, Treasury held approximately 234 million shares of 
AIG common stock, with a fair value of approximately $7.7 billion, 
representing approximately 15.9 percent [Footnote 2] of the company. 
OFS’ preferred interests in an AIG SPV were also repaid in full, 
resulting in additional collections of $9.6 billion during fiscal year 
2012. 

* OFS has continued to wind down the bank support programs, and, 
through September 30, 2012, had collections of $267.0 billion in 
repayments, sales, dividends, interest, and fees – compared to the 
$245.5 billion that was initially invested. Of the 707 original 
Capital Purchase Program (CPP) institutions, OFS held outstanding 
investments in 290 banks as of September 30, 2012. All participants in 
the Targeted Investment Program (TIP) have fully repaid OFS and no 
claim payments were made under the Asset Guarantee Program. 

* OFS also reduced the overall amount that remains outstanding in 
TARP’s credit market programs. The SBA 7(a) Securities Purchase 
Program, one of the credit market programs created under TARP to help 
restart the flow of credit to small businesses, was closed on January 
24, 2012. OFS invested $367 million (excluding purchased accrued 
interest) in the program and collected $376 million through sales, 
principal and interest payments, representing approximately $9 million 
more in collections than funds disbursed. OFS also made progress 
winding down the Term Asset Backed Securities Loan Facility (TALF), 
when Treasury and the Federal Reserve agreed to further reduce the 
credit protection OFS provides the TALF, LLC from $4.3 billion to $1.4 
billion because of the continued decline in outstanding TALF loans. In 
addition, collections under the Public Private Investment Program 
(PPIP) totaled $8.9 billion during fiscal year 2012 through loan 
repayments, interest and equity distributions. The outstanding balance 
on the program was reduced to $9.8 billion at the end of the fiscal 
year. 

The estimated cost of TARP is significantly below original 
projections. In the August 2009 Midsession Review of the President’s 
2010 Budget, the lifetime cost of TARP, based on budget scoring 
conventions, was projected to be $340.5 billion (assuming the full 
$700.0 billion of TARP authority was utilized). Estimated lifetime 
TARP cost have significantly decreased since August 2009 with the most 
recent September 30, 2012 lifetime cost estimated at $59.7 billion 
(see table 5 for lifetime cost estimates as of September 30, 2012, 
2011, 2010, and 2009). During this four year period, TARP’s purchase 
authority decreased from $700 billion to $467.0 billion.[Footnote 3] 

The accrual-based cost of TARP activities from inception, on October 
3, 2008, through September 30, 2012, based on the OFS financial 
statements, was $20.3 billion. Note that the lifetime cost of TARP, 
based on budget scoring conventions, differs from the cost based on 
the OFS financial statements. Estimates of lifetime costs, based on 
budget scoring conventions, assume that all planned expenditures are 
made and, for certain programs, include additional assumptions about 
the impact of potential sale strategies. By contrast, the TARP 
financial statement costs are based on transactions through September 
30, 2012. Thus, it does not include the committed but undisbursed 
funds for housing programs as well as other programs, all of which are 
included in the expected lifetime cost for budget purposes. The $20.3 
billion cost consists of $7.7 billion of reported TARP net income in 
the OFS financial statements for fiscal year 2012; $9.5 billion of 
reported TARP net cost for fiscal year 2011; $23.1 billion of reported 
TARP net income for fiscal year 2010 and the $41.6 billion of reported 
TARP net cost for the period from inception through September 30, 
2009. The change of $17.2 billion since fiscal year 2011 (i.e., $7.7 
billion net income for fiscal year 2012 as compared to $9.5 billion 
net cost for fiscal year 2011) is primarily due to sales of AIG common 
stock at values higher than the market value at September 30, 2011 and 
improvements in the market values of AIG, AIFP and CPP preferred and 
common stock investments still held, net of an increase in the Housing 
program cost between fiscal years. 

The estimated lifetime cost of TARP reflects several factors, 
including the cost of the initiatives to help homeowners stay in their 
homes, for which $45.6 billion has been committed and is assumed to be 
disbursed. Of this amount, $5.5 billion has been disbursed through 
September 30, 2012; because payments for modifications are made over 
time, significantly more will be disbursed assuming the modifications 
stay in effect. OFS’ housing program disbursements were never intended 
to be recovered and OFS does not expect them to result in any 
repayments. The estimated lifetime cost also reflects primarily the 
costs related to investments in the auto companies. In addition, there 
are costs related to the TARP AIG investment (which excludes activity 
related to Treasury’s non-TARP AIG shares). These costs, which 
fluctuate in large part due to changes in market prices of General 
Motors and AIG common stock, are offset in part by income on TARP 
investments in banks and other programs. 

Since its inception, TARP has disbursed $417.6 billion in direct 
loans, equity investments, and support for the Treasury Housing 
Programs under TARP; collected $326.8 billion from repayments and 
sales; received $23.0 billion in dividends, interest and fees; 
collected $9.7 billion through warrant and additional note sales; and 
received $10.2 billion in net proceeds from the sale and repurchase of 
assets in excess of costs. As of September 30, 2012, TARP had $63.1 
billion in gross outstanding direct loans and equity investments, 
which are valued at $40.2 billion (excluding the receivables for the 
Asset Guarantee Program that was valued at $1.0 billion as of 
September 30, 2012). In addition, from inception through September 30, 
2012, TARP incurred costs related to Treasury housing programs of $5.7 
billion and administrative costs of $1.1 billion. 

OFS continues to provide detailed information about TARP to ensure the 
highest level of transparency. OFS published a Two-Year Retrospective 
Report on the Troubled Asset Relief Program on October 5, 2010, and a 
corresponding Three-Year Anniversary Report on October 3, 2011. OFS 
anticipates publishing a four year retrospective report on TARP in 
December 2012. These reports include detailed information on TARP as 
well as the federal government’s additional emergency measures to 
address the 2008 financial crisis. OFS also publishes a monthly report 
to Congress on the program, a monthly report on its housing 
initiatives and a variety of other reports. Please refer to these 
documents at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/def
ault.aspx. 

[End of section] 

Part 1: Management’s Discussion and Analysis: 

Background, Mission, and OFS Organization Structure: 

In order to appreciate the concentrated efforts of the Administration 
to combat the financial crisis and TARP’s contribution to these 
efforts, it is useful to examine the origins and causes of the crisis. 

In September 2008, the nation was in the midst of one of the worst 
financial crises in our history. The financial institutions and 
markets that Americans rely upon to protect their savings, help 
finance their children’s education, and help pay their bills, and that 
businesses rely upon to make payroll, build inventories, fund new 
investment, and create new jobs, were threatened, unlike at any time 
since the Great Depression. Across the country, people were rapidly 
losing confidence in our financial system and in the federal 
government’s ability to safeguard their economic future. 

The causes of the crisis will be studied for years, and this report is 
not meant to provide a comprehensive analysis of why the crisis 
occurred. But some reasons are clear. Over the two decades preceding 
the crisis, the financial system had grown rapidly in an environment 
of economic growth and stability. Risks grew in the system without 
adequate transparency. Lax regulations and loopholes in supervision 
let firms become highly leveraged and take on too much risk. Ample 
credit around the world fueled an unsustainable housing boom in the 
first half of the last decade. When the housing market inevitably 
turned down, starting in 2006, the pace of mortgage defaults 
accelerated at an unprecedented rate. By mid-2007, rising mortgage 
defaults were undermining the performance of many investments held by 
major financial institutions. 

The crisis began in the summer of 2007 and gradually increased in 
intensity and momentum over the course of the following year. A series 
of major financial institutions, including Countrywide Financial, Bear 
Stearns, and IndyMac, were purchased under duress or failed; and 
Fannie Mae and Freddie Mac, the largest purchasers and guarantors of 
home loans in the mortgage market, came under severe stress. 

By September 2008, for the first time in 80 years, the U.S. financial 
system was at risk of collapse. Using authority granted in July 2008, 
the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac 
into conservatorship on September 7, 2008. A growing sense of panic 
was producing the classic signs of a generalized run on the banks. 
People’s trust and confidence in the stability of major institutions, 
and the capacity of the federal government to contain the damage, were 
vanishing. 

The U.S. system of regulation and supervision had failed to constrain 
the excessive use of leverage and the level of risk in the financial 
system and the United States entered this crisis without adequate 
tools to manage it. The Executive Branch did not have existing options 
for managing failures of systemically important non-bank financial 
institutions. 

The Department of the Treasury (Treasury), the Federal Reserve Board, 
the Federal Deposit Insurance Corporation (FDIC), and other federal 
government bodies undertook an array of emergency actions to help 
prevent a collapse and the dangers posed to consumers, businesses, and 
the broader economy. However, the severe conditions our nation faced 
required additional resources and authorities. Therefore, the Bush 
Administration proposed the Emergency Economic Stabilization Act 
(EESA) in late September 2008, and with the support of Democrats and 
Republicans in Congress, EESA was enacted into law on October 3, 2008 
and TARP was established. 

EESA also established the Office of Financial Stability (OFS) within 
the Office of Domestic Finance of the Treasury to implement TARP. OFS’ 
mission is to carry out the authorities given to the Secretary of the 
Treasury to implement TARP. Section 101 of EESA authorized the 
Secretary of the Treasury to establish TARP to “purchase, and to make 
and fund commitments to purchase, troubled assets from any financial 
institution, on terms and conditions as are determined by the Secretary”
. EESA defines the terms “troubled assets” and “financial institution” 
and provides other requirements that must be met for any such 
purchase. Section 102 of EESA also provides authority for a guarantee 
program for troubled assets. Section 109 of EESA provides authority to 
assist homeowners. The Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the Dodd-Frank Act) signed into law in July 2010 
reduced total TARP purchase authority from $700.0 billion to a 
cumulative $475.0 billion. 

Final purchase authority to make new commitments under TARP expired on 
October 3, 2010. This means no new commitments can be made. OFS is 
continuing to implement commitments made prior to the October 3 
deadline for the TARP programs which are disbursed over time. For 
those assets already purchased, OFS will continue to wind down TARP 
and manage the remaining TARP investments in order to recover as much 
of taxpayers’ funds as possible. 

OFS is headed by the Assistant Secretary for Financial Stability, 
appointed by the President with the advice and consent of the Senate. 
Reporting to the Assistant Secretary for Financial Stability are seven 
major organizations: the Chief Investment Officer, the Chief Financial 
Officer, the Chief of Management and Operations, the Chief of 
Homeownership Preservation, the Chief of OFS Internal Review, the 
Chief Reporting Officer, and the Chief Compliance Officer. A Chief 
Counsel’s Office reports to the Assistant Secretary and to the Office 
of the General Counsel in the Department of Treasury. 

The OFS organization chart follows: 

[Refer to PDF for image: organization chart] 

Top level: 
Assistant Secretary for Financial Stability; 
* Chief Counsel. 

Second level, reporting to Assistant Secretary for Financial Stability: 
* Chief Investment Officer 
* Chief of Internal Review; 
* Chief Reporting Officer; 
* Chief of Home Ownership Preservation; 
* Chief of Management and Operations; 
* Chief Financial Officer; 
* Chief Compliance Officer. 

[End of figure] 

The Office of the Chief Investment Officer (CIO) is responsible for 
program development and the execution and management of all 
investments made by either purchasing or insuring “troubled assets” 
pursuant to EESA, other than TARP housing programs. 

The Office of the Chief Financial Officer (CFO) has lead 
responsibility within OFS for budget formulation and execution, cash 
management, accounting, financial systems, financial reporting, 
program and internal metrics analytics, modeling cash flows, and 
internal controls. 

The Office of the Chief of Management and Operations (CMO) is 
responsible for developing the operating infrastructure and managing 
internal operations in OFS. 

The Office of the Chief of Homeownership Preservation (HPO) is 
responsible for identifying opportunities to help homeowners and 
overseeing homeownership programs while also protecting taxpayers. 

The Office of Internal Review (OIR) is responsible for identifying the 
most significant risks that TARP faces, both internally and externally. 

The Office of the Chief Reporting Officer (CRO) is responsible for 
periodic reports to the Congress as required by EESA. 

The Office of the Chief Compliance Officer (CCO), created in December 
2011, is responsible for establishing processes to help ensure that 
TARP recipients, participants, contractors, and agents conduct their 
TARP-related activities in accordance with applicable laws, 
regulations, program guidance, and contract requirements. 

This office was previously part of the Office of Internal Review. 

The Office of the Chief Counsel reports functionally to the Office of 
General Counsel at the Department of the Treasury and provides legal 
advice to the Assistant Secretary. The Office is involved in the 
structuring of OFS programs and activities to ensure compliance with 
EESA and with other laws and regulations. The Office of the Chief 
Counsel is also responsible for coordinating OFS’ work with the 
external oversight entities including the Government Accountability 
Office (GAO), the Special Inspector General for TARP (SIGTARP), the 
Financial Stability Oversight Board and the Congressional Oversight 
Panel (COP) through the end of its existence on April 3, 2011. 

OFS is not envisioned as a permanent organization, so to the maximum 
extent possible when economically efficient and appropriate, OFS 
utilizes private sector expertise in support of the execution of TARP 
programs. Fannie Mae and Freddie Mac accounted for 56.3 percent of the 
fiscal year 2012 administrative cost ($151 million of $268 million) to 
assist OFS in the administration and compliance oversight of the 
Making Home Affordable Program. Additionally, asset managers were 
hired to serve as financial agents in assisting with managing the 
assets associated with several TARP programs. Private sector firms 
were also engaged to assist with the significant volume of TARP work 
in the areas of custodial services, accounting and internal controls, 
modeling, administrative support, facilities, legal advisory, 
financial advisory, and information technology. 

Overview of TARP for Fiscal Year 2012: 

OFS Strategic Goal and Operational Goals: 

EESA provided the Secretary of the Treasury with the authorities and 
facilities to help restore liquidity and stability to the U.S. 
financial system. EESA also provided specific authority to take 
certain actions to help prevent avoidable foreclosures. As such, OFS’ 
strategic goal is to ensure the overall stability and liquidity of the 
financial system, prevent avoidable foreclosures and preserve 
homeownership. 

In light of this strategic goal, OFS established the following 
operational goals for TARP and developed a number of programs to help 
stabilize the U.S. financial system and the housing market: 

* Ensure the overall stability and liquidity of the financial system. 
- Make capital available to viable institutions. 
- Provide targeted assistance as needed. 
- Increase liquidity and volume in securitization markets. 

* Prevent avoidable foreclosures and help preserve homeownership. 

* Protect taxpayer interests. 

* Promote transparency. 

Details on programs developed in support of these Operational Goals 
can be found later in this Management’s Discussion and Analysis under 
Operational Goals. As noted earlier, the focus of OFS is now to wind 
down the programs that were statutorily implemented with a mandate to 
stabilize the financial system and to continue to implement the 
programs for the housing market. 

Fiscal Year 2012 Financial Summary and Cumulative Net Income: 

EESA provided TARP authority to purchase or guarantee up to $700.0 
billion in troubled assets.[Footnote 4] EESA spending authority would 
have terminated December 30, 2009; however, as authorized under 
Section 120(b) of EESA, the Secretary of the Treasury certified the 
extension of TARP authority until October 3, 2010, with the submission 
of a written certification to Congress. 

The Dodd-Frank Act[Footnote 5] amended EESA by capping total purchase 
and guarantee authority at a cumulative $475.0 billion and limiting 
any new obligations to programs or initiatives that were initiated 
prior to June 25, 2010. OFS reduced TARP program allocations to 
conform to these limitations. 

Based on operations for the year ended September 30, 2012, OFS reports 
the following key results: 

* Since its inception, TARP has disbursed $417.6 billion in direct 
loans, equity investments and support for the Treasury housing 
programs under TARP. 

* In fiscal year 2012, OFS disbursed $1.0 billion for loans and equity 
investments as well as $3.1 billion in payments for Treasury housing 
programs under TARP, and reported net income from operations of $7.7 
billion. 

* During fiscal year 2012, OFS received $49.9 billion from repayments 
of loans and repurchases and sales of investments. 

* As of September 30, 2012, OFS reported $40.2 billion (excluding a 
$1.0 billion receivable related to the Asset Guarantee Program) for 
the value of loans and equity investments outstanding. 

Results of TARP Operations (Fiscal Year 2012 and Fiscal Year 2011): 

OFS’ fiscal year 2012 net income from operations of $7.7 billion 
includes the reported net income related to loans, equity investments, 
and other credit programs. For the fiscal year ended September 30, 
2012, OFS reported net subsidy income for six programs – the Capital 
Purchase Program (CPP), the Community Development Capital Initiative 
(CDCI), the Term Asset-Backed Securities Loan Facility (TALF), the SBA 
7(a) Securities Purchase Program, Asset Guarantee Program (AGP) and 
the American International Group, Inc (AIG) Investment Program. These 
programs collectively reported net subsidy income of $11.4 billion. 
Also, for the fiscal year ended September 30, 2012, OFS experienced 
net subsidy cost for three programs – the Public-Private Investment 
Program (PPIP), the Automotive Industry Financing Program (AIFP), and 
the Federal Housing Agency Refinance Program totaling $445 million. 
Fiscal year 2012 expenses for the Treasury housing programs under TARP 
of $3.0 billion and administrative expenses of $268 million bring the 
total reported fiscal year net income from operations to $7.7 billion, 
as shown in Table 1. For the fiscal year ended September 30, 2011, the 
net cost of operations was $9.5 billion as reflected in Table 1. These 
net income and net cost amounts reported in the financial statements 
reflect only transactions through September 30, 2012 and September 30, 
2011, respectively, and therefore are different than lifetime cost 
estimates made for budgetary purposes. 

Table 1: Net Income (Cost) of TARP Operations: 
(Dollars in billions)[1]: 

TARP Program: 

Bank Support Programs: 

Capital Purchase Program; 
For the Year Ended September 30, 2012: $1.9; 
For the Year Ended September 30, 2011: $1.8; 
From TARP’s Inception through September 30, 2012[3]: $14.9. 

Targeted Investment Program; 
For the Year Ended September 30, 2012: [Empty]; 
For the Year Ended September 30, 2011: 0.2; 
From TARP’s Inception through September 30, 2012[3]: 4.0. 

Asset Guarantee Program; 
For the Year Ended September 30, 2012: $0.2; 
For the Year Ended September 30, 2011: [Empty]; 
From TARP’s Inception through September 30, 2012[3]: $3.9. 

Community Development Capital Initiative; 
For the Year Ended September 30, 2012: [Empty]; 
For the Year Ended September 30, 2011: $0.1; 
From TARP’s Inception through September 30, 2012[3]: ($0.2). 

Credit Market Programs: 

Public-Private Investment Program; 
For the Year Ended September 30, 2012: ($0.2); 
For the Year Ended September 30, 2011: $1.8; 
From TARP’s Inception through September 30, 2012[3]: $2.4. 

Term Asset-Backed Securities Loan Facility; 
For the Year Ended September 30, 2012: $0.1; 
For the Year Ended September 30, 2011: $0.1; 
From TARP’s Inception through September 30, 2012[3]: $0.5. 

SBA 7(a) Securities Purchase Program; 
For the Year Ended September 30, 2012: [Empty]; 
For the Year Ended September 30, 2011: [Empty]; 
From TARP’s Inception through September 30, 2012[3]: [Empty]. 

Other Programs: 

Automotive Industry Financing Program; 
For the Year Ended September 30, 2012: ($0.2); 
For the Year Ended September 30, 2011: ($9.7); 
From TARP’s Inception through September 30, 2012[3]: ($23.8). 

American International Group Investment Program[2]; 
For the Year Ended September 30, 2012: $9.2; 
For the Year Ended September 30, 2011: ($1.6); 
From TARP’s Inception through September 30, 2012[3]: ($15.2). 

FHA-Refinance Program; 
For the Year Ended September 30, 2012: [Empty]; 
For the Year Ended September 30, 2011: [Empty]; 
From TARP’s Inception through September 30, 2012[3]: [Empty]. 

Total Net Subsidy Income (Cost); 
For the Year Ended September 30, 2012: $11.0; 
For the Year Ended September 30, 2011: ($7.3); 
From TARP’s Inception through September 30, 2012[3]: ($13.5). 

Additional TARP (Costs): 

Treasury Housing Programs Under TARP (excluding FHA-Refinance Program); 
For the Year Ended September 30, 2012: ($3.0); 
For the Year Ended September 30, 2011: ($1.9); 
From TARP’s Inception through September 30, 2012[3]: ($5.7). 

Administrative Costs; 
For the Year Ended September 30, 2012: ($0.3); 
For the Year Ended September 30, 2011: ($0.3); 
From TARP’s Inception through September 30, 2012[3]: ($1.1). 

Total Net Income (Cost) of TARP Operations: 
For the Year Ended September 30, 2012: $7.7; 
For the Year Ended September 30, 2011: ($9.5); 
From TARP’s Inception through September 30, 2012[3]: ($20.3). 

[1] Information in Table 1 is presented in billions of dollars to 
ensure consistency with other tables in this Management’s Discussion 
and Analysis; similar information is presented in the financial 
statements in millions of dollars. 

[2] The amounts for AIG reflect only the operations/activities of TARP 
and do not reflect proceeds received from the sale of shares of AIG 
common stock held by Treasury outside of TARP (non-TARP shares). For 
further details, see the discussion of the American International 
Group Investment Program, beginning on p. 28. 

[3] Inception through September 30, 2012 column includes dollar 
amounts related to the ($18.5) billion net cost of operations for the 
period from inception through September 30, 2010. 

[End of table] 

Over time the cost of TARP programs will change. As described later in 
the MD&A, and in the OFS audited financial statements, these estimates 
are based in part on currently projected economic factors. These 
economic factors will likely change, either increasing or decreasing 
the lifetime cost of TARP. 

TARP Program Summary: 

Table 2 provides a financial summary for TARP programs since TARP 
inception on October 3, 2008, through September 30, 2012. For each 
program, the table provides utilized TARP authority (which includes 
purchases made, legal commitments to make future purchases, and 
offsets for guarantees made), the amount actually disbursed, 
repayments to OFS from program participants or from sales of the 
investments, write-offs and losses, net outstanding balance as of 
September 30, 2012, and cash inflows on the investments in the form of 
dividends, interest or other fees. As of September 30, 2012, $49.4 
billion of the $467.0 billion in purchase and guarantee authority 
remained unused.[Footnote 6] 

Table 2: TARP Summary[1]: 
From TARP Inception through September 30, 2012: 
(Dollars in billions): 

Bank Support Programs: 

Capital Purchase Program[5]; 
Purchase Price or Guarantee Amounts: $204.9; 
Total $ Disbursed: $204.9; 
Investment Sales and Repayments: ($193.2)[6]; 
Writeoffs and Losses[3]: ($3.0); 
Outstanding Balance[4]: $8.7; 
Received from Investments: $26.4. 

Targeted Investment Program 
Purchase Price or Guarantee Amounts: $40.0; 
Total $ Disbursed: $40.0; 
Investment Sales and Repayments: ($40.0); 
Writeoffs and Losses[3]: [Empty]; 
Outstanding Balance[4]: [Empty]; 
Received from Investments: $4.4. 

Asset Guarantee Program 
Purchase Price or Guarantee Amounts: $5.0; 
Total $ Disbursed: [Empty]; 
Investment Sales and Repayments: [Empty]; 
Writeoffs and Losses[3]: [Empty]; 
Outstanding Balance[4]: [Empty]; 
Received from Investments: $3.0. 

Community Development Capital Initiative 
Purchase Price or Guarantee Amounts: $0.6; 
Total $ Disbursed: $0.6; 
Investment Sales and Repayments: [Empty]; 
Writeoffs and Losses[3]: [Empty]; 
Outstanding Balance[4]: $0.6; 
Received from Investments: [Empty]. 

Credit Market Programs: 

Public Private Investment Program 
Purchase Price or Guarantee Amounts: $21.6; 
Total $ Disbursed: $18.6 
Investment Sales and Repayments: ($8.8); 
Writeoffs and Losses[3]: [Empty]; 
Outstanding Balance[4]: $9.8; 
Received from Investments: $2.4. 

Term Asset-Backed Securities Loan Facility 
Purchase Price or Guarantee Amounts: $1.4; 
Total $ Disbursed: $0.1; 
Investment Sales and Repayments: [Empty]; 
Writeoffs and Losses[3]: [Empty]; 
Outstanding Balance[4]: $0.1; 
Received from Investments: [Empty]. 

SBA 7(a) Securities Purchase Program 
Purchase Price or Guarantee Amounts: $0.4; 
Total $ Disbursed: $0.4; 
Investment Sales and Repayments: ($0.4); 
Writeoffs and Losses[3]: [Empty]; 
Outstanding Balance[4]: [Empty]; 
Received from Investments: [Empty]. 

Other Programs: 

Automotive Industry Financing Program 
Purchase Price or Guarantee Amounts: $79.7; 
Total $ Disbursed: $79.7; 
Investment Sales and Repayments: ($35.1); 
Writeoffs and Losses[3]: ($7.4); 
Outstanding Balance[4]: $37.2; 
Received from Investments: $5.7. 

American International Group Investment Program[2]; 
Purchase Price or Guarantee Amounts: $67.8; 
Total $ Disbursed: $67.8; 
Investment Sales and Repayments: ($49.3); 
Writeoffs and Losses[3]: ($11.8); 
Outstanding Balance[4]: $6.7; 
Received from Investments: $1.0. 

Sub-total for Investment Programs: 
Purchase Price or Guarantee Amounts: $421.4; 
Total $ Disbursed: $412.1; 
Investment Sales and Repayments: ($326.8); 
Writeoffs and Losses[3]: ($22.2); 
Outstanding Balance[4]: $63.1; 
Received from Investments: $42.9. 

Treasury Housing Programs under TARP: 
Purchase Price or Guarantee Amounts: $45.6[7]; 
Total $ Disbursed: $5.5; 
Investment Sales and Repayments: N/A; 
Writeoffs and Losses[3]: N/A; 
Outstanding Balance[4]: N/A; 
Received from Investments: N/A. 

Total for TARP Program: 
Purchase Price or Guarantee Amounts: $467.0; 
Total $ Disbursed: $417.6; 
Investment Sales and Repayments: ($326.8); 
Writeoffs and Losses[3]: ($22.2); 
Outstanding Balance[4]: $63.1; 
Received from Investments: $42.9. 

[1] This table shows TARP activity for the period from inception 
through September 30, 2012, on a cash basis. Received from investments 
includes dividends and interest income reported in the Statement of 
Net Cost, and proceeds from sale and repurchases of assets in excess 
of costs. 

[2] The amounts for AIG reflect only the operations of TARP and do not 
reflect proceeds received from the sale of shares of AIG common stock 
held by Treasury outside of TARP (non-TARP shares). For further 
details, see the discussion of the American International Group 
Investment Program, beginning on page 27. 

[3] Losses represent proceeds less than cost on sales of assets which 
are reflected in the financial statements within “net proceeds from 
sales and repurchases of assets in excess of (less than) cost”. 

[4] Total disbursements less repayments, write-offs and losses do not 
equal the total outstanding balance because the disbursements for the 
Treasury housing programs under TARP generally do not require (and OFS 
does not expect) repayments. 

[5] OFS received $31.9 billion in proceeds from sales of Citigroup 
common stock, of which $25.0 billion is included at cost in investment 
sales, and $6.9 billion of net proceeds in excess of cost is included 
in Received from Investments. 

[6] Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI 
exchanges from CPP of $363 million. 

[7] Individual obligation amounts are $29.9 billion for the Making 
Home Affordable Program, $7.6 billion for the Hardest Hit Fund, and 
$8.1 billion committed for the FHA-Refinance Program. 

[End of table] 

Most TARP funds have been used to make investments in preferred stock 
or to make loans. OFS has generally received dividends on the 
preferred stock and interest payments on the loans from the 
institutions participating in TARP programs. These payments represent 
additional proceeds received on OFS’ TARP investments. From inception 
through September 30, 2012, OFS received a total of $23.0 billion in 
dividends and interest. 

OFS has conducted several sales of its positions in banking 
institutions as part of its exit strategy for winding down TARP. OFS 
plans to sell its investments in banks that are not expected to be 
able to repay Treasury in the foreseeable future. These sales are 
being conducted over time and in stages and include both common and 
preferred stock. During fiscal year 2012, OFS sold its positions in 40 
banks for $1.3 billion in aggregate proceeds through individual public 
and private auctions resulting in proceeds less than cost of $180 
million for those investments. 

OFS also received warrants in connection with most of its investments, 
which provides an opportunity for taxpayers to realize additional 
proceeds on investments. Since the program’s inception, OFS has 
received $9.3 billion in gross proceeds from the disposition of 
warrants associated with 169 CPP investments, both TIP investments, 
and AGP, consisting of (i) $3.9 billion from issuer repurchases at 
agreed upon values and (ii) $5.4 billion from auctions. TARP’s Warrant 
Disposition Report is posted on the OFS website at the following link: 
[hyperlink, 
http://www.financialstability.gov/latest/reportsanddocs.html]. 

Table 3 shows the breakdown of receipts for the periods ended 
September 30, 2012 and 2011 for all TARP programs combined as well as 
totals for the period from inception through September 30, 2012. 

Table 3: TARP Receipts and Repayments on Investments/Loans[1]: 
(Dollars in billions): 

Dividends, Interest, Warrant Repurchases and Additional Notes: 

Dividends and Interest; 
For the Year Ended September 30, 2012: $2.9; 
For the Year Ended September 30, 2011: $3.7; 
From TARP’s inception through September 30, 2012[2]: $23.0. 

Sales/Repurchases of Warrants and Warrant Preferred Stock and 
Additional Notes; 
For the Year Ended September 30, 2012: $0.1; 
For the Year Ended September 30, 2011: $1.5; 
From TARP’s inception through September 30, 2012[2]: $9.7. 

Proceeds in Excess of Cost; 
For the Year Ended September 30, 2012: $0.4; 
For the Year Ended September 30, 2011: $6.2; 
From TARP’s inception through September 30, 2012[2]: $10.2. 

Subtotal: 
For the Year Ended September 30, 2012: $3.4; 
For the Year Ended September 30, 2011: $11.4; 
From TARP’s inception through September 30, 2012[2]: $42.9. 

Investment/Loan Repayments: 

Sales/Repurchases/Repayments on Investments[3]; 
For the Year Ended September 30, 2012: $43.9; 
For the Year Ended September 30, 2011: $66.5; 
From TARP’s inception through September 30, 2012[2]: $303.1. 

Loan Principal Repaid; 
For the Year Ended September 30, 2012: $6.0; 
For the Year Ended September 30, 2011: $6.3; 
From TARP’s inception through September 30, 2012[2]: $23.7. 

Subtotal: 
For the Year Ended September 30, 2012: $49.9; 
For the Year Ended September 30, 2011: $72.8; 
From TARP’s inception through September 30, 2012[2]: $326.8. 

Grand Total: 
For the Year Ended September 30, 2012: $53.3; 
For the Year Ended September 30, 2011: $84.2; 
From TARP’s inception through September 30, 2012[2]: $369.7. 

[1] This table shows TARP activity on a cash basis. 

[2] The total reported for Inception through September 30, 2012 column 
includes the $232.2 billion in receipts and repayments related to the 
period from inception through September 30, 2010. 

[3] Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI 
exchanges from CPP of $363 million. 

[End of table] 

Summary of TARP Direct Loans and Equity Investments: 

Table 4 provides information on the estimated values of TARP direct 
loan and equity investments by program, as of the end of fiscal years 
2012 and 2011. (Treasury housing programs under TARP are excluded from 
the chart because no repayments are expected). The Outstanding Balance 
column represents the amounts disbursed by OFS relating to the loans 
and equity investments that were outstanding as of September 30, 2012 
and 2011. The Estimated Value of the Investment column represents the 
present value of net cash inflows that OFS estimates it will receive 
from the loans and equity investments. These estimates include market 
risk assumptions. For equity securities, this amount represents fair 
value. The total difference of $22.9 billion (2012) and $42.3 billion 
(2011) between the two columns is considered the “subsidy cost 
allowance” under the Federal Credit Reform Act methods OFS follows for 
budget and accounting purposes (see Note 6 in the financial statements 
for further discussion).[Footnote 7] 

Table 4: Summary of TARP Direct Loans and Equity Investments: 
(Dollars in billions): 

Bank Support Programs: 

Capital Purchase Program; 
Outstanding Balance as of September 30, 2012[1]: $8.7; 
Estimated Value of Investment as of September 30, 2012: $5.7; 
Outstanding Balance as of September 30, 2011[1]: $17.3; 
Estimated Value of Investment as of September 30, 2011: $12.4. 

Community Development Capital Initiative; 
Outstanding Balance as of September 30, 2012[1]: $0.6; 
Estimated Value of Investment as of September 30, 2012: $0.4; 
Outstanding Balance as of September 30, 2011[1]: $0.6; 
Estimated Value of Investment as of September 30, 2011: $0.4. 

Credit Market Programs: 

Public Private Investment Program; 
Outstanding Balance as of September 30, 2012[1]: $9.8; 
Estimated Value of Investment as of September 30, 2012: $10.8; 
Outstanding Balance as of September 30, 2011[1]: $15.9; 
Estimated Value of Investment as of September 30, 2011: $18.4. 

Term Asset-Backed Securities Loan Facility; 
Outstanding Balance as of September 30, 2012[1]: $0.1; 
Estimated Value of Investment as of September 30, 2012: $0.7; 
Outstanding Balance as of September 30, 2011[1]: $0.1; 
Estimated Value of Investment as of September 30, 2011: $0.6. 

SBA 7(a) Securities Purchase Program; 
Outstanding Balance as of September 30, 2012[1]: [Empty]; 
Estimated Value of Investment as of September 30, 2012: [Empty]; 
Outstanding Balance as of September 30, 2011[1]: $0.1; 
Estimated Value of Investment as of September 30, 2011: $0.1. 

Other Programs: 

Automotive Industry Financing Program; 
Outstanding Balance as of September 30, 2012[1]: $37.2; 
Estimated Value of Investment as of September 30, 2012: $17.5; 
Outstanding Balance as of September 30, 2011[1]: $37.3; 
Estimated Value of Investment as of September 30, 2011: $17.8. 

American International Group Investment Program; 
Outstanding Balance as of September 30, 2012[1]: $6.7; 
Estimated Value of Investment as of September 30, 2012: $5.1; 
Outstanding Balance as of September 30, 2011[1]: $51.1; 
Estimated Value of Investment as of September 30, 2011: $30.4. 

Total: 
Outstanding Balance as of September 30, 2012[1]: $63.1; 
Estimated Value of Investment as of September 30, 2012: $40.2; 
Outstanding Balance as of September 30, 2011[1]: $122.4; 
Estimated Value of Investment as of September 30, 2011: $80.1. 

[1] Before subsidy cost allowance. 

[End of table] 

The ultimate cost of TARP will not be known for some time. The 
financial performance of the programs will depend on many factors such 
as future economic and financial conditions, and the business 
prospects of specific institutions. The cost estimates are sensitive 
to slight changes in model assumptions, such as general economic 
conditions, specific stock price volatility of the entities in which 
OFS has an equity interest, estimates of expected defaults, and 
prepayments. If OFS receives repayments faster than expected and 
incurs lower than expected defaults, TARP’s ultimate cost on these 
investments may be lower than estimated. Wherever possible, OFS uses 
market prices of tradable securities to estimate the fair value of 
TARP investments. Use of market prices was possible for TARP 
investments that trade in public markets or are closely related to 
tradable securities. For those TARP investments that do not have 
direct analogs in private markets, OFS uses internal market-based 
models to estimate the market value of these investments. All future 
cash flows are adjusted for market risk. Further details on asset 
valuation can be found in Note 6 of the Financial Statements. 

Comparison of Estimated Lifetime TARP Costs Over Time: 

Market conditions and the performance of specific financial 
institutions are critical determinants of TARP’s estimated lifetime 
cost. The changes in the OFS estimates since TARP’s inception through 
September 30, 2012, provide a good illustration of this impact. Table 
5 provides information on how OFS’ estimated lifetime cost of TARP has 
changed over time. These costs fluctuate in large part due to changes 
in the market prices of common stock for AIG and General Motors (GM) 
and the estimated value of the Ally Financial (Ally) stock. This table 
assumes that all expected investments (e.g. PPIP) and disbursements 
for Treasury housing programs under TARP are completed, and adhere to 
general government budgeting guidance. This table will not tie to the 
financial statements since it includes investments and other 
disbursements expected to be made in the future. Table 5 is consistent 
with the estimated TARP lifetime cost disclosures on the OFS web site 
at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/Pages/default.asp
x]. 

The cost amounts in Table 5 are based on assumptions regarding future 
events, which are inherently uncertain. 

Table 5: Estimated Lifetime TARP Costs (Income)[1]: 
(Dollars in billions): 

Bank Support Programs: 

Capital Purchase Program; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: ($14.6); 
2010: ($11.2); 
2011: ($13.0); 
2012: ($14.9). 

Targeted Investment Program; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: ($1.9); 
2010: ($3.8); 
2011: ($4.0); 
2012: ($4.0). 

Asset Guarantee Program[2]; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: ($2.2); 
2010: ($3.7); 
2011: ($3.7); 
2012: ($3.9). 

Community Development Capital Initiative; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $0.4; 
2010: $0.3; 
2011: $0.2; 
2012: $0.2. 

Credit Market Programs: 

Public Private Investment Program; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $1.4; 
2010: ($0.7); 
2011: ($2.4); 
2012: ($2.4). 

Term Asset-Backed Securities Loan Facility; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: ($0.3); 
2010: ($0.4); 
2011: ($0.4); 
2012: ($0.5). 

SBA 7(a) Securities Purchase Program; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: N/A; 
2010: [Empty]; 
2011: [Empty]; 
2012: [Empty]. 

Other Programs: 

Automotive Industry Financing Program; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $34.5; 
2010: $14.7; 
2011: $23.6; 
2012: $24.3. 

American International Group Investment Program[3]; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $56.8; 
2010: $36.9; 
2011: $24.3; 
2012: $15.3. 

Subtotal: 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $74.1; 
2010: $32.1; 
2011: $24.6; 
2012: $14.1. 

Treasury Housing Programs under TARP[4]; 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $50.0; 
2010: $45.6; 
2011: $45.6; 
2012: $45.6. 

Total: 
Estimated Lifetime Cost (Income) as of September 30: 
2009[5]: $124.1; 
2010: $77.7; 
2011: $70.2; 
2012: $59.7. 

[1] Estimated program costs (+) or savings (in parentheses) over the 
life of the program, including interest on reestimates and excluding 
administrative costs. 

[2] Prior to the termination of the guarantee agreement, Treasury 
guaranteed up to $5.0 billion of potential losses on a $301.0 billion 
portfolio of loans. 

[3] The amounts for AIG reflect only the operations of TARP and do not 
reflect proceeds received from the sale of shares of AIG common stock 
held by Treasury outside of TARP (non-TARP shares). For further 
details, see the discussion of the American International Group 
Investment Program, beginning on page 27. 

[4] Includes FHA-Refinance Program, which is accounted for under 
credit reform. 

[5] Estimated lifetime cost for 2009 includes funds for projected 
disbursements and anticipated obligations. 

[End of table] 

Key Trends/Factors Affecting TARP Future Activities and Ultimate Cost: 

This section provides additional TARP analytic information and 
enhanced sensitivity analysis focusing on the remaining TARP 
dollars/continued taxpayer exposure and what is likely to affect the 
expected future return. As of September 30, 2012, one TARP program – 
the AIFP – has more than $10 billion still outstanding and remains at 
the most risk of additional taxpayer loss. Going forward, the 
collections or costs from the AIFP and the expenditures for Treasury 
housing programs under TARP are expected to most significantly affect 
the lifetime cost of TARP. 

Automotive Industry Financing Program: 

As of September 30, 2012, OFS’ gross AIFP investments outstanding in 
GM and Ally Financial totaled $37.2 billion, with an estimated value 
of $17.5 billion. The future value of OFS’ investment in GM will 
depend on the market price of GM common stock, which is affected by a 
variety of factors specific to the financial condition and results of 
operations of GM as well as factors pertaining to the industry and the 
overall economy, such as the competitiveness of U.S. manufacturers, 
both domestically and internationally, and macroeconomic conditions 
(unemployment, Gross Domestic Product growth, etc.) which affect the 
overall trends in auto sales. The future value of OFS’ investment in 
Ally will depend on industry and macroeconomic factors as well as 
company-specific factors, including in particular the ability of the 
company to resolve the bankruptcy of its subsidiary, Residential 
Capital, LLC (ResCap), in a timely and costeffective manner, and the 
proceeds realized from the sale of its international operations. 

Treasury Housing Programs Under TARP: 

OFS committed $45.6 billion to fund Treasury housing programs under 
TARP. From inception through September 30, 2012, $5.5 billion has been 
disbursed under these programs. Based only on the permanent 
modifications in place as of September 30, 2012, OFS estimates that 
$10.5 billion in incentive fees will ultimately be disbursed in 
association with all Making Home Affordable (MHA) modifications made 
as of September 30, 2012, if all active modifications were to remain 
current and receive incentives for five years. The program is 
continuing to enter into new modifications, as the termination date 
was extended to December 31, 2013. Separately, $7.6 billion has been 
allocated for the Hardest Hit Fund and $8.1 billion for the FHA 
Refinance Program. 

Sensitivity Analysis: 

The ultimate value of TARP investments will only be known in time. 
Realized values will vary from current estimates in part because 
economic and financial conditions will change. Many TARP investments 
do not have readily observable values and their values can only be 
estimated by OFS. 

Sensitivity analysis is one way to get some feel for the degree of 
uncertainty around the OFS estimates. In the analysis reported here, 
OFS focuses on the AIFP as it is the only remaining program with 
investments in excess of $10.0 billion. 

AIFP Analysis: 

The most important inputs to the valuation of OFS’ outstanding 
investments under the AIFP are the market price of New GM common stock 
and the change in the estimated value of Ally Financial common stock, 
which is driven by certain pricing metrics of comparable public 
financial institutions. Table 6 shows the change in estimated value of 
OFS outstanding AIFP investments based on a 10 percent increase and 10 
percent decrease in the trading price of the New GM common stock and 
separately a 10 percent increase and 10 percent decrease in the 
estimated value of the Ally Financial common stock. Figure A shows 
that the securities have recently been trading within the range used 
in the analysis as well as outside of this range, illustrating the 
uncertainty around the cost estimates. 

Table 6: Impact on AIFP Valuation: 
(Dollars in billions): 

Impact of GM on AIFP: 
September 30, 2012 Reported Value for AIFP: $17.55; 
Effect of 10% Increase: $18.68; 
Effect of 10% Decrease: $16.41. 

Percent change from current: 
September 30, 2012 Reported Value for AIFP: N/A; 
Effect of 10% Increase: 6.40%; 
Effect of 10% Decrease: (6.40)%. 

Impact of Ally (formerly GMAC) on AIFP: 
September 30, 2012 Reported Value for AIFP: $17.55; 
Effect of 10% Increase: $18.16; 
Effect of 10% Decrease: $16.93. 

Percent change from current: 
September 30, 2012 Reported Value for AIFP: N/A; 
Effect of 10% Increase: 3.50%; 
Effect of 10% Decrease: (3.50)%. 

[End of table] 

Figure A shows the daily closing price of the New GM common stock 
since the initial public offering in November 2010. The closing price 
for September 30, 2012 was $22.75. The dashed lines represent the high 
and low price used in the sensitivity analysis. 

[Refer to PDF for image: line graph] 

[End of figure] 

Systems, Controls, and Legal Compliance: 

Management Assurance Statement: 

The Office of Financial Stability's (OFS) management is responsible 
for establishing and maintaining effective internal control and 
financial management systems that meet the objectives of the Federal 
Managers’ Financial Integrity Act (FMFIA), 31 U.S.C. 3512(c),(d). OFS 
has evaluated its management controls, internal controls over 
financial reporting, and compliance with the federal financial systems 
standards. As part of the evaluation process, we considered the 
results of extensive documentation, assessment and testing of controls 
across OFS, as well as the results of independent audits. We conducted 
our reviews of internal controls in accordance with FMFIA and Office 
of Management and Budget (OMB) Circular A-123. 

As a result of our reviews, management concludes that the management 
control objectives described below, taken as a whole, were achieved as 
of September 30, 2012. Specifically, this assurance is provided 
relative to Section 2 (internal controls) and 4 (systems controls) of 
FMFIA. OFS further assures that the financial management systems 
relied upon by OFS are in substantial compliance with the requirements 
imposed by the Federal Financial Management Improvement Act (FFMIA). 

OFS' internal controls are designed to meet the management objectives 
established by Treasury and listed below: 

(a) Programs achieve their intended results; 
(b) Resources are used consistent with overall mission; 
(c) Programs and resources are free from waste, fraud, and 
mismanagement; 
(d) Laws and regulations are followed; 
(e) Controls are sufficient to minimize any improper or erroneous 
payments; 
(f) Performance information is reliable; 
(g) System security is in substantial compliance with all relevant 
requirements; 
(h) Continuity of operations planning in critical areas is sufficient 
to reduce risk to reasonable levels; and; 
(i) Financial management systems are in compliance with federal 
financial systems standards, i.e., FMFIA Section 4 and FFMIA. 

In addition, OFS management conducted its assessment of the 
effectiveness of internal control over financial reporting, which 
includes safeguarding of assets and compliance with applicable laws 
and regulations, in accordance with OMB Circular A-123, Management’s 
Responsibility for Internal Control, Appendix A, Internal Control over 
Financial Reporting. Based on the results of this evaluation, OFS 
provides unqualified assurance that internal control over financial 
reporting is appropriately designed and operating effectively as of 
September 30, 2012, with no related material weaknesses noted. 

Sincerely, 

[Signed by] 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

[End of Management Assurance Statement] 

Internal Control Program: 

OFS management remains committed to maintaining effective internal 
controls in safeguarding taxpayer dollars while providing financial 
stability through the TARP. OFS continues to have a high performing 
internal control program in compliance with the Federal Managers’ 
Financial Integrity Act (FMFIA). The OFS Risk and Control Group (RCG) 
works closely with program managers and support personnel to maintain 
robust internal controls across business functions. RCG also 
coordinates with the OFS Office of Financial Agents (OFA) to ensure 
that third party service providers whose work has a potential 
financial reporting impact on OFS have well designed and effective 
internal control environments supporting the TARP. During fiscal year 
2012, OFS continued to implement effectively its internal control 
environment as demonstrated below: 

* Business processes supporting existing programs, including internal 
control activities, utilized increasingly well-defined policies and 
procedures and internal control documentation. OFS management 
regularly monitors activities to confirm that control procedures are 
performed consistently and as designed. 

* OFS made significant progress in addressing findings and areas for 
improvement in the internal control environment identified through 
OFS' self-assessment processes (e.g., OMB Circular A-123 internal 
controls over financial reporting assessment, annual assurance 
statement process) and through work performed by the oversight bodies 
(i.e., GAO and SIGTARP). 

* OFS continued to make improvements in information technology (IT) in 
fiscal year 2012 to drive efficiencies through the increased 
automation of the operational and accounting environments. 

OFS has a Senior Assessment Team (SAT) to guide the organization’s 
efforts to meet the statutory and regulatory requirements surrounding 
a sound system of internal control. The SAT is chaired by the Deputy 
Chief Financial Officer and includes representatives from all OFS 
functional areas. Furthermore, OFS has an internal control framework 
in place that is based on the principles of the Committee of 
Sponsoring Organizations of the Treadway Commission (COSO). The SAT 
leverages this framework in communicating control objectives across 
the organization and to its third party service providers. 

RCG operates under the direction of the Chief Financial Officer (CFO) 
and is guided by the SAT. RCG monitors the implementation of the 
internal control framework and is responsible for assessing the 
achievement of management control objectives by: 

* Integrating management controls into OFS business processes by: 
- Maintaining internal control documentation, 
- Developing and designing internal control responsibilities with 
business owners before major program transactions, and, 
- Enhancing the monitoring of control effectiveness during or after 
significant new program events; 

* Conducting “lessons learned” sessions to identify and remediate 
areas requiring improvement; 

* Performing periodic sample-based testing of key controls across 
mature business processes; and, 

* Monitoring feedback from oversight bodies. 

In addition, the internal control environment supporting TARP 
undergoes continuous improvement to remain effective and is subject to 
significant third party oversight by the GAO and the SIGTARP. 

The Assistant Secretary for Financial Stability reports annually to 
the Under Secretary for Domestic Finance on the adequacy of the 
various internal controls throughout OFS to include financial 
management systems compliance. This assurance statement covers OFS’ 
compliance with the FMFIA, the Federal Financial Management 
Improvement Act (FFMIA) and OMB Circular A-123 (Management’s 
Responsibility for Internal Control). In order to support the 
Assistant Secretary’s letter of assurance, the respective OFS 
functional areas prepare individual statements of assurance. These 
individual statements of assurance provide evidence supporting the 
achievement of OFS’ internal control objectives and disclose any noted 
internal control weaknesses. 

Information Technology Systems: 

In fiscal year 2012, OFS continued to utilize and improve the Core 
Investment Transaction Flow (CITF), TARP’s system of record and 
accounting translation engine. OFS added standardized management 
reports to CITF to improve its usefulness to management decision-
making and added functionality to capture key data elements for use in 
preparing the financial statements and associated notes. 

Other systems are supported by financial agents, which provide 
services to OFS. The financial agency agreements maintained by the 
Treasury Office of the Fiscal Assistant Secretary in support of OFS 
require financial agents to design and implement suitably robust 
security plans and internal control programs, to be reviewed and 
approved by OFS at least annually. 

In addition, OFS utilizes financial systems maintained by Treasury 
Departmental Offices and various Treasury bureaus. These systems are 
in compliance with federal financial systems standards and undergo 
regular independent audits. 

Compliance with the Improper Payments Elimination and Recovery Act 
(IPERA): 

The Improper Payments Elimination and Recovery Act of 2010 (IPERA) 
requires agencies to review their programs and activities annually to 
identify those susceptible to significant improper payments. IPERA 
significantly increases agency payment recapture efforts by requiring 
reviews of all programs with annual payments of $1 million or more, if 
cost effective. IPERA requires agencies to report information on their 
significant improper payments and recapture audit programs to the 
President and Congress annually. 

The elimination of improper payments is a major focus of OFS senior 
management. Managers are held accountable for developing and 
strengthening financial management controls to detect and prevent 
improper payments, and thereby better safeguard taxpayer dollars. OFS 
carried out its fiscal year 2012 IPERA review per Treasury-wide 
guidance and did not assess any programs or activities as susceptible 
to significant erroneous payments. However, management did identify 
the following matter: 

* A number of Making Home Affordable (MHA) investor cost share 
payments were erroneously calculated due to data discrepancies between 
servicer files and the MHA system of record. Data that servicers 
upload to the MHA system of record is used to calculate these 
incentive payments. The overall impact of the data errors on incentive 
payments was immaterial, and OFS management required servicers to take 
action to correct these data discrepancies. 

In fiscal year 2012, OFS concluded that a payment recapture audit was 
not cost effective as all programs were deemed to have a low risk of 
significant improper payments. For many programs, OFS already has 
procedures in place to review payments for completeness and accuracy 
prior to and after disbursement. Management leveraged OFS’ extensive 
internal control testing results or other compliance activities to 
corroborate risk assessment results, as well as the Bureau of the 
Public Debt’s testing results over administrative disbursements. 

On April 12, 2012, OMB issued Memorandum 12-11 "Reducing Improper 
Payments through the 'Do Not Pay List,'" based on a Directive provided 
by the President in June 2010. The President directed agencies to 
"review current pre-payment and pre-award procedures and ensure that a 
thorough review of available databases with relevant information on 
eligibility occurs before the release of any Federal funds." In order 
to achieve this mission, the President directed the creation of a 
single point of entry through which agencies would access relevant 
data before determining eligibility for Federal funding commonly 
referred to as the "Do Not Pay List." Prior to the release of this 
directive, OFS already had strong controls in place to help ensure 
payment eligibility. In fiscal year 2013 and beyond, OFS will, as 
appropriate, integrate the "Do Not Pay List” solution into its 
processes. 

Areas for Improvement: 

Over the next year, OFS management will focus on maintaining its 
internal control environment in several key areas as follows: 

* As programs continue to wind down, OFS will remain vigilant to 
maintain effective processes and controls. OFS management will take 
steps to sustain adequate segregation of duties and the right level of 
institutional knowledge among remaining staff as the size of the 
organization decreases. 

* Third party service providers will continue to support critical 
services as programs continue to wind down. OFS will monitor these 
third parties closely to safeguard the operational efficiency of 
programs and processes. 

* As OFS programs conclude and staff continues to decrease, OFS plans 
to streamline the number and depth of policies and procedures to make 
them more efficient and reduce the maintenance burden. OFS will manage 
this process through the Senior Assessment Team to ensure that any 
resulting risk is minimal and controlled. 

* OFS has developed information technology capabilities to increase 
efficiency and automate manual processes. Continuing to leverage 
existing information technology assets will help reduce risks 
associated with human error. In addition, OFS management will continue 
to strengthen IT-related controls towards a more mature IT environment 
supporting core business processes. 

Limitations of the Financial Statements: 

The principal financial statements have been prepared to report the 
financial position and results of operations of OFS’ TARP programs, 
consistent with the requirements of 31 U.S.C. 3515(b). While the 
statements have been prepared from the books and records of the OFS 
and the Department of the Treasury in accordance with section 116 of 
EESA and Generally Accepted Accounting Principles (GAAP) for Federal 
entities and the formats prescribed by the OMB, the statements are in 
addition to the financial reports used to monitor and control 
budgetary resources which are prepared from the same books and records. 

The statements should be read with the realization that they are for a 
component of the U.S. Government, a sovereign entity. 

Operational Goals: 

The following discussion of OFS goals and TARP programs focuses 
largely on the significant events that occurred from inception through 
fiscal year 2012. A more comprehensive discussion of each program, 
including its development and prior years’ performance, can be found 
in the TARP Two-Year Retrospective, the TARP Three Year Anniversary 
Report, and the TARP Four Year Retrospective (expected to be published 
in December 2012) which are available at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/def
ault.aspx]. 

Operational Goal One: Ensure the Overall Stability and Liquidity of 
the Financial System: 

The first and most significant goal of TARP was to help restore 
stability to the financial system. Despite recent volatility in the 
stock market and shocks in the global economy, the U.S. financial 
system today is more stable than it was during the midst of the 2008 
crisis. 

Financial markets and the economy continue to recover. Credit remains 
available for consumers and businesses. Financial institutions hold 
more capital relative to risk than they did before the crisis hit. 
Most of the government’s emergency responses to the crisis are being 
wound down in a way that protects the public’s interest and 88.5 
percent of TARP program investments have been collected through 
repayments, sales, dividends, interest and other income. 

Bank Support Programs (CPP, TIP, AGP, CDCI): 

Capital Purchase Program: 

OFS launched the Capital Purchase Program (CPP), the largest and most 
significant program under EESA, on October 14, 2008. Through the CPP, 
OFS provided capital infusions directly to banks and thrifts deemed 
viable by their regulators to bolster the capital position of 
institutions of all sizes and, in doing so, to build confidence in 
these institutions and the financial system as a whole. With the 
additional capital, CPP participants were better equipped to undertake 
new lending and continue to provide other services to consumers and 
businesses, even while absorbing write-downs and charge-offs on loans 
that were not performing. 

In the period following the CPP announcement, OFS provided $204.9 
billion in capital to 707 institutions of all sizes and types across 
the country, including more than 450 small and community banks and 22 
community development financial institutions (CDFIs) (see Table 7 
below). The largest investment was $25.0 billion and the smallest was 
$301,000. As Table 7 illustrates, smaller financial institutions make 
up the vast majority of participants in the CPP. Of the 707 
applications approved and funded by OFS through the CPP by the time it 
closed to new institutions on December 31, 2009, 473 or 66.9 percent 
were institutions with less than $1.0 billion in assets. 

Table 7: CPP Investment Profile: 

Asset Range: Less than $1 billion; 
CPP Participants: 
Number: 473; 
Percent: 66.9%; 
Total TARP Investment: 
Amount: $$3.8; 
Percent: 1.8%. 

Asset Range: $1 billion - $10 billion; 
CPP Participants: 
Number: 177; 
Percent: 25.0%; 
Total TARP Investment: 
Amount: $10.0; 
Percent: 4.9%. 

Asset Range: More than $10 billion; 
CPP Participants: 
Number: 57; 
Percent: 8.1%; 
Total TARP Investment: 
Amount: $191.1; 
Percent: 93.3%. 

Asset Range: Total; 
CPP Participants: 
Number: 707; 
Percent: 100%; 
Total TARP Investment: 
Amount: $204.9; 
Percent: 100%. 

[End of table] 

OFS received preferred stock or debt securities in exchange for these 
investments. Most financial institutions participating in the CPP pay 
OFS a dividend rate of five percent per year, which will increase to 
nine percent per year after the first five years starting in fiscal 
year 2014. From inception of the program through September 30, 2012, 
OFS has received approximately $193.2 billion in CPP repayments/sales, 
along with approximately $11.8 billion in CPP dividends and interest, 
and $14.6 billion of proceeds in excess of cost that includes $6.9 
billion in net proceeds received from the sale of Citigroup common 
stock in excess of cost. 

During fiscal year 2012, OFS has focused on winding down the CPP 
according to the exit strategy it announced on May 3, 2012. That 
strategy includes a combination of repayments in the case of banks 
which are expected to repay in the near future, selling OFS’ positions 
in banks through auctions, and restructuring some investments, 
typically in connection with a merger or other plan of the bank to 
infuse capital, in a way that maximizes timely OFS collections and 
helps avoid bank failures. The extent to which OFS employs each of the 
individual options will depend on market conditions and other factors. 

Repayments: 

Under the terms of the CPP, participating financial institutions may 
repay the funds they received at any time, so long as they have the 
approval of their regulators. OFS cannot demand repayment of CPP 
preferred stock, nor is OFS’ approval required for financial 
institutions to repay. 

During fiscal year 2012, 95 financial institutions fully repaid a 
total of $8.1 billion, including proceeds from auctions and sales. 
Repayments were received from several of the largest remaining banks 
in the program such as Regions Financial Corp ($3.5 billion), Zion’s 
Bancorp ($1.4 billion), and M & T ($0.4 billion). 

Auction (and Other) Sales: 

To expedite the wind down of the CPP, OFS will periodically sell 
preferred stock and subordinated debt in CPP participants through both 
public and private auctions. OFS generally employs a modified Dutch 
auction[Footnote 8] process, which establishes a market price by 
allowing investors to submit bids at specified increments. Additional 
guidance for public auctions is available in prospectuses that are 
filed by the issuers of the preferred stock prior to the opening of 
each public auction. For private auctions, the procedures are 
described in full in the applicable bidder letter agreement. 

OFS held its first Dutch auction of CPP preferred securities and 
debentures in March 2012, and has held five additional auctions since 
that date. OFS has sold its investments in 40 banks with an aggregate 
outstanding balance of $1.5 billion. These auctions resulted in 
combined proceeds of $1.3 billion or $180 million in proceeds less 
than cost. 

Restructurings: 

Another component of OFS’ exit strategy for the CPP is to restructure 
certain investments where a bank makes a proposal to do so. This is 
typically done in connection with a merger or the bank’s plan to raise 
new capital. Treasury agrees to receive cash (sometimes at a discount 
to the original “par” value of the investment) or other securities, 
which can be more easily sold. Treasury will participate in these 
transactions in limited cases and only if the terms help maximize 
collections on behalf of taxpayers. 

OFS also received warrants to purchase common shares or other 
securities from the financial institutions at the time of the CPP 
investment. The purpose of the additional securities is to provide 
opportunities for OFS to reap additional returns on the investments 
made by it as CPP participants recover. From inception of the program 
through September 30, 2012, OFS has received nearly $7.7 billion in 
proceeds from the sale/repurchase of CPP warrants. 

For additional information, please see OFS’ Monthly Report to Congress 
(also known as the 105a Report), which can be found at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Mon
thly-Report-to-Congress.aspx]. 

Refinancing Through the Small Business Lending Fund: 

In fiscal year 2011, 137 CPP institutions refinanced their CPP 
investments totaling more than $2.2 billion using the Small Business 
Lending Fund (SBLF). These refinancing transactions moved the risk 
associated with these institutions’ repayments from OFS to SBLF. SBLF 
is not a TARP program and does not use TARP funds. The SBLF ceased 
making new commitments at the close of fiscal year 2011. As a result, 
there were no SBLF refinances in fiscal year 2012. 

Targeted Investment Program: 

OFS established the Targeted Investment Program (TIP) in December 
2008. Through TIP, OFS sought to prevent a loss of confidence in 
critical financial institutions, which could result in significant 
financial market disruptions, threaten the financial strength of 
similarly situated financial institutions, impair broader financial 
markets, and undermine the overall economy. TIP was considered “
exceptional assistance” for purposes of executive compensation 
requirements. 

OFS invested $20.0 billion in preferred stock in each of two 
institutions – Bank of America (BofA) and Citigroup – under TIP, in 
addition to those funds that these financial institutions received 
under the CPP. In December 2009, both participating institutions 
repaid their TIP investments in full, with dividends. Total TIP 
dividends were about $3.0 billion during the life of the program. OFS 
also received warrants from each bank which provided the taxpayer with 
additional gain on the investments when OFS sold the BofA warrants in 
fiscal year 2010 for $1.2 billion and the Citigroup warrant in fiscal 
year 2011 for $190 million. TIP closed during fiscal year 2011 and 
resulted in a positive return for taxpayers. 

Asset Guarantee Program: 

Under AGP, OFS acted to support the value of certain assets held by 
qualifying financial institutions, by agreeing to absorb a portion of 
the losses on those assets. The program was conducted jointly by 
Treasury, the FRBNY and the Federal Deposit Insurance Corporation 
(FDIC). Like TIP, it was designed for financial institutions whose 
failure could harm the financial system and reduce the potential for “
spillover” to the broader financial system and economy. The AGP was 
used to assist BofA and Citigroup in conjunction with TIP investments 
in those institutions. The arrangement with BofA was terminated before 
it was formally finalized, with BofA paying OFS a termination fee. 
Under the terms of the guarantee agreement with Citigroup, OFS, the 
FDIC, and the FRBNY received a premium for the guarantee of $7.0 
billion in Citigroup preferred stock and warrants. Additional 
information on the two institutions under AGP can be found in the OFS’ 
fiscal year 2010 Agency Financial Report available at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Ann
ual-Agency-Financial-Reports.aspx]. 

Although the guarantee was originally expected to be in place for five 
to ten years, Citigroup requested that it be terminated in December 
2009 in conjunction with its repayment of $20 billion it received from 
the TIP. The banking regulators approved its request in conjunction 
with Citibank's raising of more than $20 billion of private capital. 

In connection with the termination, Treasury and the FDIC kept most of 
the premium paid by Citigroup. Specifically, the government retained a 
total of $5.2 billion of the $7.0 billion of preferred stock (which 
had since been converted to trust preferred securities). OFS’ portion 
was $2.2 billion. 

The FDIC and OFS agreed that, subject to certain conditions, the FDIC 
would transfer to OFS $800 million of their Citigroup trust preferred 
stock holding plus dividends thereon contingent on Citigroup repaying 
its previously-issued FDIC guaranteed debt under the FDIC’s Temporary 
Liquidity Guarantee Program which expires on December 31, 2012. OFS 
sold its trust preferred securities in October 2010 and the AGP 
warrants in January 2011, leaving only the $800 million of trust 
preferred stock receivable from the FDIC valued at $967 million 
(including dividends thereon held by FDIC) at September 30, 2012. 
During fiscal year 2013, OFS expects to receive and liquidate the $800 
million Citigroup trust preferred securities. 

The AGP is now closed and resulted in a positive return for taxpayers. 
No OFS payments were made under the program. 

Community Development Capital Initiative: 

The CDFIs focus on providing financial services to communities 
underserved by traditional banks, such as low- and moderate-income, 
minority, and other underserved communities. OFS launched the 
Community Development Capital Initiative to help viable certified 
CDFIs and the communities they serve cope with effects of the 
financial crisis. Under this program, CDFI banks and thrifts received 
investments of capital with an initial dividend or interest rate of 
two percent, compared to the five percent rate generally offered under 
CPP. CDFI banks and thrifts applied to receive capital up to five 
percent of risk-weighted assets. To encourage repayment while 
recognizing the unique circumstances facing CDFIs, the dividend rate 
will increase to nine percent after eight years, compared to five 
years under CPP. 

OFS completed funding under this program in September 2010. The total 
investment amount for the CDCI program under TARP is $570 million for 
84 institutions. Of this amount, $363 million resulted from 28 banks 
exchanging their investments under the CPP into the CDCI. As of 
September 30, 2012, one institution representing $7 million went into 
receivership and OFS does not expect any collection on the associated 
preferred shares, and two institutions representing $3 million have 
fully repaid OFS. Due to the unique nature of these institutions and 
the difficulties faced by the communities they serve, OFS designed 
this program to encourage repayment over a longer period of time. So 
for the time being, OFS will continue to hold these investments and 
will evaluate its options for exiting them at a later date. 

Credit Market Programs (PPIP, TALF, SBA 7(a)): 

Public-Private Investment Program: 

During the financial crisis, many institutions and investors were 
under extreme pressure to reduce indebtedness. This de-leveraging 
process pushed down the market prices for many financial assets, 
including troubled legacy securities (i.e., non-agency residential 
mortgage-backed securities (RMBS) and commercial mortgage-backed 
securities (CMBS)) below their fundamental value. Institutions and 
investors were trapped with these hard-to-value assets, marked at 
distressed prices on their balance sheets, which constrained liquidity 
and the availability of credit in these markets. 

The OFS designed the PPIP to facilitate the purchase of troubled 
legacy securities (i.e., non-agency RMBS and CMBS) by providing 
financing on attractive terms as well as a matching equity investment 
made by private investors. By drawing new private capital into the 
market for legacy RMBS and CMBS, PPIP was designed to help restart the 
market for these securities, thereby facilitating the removal of these 
assets from financial institutions’ balance sheets and allowing for 
more credit to become available for consumers and small businesses. 

Under the program, Public-Private Investment Funds (PPIFs) were 
established by private sector fund managers for the purpose of 
purchasing eligible legacy securities from banks, insurance companies, 
mutual funds, pension funds, and other eligible sellers as defined 
under EESA. OFS matches equity dollar-for-dollar and lends up to the 
amount of equity raised by the PPIFs for the purpose of purchasing 
eligible RMBS and CMBS from eligible financial institutions under EESA. 

PPIFs have the ability to invest in eligible assets over a three-year 
investment period ending in December 2012 for the remaining PPIFs. 
They then have up to five additional years, which may be extended for 
up to two more years, to manage these investments and return the 
proceeds to OFS and the other PPIF investors. PPIP fund managers 
retain control of asset selection, purchasing, trading, and 
disposition of investments. The profits generated by a PPIF, net of 
expenses, will be distributed to the investors, including OFS, in 
proportion to their equity capital investments. OFS also receives 
warrants from the PPIFs, which gives OFS the right to receive a 
percentage of the profits that would otherwise be distributed to the 
private partners that are in excess of their contributed capital. The 
program structure allows for risk to be spread between the private 
investors and OFS and provides taxpayers with the opportunity for 
positive returns. 

PPIP Results 

Treasury originally committed approximately $22.1 billion of equity 
and loans to the nine PPIFs. After completing their fundraising, PPIFs 
closed on approximately $7.4 billion of private sector equity capital 
commitments, which were matched 100 percent by OFS, representing $14.7 
billion of equity capital commitments. In the aggregate, all nine 
PPIFs had $29.4 billion of total purchasing power. The following is a 
summary of the commitments and investments in individual PPIFs as of 
September 30, 2012. 

Table 8: OFS Commitments and Investments in PPIFs: 
(Dollars in billions): 

PPIF: Angelo, Gordon & Co., LP and GE Capital Real Estate; 
Purchase Price: $3.6; 
Disbursements: $3.4; 
Repayments: $1.1; 
Amount Outstanding: $2.3; 
Other Receipts[3]: $0.6; 
Total Cash Back: $1.7.; 

PPIF: BlackRock, Inc; 
Purchase Price: $2.1; 
Disbursements: $1.5; 
Repayments: $0.2; 
Amount Outstanding: $1.3; 
Other Receipts[3]: $0.2; 
Total Cash Back: $0.4. 

PPIF: Invesco Ltd.[1]; 
Purchase Price: $2.0; 
Disbursements: $1.7; 
Repayments: $1.7; 
Amount Outstanding: [Empty]; 
Other Receipts[3]: $0.2; 
Total Cash Back: $1.9. 

PPIF: Marathon Asset Management, LP; 
Purchase Price: $1.4; 
Disbursements: $1.4; 
Repayments: $0.1; 
Amount Outstanding: $1.3; 
Other Receipts[3]: $0.2; 
Total Cash Back: $0.3. 

PPIF: Oaktree Capital Management, LP; 
Purchase Price: $3.5; 
Disbursements: $1.7; 
Repayments: $0.3; 
Amount Outstanding: $1.4; 
Other Receipts[3]: [Empty]; 
Total Cash Back: $0.3. 

PPIF: RLJ Western Asset Management, LP; 
Purchase Price: $1.9; 
Disbursements: $1.9; 
Repayments: $1.4; 
Amount Outstanding: $0.5;
Other Receipts[3]: $0.4; 
Total Cash Back: $1.8. 

PPIF: The TCW Group, Inc[2]; 
Purchase Price: $0.4; 
Disbursements: $0.4; 
Repayments: $0.4; 
Amount Outstanding: [Empty]; 
Other Receipts[3]: [Empty]; 
Total Cash Back: $0.4. 

PPIF: Wellington Management Company, LLP; 
Purchase Price: $3.4; 
Disbursements: $3.4; 
Repayments: $0.4; 
Amount Outstanding: $3.0; 
Other Receipts[3]: $0.3; 
Total Cash Back: $0.7. 

PPIF: Alliance Bernstein[1];
Purchase Price: $3.3; 
Disbursements: $3.2; 
Repayments: $3.2; 
Amount Outstanding: $0.0; 
Other Receipts[3]: $0.5; 
Total Cash Back: $3.7. 

PPIF: Total; 
Purchase Price: $21.6; 
Disbursements: $18.6; 
Repayments: $8.8; 
Amount Outstanding: $9.8; 
Other Receipts[3]: $2.4; 
Total Cash Back: $11.2. 

[1] Investment period has expired or been terminated. 

[2] The fund has been closed. 

[3] Other receipts includes interest, investment income and proceeds 
in excess of cost. 

[End of table] 

Wind Down Status for PPIFs: 

In March 2012, Invesco Legacy Securities Master Fund (Invesco Ltd) 
became the second PPIF to sell its remaining investments, repaying all 
of the $1.2 billion in debt and $581 million in equity capital 
invested by OFS in the fund. Cumulatively, OFS received $18 million in 
interest and $139 million of proceeds in excess of original equity 
capital, including $3 million in warrant proceeds from Invesco Ltd. 

In July 2012, RLJ Western formally terminated its investment period. 
As of September 30, 2012, RLJ Western has repaid all of the $1.2 
billion in debt and $144 million of the original $621 million in 
equity capital invested by OFS. Cumulatively, OFS received $37 million 
in interest and $340 million of proceeds in excess of original equity 
capital. 

As of September 2012, Alliance Bernstein also substantially wound down 
the fund. As of September 30, 2012, Alliance Bernstein has repaid all 
of the $2.1 billion in debt and all of the $1.1 billion in equity 
capital invested by OFS in the fund. Cumulatively, OFS received $58 
million in interest and $448 million in proceeds in excess of original 
equity capital. 

OFS provides quarterly status reports on the program’s performance. 
For more information on these holdings and the performance of the 
PPIFs, readers can refer to the most recent PPIP Quarterly Report 
available at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Pub
lic-Private-Investment-Program-Quarterly-Report.aspx]. 

Term Asset-Backed Securities Loan Facility: 

TALF was a joint Federal Reserve-OFS program that was designed to 
restart the asset-backed securities (ABS) market that provide credit 
to consumers and small businesses, which had ground to a virtual 
standstill during the early months of the financial crisis. 

Pursuant to its Federal Reserve Act Section 13(3) authority, the 
Federal Reserve Board authorized the FRBNY to extend up to $200.0 
billion in non-recourse loans to borrowers to enable the purchase of 
newly issued asset-backed (including newly issued CMBS and legacy 
CMBS) AAA-rated securities including those backed by consumer loans, 
student loans, small business loans, and commercial real estate loans. 
In return, the borrowers pledged the eligible collateral with a risk 
premium (“haircut”) as security for the loans. Should a borrower 
default upon its TALF loan or voluntarily surrender the collateral, it 
would be seized and sold to TALF LLC, a special purpose vehicle 
created by FRBNY to purchase and hold seized or surrendered 
collateral. Through September 30, 2012, TALF LLC has not purchased any 
collateral from the FRBNY. 

OFS originally committed to provide $20.0 billion in the form of a 
subordinated loan commitment to TALF LLC. This commitment was reduced 
to $4.3 billion after the program closed to new lending in June 2010, 
which represented 10 percent of the outstanding TALF loans at the 
time. In June 2012, the commitment was further reduced to $1.4 billion 
at a time when the outstanding loans were $3.5 billion. As of 
September 30, 2012, $1.5 billion of TALF loans due to the FRBNY 
remained outstanding and the TALF program has experienced no losses. 
OFS does not expect any program cost to the taxpayers from this 
program. 

Small Business Administration 7(a) Securities Purchase Program: 

Small businesses play an important role in generating new jobs and 
growth in our economy. The SBA’s 7(a) Loan Guarantee Program assists 
start-up and existing small businesses that face difficulty in 
obtaining loans through traditional lending channels. 

To help ensure that credit flows to entrepreneurs and small business 
owners, OFS developed the SBA 7(a) Securities Purchase Program to 
purchase SBA-guaranteed securities from pool assemblers. Purchasing 
securities from participating pool assemblers enabled them to purchase 
additional small business loans from loan originators. OFS invested in 
a total of 31 SBA 7(a) securities with a value of approximately $367 
million (excluding purchased accrued interest) between March and 
September 2010. Those securities were comprised of 1,001 loans from 17 
different industries, including retail, food services, manufacturing, 
scientific and technical services, health care, educational services, 
and others. Through its purchases, OFS injected much needed liquidity 
into this market to help restart the flow of credit, enabling pool 
assemblers to purchase additional small business loans from loan 
originators. Since OFS began its purchases, the SBA 7(a) market has 
now recovered with new SBA 7(a) loan volumes returning to precrisis 
levels. 

In January 2012, OFS sold its eight remaining SBA 7(a) securities in 
the portfolio, marking the successful wind down of the SBA 7(a) 
Securities Purchase Program. In total, OFS collected $376 million 
through sales ($334 million) and principal payments ($29 million) and 
interest payments ($13 million) over the life of the program, 
representing cash collections of approximately $9 million more than 
its original investment of $367 million. 

Other Programs: 

Automotive Industry Financing Program: 

The Automotive Industry Financing Program (AIFP) was launched in 
December 2008 to help prevent the disorderly liquidation of Chrysler 
and General Motors (GM) and thus a significant disruption of the U.S. 
auto industry. The potential for such a disruption at that time posed 
a significant risk to financial market stability and threatened the 
overall economy. 

Recognizing both General Motors Corporation (Old GM) and Chrysler 
Holdings LLC (Old Chrysler) were on the verge of potentially 
disorderly liquidations, OFS extended temporary loans to GM and 
Chrysler in December 2008. OFS agreed to provide additional funds 
conditioned on each company and its stakeholders participating in a 
fundamental restructuring. Sacrifices were made by unions, dealers, 
creditors and other stakeholders, and the restructurings were achieved 
through bankruptcy court proceedings in a record time. As a result, 
General Motors Company (New GM) and Chrysler Group LLC (New Chrysler) 
are more competitive and viable companies, supporting American jobs 
and the economy. Operating results have improved, the industry has 
added jobs, and TARP investments have begun to be repaid. 

In total, OFS disbursed $79.7 billion in loans and equity investments 
to GM, GMAC (now known as Ally Financial), Chrysler, and Chrysler 
Financial. Please see Note 6 of financial statements for further 
information on the AIFP subsidy cost. 

General Motors: 

OFS provided $49.5 billion under TARP to Old GM. The initial 
assistance was a $13.4 billion loan in December 2008 to Old GM to fund 
working capital. Under the loan agreement, Old GM was required to 
submit a viable restructuring plan. The first plan Old GM submitted 
failed to establish a credible path to viability, and the deadline was 
extended to June 2009 for Old GM to develop an amended plan. OFS 
loaned an additional $6.0 billion to fund Old GM as it worked to 
submit a viable restructuring plan. To achieve an orderly 
restructuring, Old GM filed for bankruptcy on June 1, 2009. OFS 
provided $30.1 billion under a debtor-in-possession financing 
agreement to assist Old GM during the restructuring. A newly formed 
entity, New GM purchased most of the assets of Old GM under a sale 
pursuant to Section 363 of the bankruptcy code (363 Sale). When the 
sale to New GM was completed on July 10, 2009, OFS converted most of 
its loans into 60.8 percent of the common equity in New GM and $2.1 
billion in preferred stock. At that time, OFS held $6.7 billion in 
outstanding loans which were repaid in full during fiscal year 2010. 
Approximately $986 million in loans to Old GM (now known as Motors 
Liquidation Company) for wind-down costs associated with its 
liquidation remained outstanding. 

Following confirmation of the plan for liquidation by the bankruptcy 
court, New GM emerged from the managed bankruptcy process as a 
stronger, more viable, and more competitive company. In 2010, New GM 
posted its first annual profit in six years. Since then, it has 
continued to add jobs and post strong growth. 

In November 2010, New GM completed its initial public offering (IPO), 
with gross proceeds to OFS of $13.6 billion, resulting in OFS 
reporting net proceeds less than cost of $4.3 billion. The IPO reduced 
OFS’ ownership of New GM’s outstanding common stock by nearly half. 
New GM then purchased all of OFS' preferred shares, further reducing 
the OFS’s stake in the company. 

In March 2011, the Plan of Liquidation for Old GM became effective and 
OFS’ $986 million loan to Old GM was converted to an administrative 
claim. During fiscal year 2011, OFS received payments totaling $111 
million from Motors Liquidation Company. During fiscal year 2012, OFS 
received payments of $26 million from Motors Liquidation Company. OFS 
retains the right to recover additional proceeds; however, any 
additional recovery is dependent on actual liquidation proceeds and 
pending litigation. OFS does not expect significant additional 
recoveries on this administrative claim. 

As of September 30, 2012, OFS holds approximately 500 million common 
stock shares with a value of $11.4 billion, representing 31.9 percent 
of the outstanding shares of common stock in New GM as discussed in 
Note 6 to the OFS Financial Statements. As of that date, OFS has 
collected $24.0 billion of its total $51.0 billion investment[Footnote 
9]. 

Since New GM is a publicly-traded company and its stock is highly 
liquid, OFS can exit its investment over time through sales of its 
remaining common shares on the open market, through underwritten 
offerings, block trades or dribble out programs, or a combination of 
the above. OFS will continue to evaluate its options based on market 
conditions. 

Chrysler: 

OFS disbursed a total of $12.4 billion to Chrysler related entities 
including Old Chrysler and New Chrysler. During fiscal year 2011, OFS 
fully exited its loans and investment relating to Chrysler entities, 
six years ahead of the scheduled maturity of its loans. Of the $12.4 
billion that was disbursed to Chrysler related entities under TARP, 
OFS collected more than $11.1 billion through principal repayments, 
sale of investments, and interest. While OFS retains a right to 
receive proceeds from a liquidation trust, no significant future 
cashflows are expected. The $12.4 billion disbursed to Chrysler 
related entities are made up primarily of the following transactions: 

In January 2009, OFS loaned $4.0 billion to Old Chrysler and the 
company was required to implement a viable restructuring plan. In 
fiscal year 2010, Old Chrysler repaid $1.9 billion while a $500 
million existing liability was assumed by New Chrysler. OFS wrote off 
the remaining $1.6 billion of this loan. 

During fiscal year 2009 the Administration laid out a framework for 
Old Chrysler to achieve viability by partnering with the international 
car company Fiat and OFS provided $1.9 billion to Old Chrysler under a 
debtor-in-possession (DIP) financing agreement for assistance during 
Old Chrysler’s bankruptcy proceeding. The DIP loan was extinguished by 
the bankruptcy court in April 2010, including collateral security 
attached to the loan, and transferred to a liquidation trust. OFS 
retained the right to recover the proceeds from the liquidation of the 
specified collateral and received $40 million from the liquidation 
trust in fiscal year 2010, $8 million in fiscal year 2011, and $9 
million in fiscal year 2012. 

In June 2009, a newly formed entity, Chrysler Group LLC, (New 
Chrysler) purchased most of the assets of Old Chrysler under a 363 
sale. OFS provided a $6.6 billion loan commitment to New Chrysler (of 
which $4.6 billion was disbursed), and received $384 million in 
additional notes and a 9.9 percent equity ownership in New Chrysler. 

In May 2011, New Chrysler repaid $5.1 billion in TARP loans, $384 
million relating to additional notes received, and interest thereon, 
and terminated its ability to draw a remaining $2.1 billion TARP loan 
commitment. New Chrysler’s repayment came six years before the 
scheduled maturity of those loans in 2017. In July 2011, OFS received 
$560 million in proceeds from the sale of its remaining stake in New 
Chrysler to Fiat. With the closing of this transaction, OFS completed 
its exit from New Chrysler. 

Ally Financial (formerly GMAC): 

In December 2008, OFS made an initial investment of $5.0 billion in 
GMAC. OFS also lent $884 million of TARP funds to Old GM for the 
purchase of additional ownership interests in a rights offering by 
GMAC. In May 2009, federal banking regulators required GMAC to raise 
additional capital by November 2009 in connection with the Supervisory 
Capital Assistance Program (SCAP)/stress test. Concurrently, OFS 
exercised its option to exchange the loan with Old GM for 35.4 percent 
of common membership interests in GMAC. OFS also purchased $7.5 
billion of convertible preferred shares from GMAC in May 2009, which 
enabled GMAC to partially meet the Supervisory Capital Assessment 
Program (SCAP) requirements. In December 2009, OFS made additional 
investments of $3.8 billion in GMAC to enable GMAC to satisfy the SCAP 
requirements and exchanged certain preferred shares for common stock. 
OFS provided the $3.8 billion in new capital in the form of $2.5 
billion of trust preferred securities, which are senior to all other 
capital securities of the company, and $1.3 billion of mandatory 
convertible preferred stock. 

In May 2010, GMAC changed its corporate name to Ally Financial, Inc. 
In December 2010, OFS converted preferred stock in Ally Financial with 
a liquidation preference of $5.5 billion into common stock. The 
conversion increased OFS’ common equity stake in Ally Financial from 
56 percent to 74 percent of total common shares outstanding. 

In fiscal year 2011, Ally commenced work on an initial public offering 
which would have enabled OFS to begin exiting its common stock 
investment. However, Ally was forced to delay the IPO due to 
intensifying issues related to legacy liabilities of its subsidiary, 
ResCap, a residential mortgage company, as well as a general weakening 
in the IPO market. 

In March 2011, OFS sold all of its Ally Financial trust preferred 
securities at par. Aggregate proceeds from the sale totaled $2.7 
billion. With the proceeds from this sale, OFS has received $5.7 
billion from Ally Financial from inception of the program through 
September 30, 2012, including $3.0 billion in dividends. 

In May 2012, ResCap filed to enter into a Chapter 11 reorganization 
process. ResCap, about one-tenth the size of Ally based on assets, is 
a separate and distinct company from Ally that has its own board of 
directors and creditors. OFS does not hold any equity, debt, or other 
direct investment in ResCap. While it is unfortunate that a Chapter 11 
filing became necessary for ResCap, OFS believes this action puts OFS 
in a stronger position to continue recovering OFS’ investment in Ally 
Financial. Ally’s automotive financing business has remained 
profitable and its retail banking operation has grown. Concurrently 
with the filing by ResCap, Ally began exploring strategic alternatives 
for its international business in a manner that Ally believes will 
maximize value for its shareholders. 

As of September 30, 2012, OFS held 119 million convertible preferred 
stock shares with a liquidation preference of $5.9 billion and 74 
percent of Ally Financial’s outstanding common stock as discussed in 
Note 6 to the OFS Financial Statements. 

OFS provided a total of $16.3 billion to GMAC from December 2008 
through December 2009 to help support its ability to issue new loans 
to GM and Chrysler dealers and consumers and to address the company’s 
capital needs. As of September 30, 2012, OFS has collected $5.7 
billion, consisting of $3.0 billion in dividend receipts on the 
mandatory convertible preferred, warranty preferred, and trust 
preferred securities (TruPS), and $2.7 billion from the sale of TruPS, 
(including $127 million of proceeds in excess of cost). 

American International Group, Inc. (AIG) Investment Program: 

The peak amount of assistance offered to AIG by the FRBNY and Treasury 
was $182.3 billion, a part of which ($22.1 billion) was later 
canceled, and an amount in excess of the total disbursed has now been 
recovered through repayments, sales and other income. Through 
September 30, 2012, Treasury disbursed a total of $67.8 billion to AIG 
and has collected $65.3 billion (of this, OFS disbursed $67.8 billion 
and collected $50.3 billion). Treasury’s collections include proceeds 
from sales of a total of 1.4 billion AIG common stock shares resulting 
in proceeds in excess of costs for non-TARP shares of $15.0 billion 
and proceeds less than cost of $11.8 billion for TARP shares. 

In September 2008, AIG was the largest provider of conventional 
insurance in the world, with approximately 75 million individual and 
corporate customers in more than 130 countries. AIG’s assets exceeded 
$1 trillion and insured 180,000 businesses and other entities 
employing more than 100 million people in the U.S. It was a large 
issuer of commercial paper and the second largest holder of U.S. 
municipal bonds. 

Then, the financial crisis peaked in 2008. AIG’s parent holding 
company engaged in financial activities that were well beyond the 
business of life insurance and property and casualty insurance. Its 
financial products unit was a significant participant in some of the 
newest, riskiest, and most complex transactions of the U.S. financial 
system. In the chaotic environment of September 2008, the Federal 
Reserve and Treasury concluded that AIG’s failure could be 
catastrophic. Among other things, if AIG had failed, the crisis would 
have almost certainly spread to the entire insurance industry, and its 
failure could have directly affected the savings of millions of 
Americans. Therefore, Treasury and the FRBNY took action to protect 
the U.S. financial system. 

During the fall of 2008, the Federal Reserve and OFS took a series of 
steps to prevent AIG’s disorderly failure and mitigate systemic risks. 
The initial assistance to AIG was provided by the FRBNY before the 
passage of EESA and the creation of TARP. After EESA became law, OFS 
and the Federal Reserve continued to work together to address the 
challenges posed by AIG. 

In November 2008, OFS invested $40.0 billion in senior preferred stock 
of AIG and it also received warrants to purchase common shares in the 
firm. The funds were used immediately to reduce the loans provided to 
AIG by the FRBNY. The preferred stock was subsequently exchanged in 
April 2009, for face value plus accrued dividends, into $41.6 billion 
of a different series of preferred stock. Complete details on the AIG 
investment are available in the TARP Three Year Anniversary Report and 
the TARP Two-Year Retrospective Report which are both available at: 
[hyperlink, 
http://www.treasury.gov/initiatives/financialstability/briefingroom/repo
rts/agency_reports/Pages/default.aspx]. 

In fiscal year 2011, Treasury, including OFS, FRBNY, the trustees of 
the AIG Credit Facility Trust (the Trust)[Footnote 10] and AIG 
completed a restructuring of AIG and Treasury, including OFS, and the 
FRBNY began exiting their respective investments. The restructuring, 
which was announced on September 30, 2010 and completed in January 
2011, was a series of integrated transactions and corporate actions 
designed to accelerate the repayment of U.S. taxpayer funds and to 
promote AIG’s transition from a majority government owned and 
supported entity to a financially sound and independent entity. As 
part of the restructuring, AIG drew $20.3 billion from the capital 
facility made available by OFS, for a total of $27.8 billion drawn and 
AIG repaid FRBNY a total of $47.0 billion, as a result of which AIG no 
longer had any outstanding obligations to the FRBNY (although the 
FRBNY still had loans to two special purpose vehicles which acquired 
assets from AIG). Following the restructuring, OFS’ total investment 
in AIG was $67.8 billion, and as of January 31, 2011, Treasury’s 
investment consisted of approximately 1.7 billion shares of AIG common 
stock (1.1 billion shares owned by OFS and 563 million shares owned by 
the Treasury, which were received on the termination of the Trust), 
representing ownership of 92 percent of the company (77 percent held 
by OFS and 15 percent held by the Treasury outside of OFS) as well as 
$20.3 billion of OFS’ preferred interests in two AIG SPVs. The AIG 
SPVs are wholly owned by AIG and consolidated on the AIG financial 
statements. The OFS owned 100 percent of the preferred interests in 
the two AIG SPVs. 

Exiting the Government’s AIG Investment: 

During fiscal year 2012, AIG completed the repayment of OFS’ preferred 
interests in the AIG SPVs. In March 2012, OFS received $8.6 billion in 
repayments of its preferred interest in the AIG AIA SPV. This allowed 
for OFS’ preferred interests in AIG SPVs to be repaid in full. 

During fiscal year 2012, the Treasury’s, including OFS’, common stock 
investment in AIG was also substantially reduced. Over the course of 
the year, OFS conducted four offerings that sold a total of 1.2 
billion shares of AIG common stock (consisting of 806 million TARP 
shares and 415 million Treasury non-TARP shares) at prices that ranged 
from $29.00 per share to $32.50 per share. Total proceeds from these 
fiscal year 2012 sales of AIG common stock amounted to $38.2 billion, 
consisting of $25.2 billion in proceeds to OFS and additional proceeds 
to the Treasury for the non-TARP shares of $13.0 billion. The proceeds 
to OFS from such common stock sales were $9.9 billion less than the 
cost of the shares. 

As of September 30, 2012, Treasury’s remaining outstanding AIG 
investments consisted of 234 million shares of AIG common stock, 
consisting of 154 million TARP shares and 80 million non-TARP shares. 
Treasury’s percentage ownership of AIG’s outstanding shares of common 
stock was 15.9 percent at such date (of which the TARP shares are 10.5 
percent and non-TARP shares are 5.4 percent). OFS’ remaining TARP 
shares have a cost basis of $43.53 per share and have a fair market 
value of $5.1 billion, or $32.79 per share, as of September 30, 2012. 
The Treasury non-TARP shares, which were received from the trust, are 
not owned by OFS and, consequently, are not included in the OFS 
financial statements and were provided to Treasury at no cost. The 
figure of $28.73 per share is often referred to as Treasury’s 
“breakeven” price for AIG common stock sales in order for Treasury to 
recover the TARP AIG investment because that number averages the cost 
over the TARP and non-TARP shares. Additional discussion of the AIG 
investment including subsidy cost can be found in Note 6 to the OFS 
Financial Statements. 

Operational Goal Two: Prevent Avoidable Foreclosures and Preserve 
Homeownership: 

OFS established several programs under TARP to address the historic 
housing crisis and important new reforms are being introduced in part 
because of TARP’s housing programs. While the housing market remains 
fragile, there have been more than 1.2 million homeowner assistance 
actions taken through the Making Home Affordable (MHA) program (a 
joint TARP and government sponsored enterprise (GSE)[Footnote 11] 
initiative) to assist struggling homeowners[Footnote 12]. In addition, 
TARP’s housing programs have also transformed the mortgage servicing 
industry. These programs have changed industry standards and practices 
and have helped to make mortgage modifications become more sustainable 
and affordable. Since March 2009, there have been more than 3 million 
private-sector mortgage modifications, in part because of the new 
standards that TARP’s housing programs have established. 

Using authority granted under EESA, OFS established two central 
housing programs under TARP. There is the MHA program, which includes 
the Home Affordable Modification Program (HAMP) and several additional 
programs to help homeowners refinance or address specific types of 
mortgages. There is also the Hardest Hit Fund (HHF) Program which 
commits $7.6 billion to the 18 hardest hit states, plus the District 
of Columbia, to develop locally-tailored programs to assist struggling 
homeowners in their communities. In addition, OFS provided support for 
the Federal Housing Administration’s Short Refinance Program that 
assists borrowers who are current on their mortgage (or complete a 
trial payment plan) but owe more than their home is worth, to 
refinance into an FHA-insured loan. 

To protect taxpayers, the MHA and HHF housing initiatives generally 
have pay-for-success incentives: funds are disbursed only when 
transactions are completed and thereafter only as long as those 
contracts remain in place. Therefore, funds will be disbursed over 
many years. The total cost of the Treasury housing programs under 
TARP, excluding administrative costs, cannot exceed-—and may be less 
than—-$45.6 billion,[Footnote 13] which is the amount committed to 
that purpose. 

Making Home Affordable (MHA): 

Launched in February 2009, MHA consists of several programs designed 
to help struggling homeowners prevent avoidable foreclosures. The 
cornerstone of MHA is the Home Affordable Modification Program (HAMP). 
HAMP is a first-lien mortgage modification program that provides 
incentives to mortgage servicers, investors, and homeowners to reduce 
eligible homeowners’ monthly payments to affordable levels. Under this 
program, OFS pays the incentives for the modification of loans not 
held by GSEs while the GSEs bear the cost of modifications of loans 
held by the GSEs. HAMP is the largest program within MHA and includes 
several additional components to complement first lien modifications: 

* The Principal Reduction Alternative (PRA), which was implemented in 
October 2010. PRA requires servicers of non-GSE loans to evaluate the 
benefit of principal reduction for mortgages with a loan-to-value 
(LTV) ratio greater than 115.0 percent when evaluating a homeowner for 
a HAMP first lien modification. While servicers are required to 
evaluate homeowners for PRA, they are not required to offer principal 
reduction and generally may only do so when permitted by the mortgage 
investor. PRA pays investors incentives for every dollar of principal 
forgiven, according to a sliding scale depending on the degree to 
which the homeowner's unmodified balance is greater than the market 
value of the home and the delinquency status of the homeowner at time 
of modification. 

* The Home Affordable Unemployment Program (UP) requires participating 
servicers to grant qualified unemployed borrowers a forbearance period 
during which their mortgage payments are temporarily reduced or 
suspended while they look for employment. At the end of this 
forbearance period, if the homeowner receives a HAMP modification, the 
forborne amount is capitalized onto the unpaid principal balance. This 
program does not require any payments from OFS. 

* The Home Affordable Foreclosure Alternatives Program (HAFA), which 
helps homeowners exit their homes and transition to a more affordable 
living situation through a short sale or deed-in-lieu of foreclosure. 
HAFA provides a defined process along with incentives for these 
transactions. 

* The Home Price Decline Program provides incentives to investors to 
partially offset losses from home price declines. 

Additional components of the MHA program include: 

* The Second Lien Modification Program (2MP), which provides 
incentives for second-lien holders to modify or extinguish a second-
lien mortgage when a modification has been initiated on the first lien 
mortgage for the same property under HAMP. 

* The FHA-HAMP Program, which provides similar servicer incentives as 
HAMP for Federal Housing Administration (FHA) guaranteed loans. 

* The Treasury/FHA Second Lien Program (2LP), which provides 
incentives to servicers for extinguishment of second liens for 
borrowers who refinance their first lien mortgages under the FHA-
Refinance Program. 

* The Rural Development (RD)-HAMP Program provides incentives for 
modified United States Department of Agriculture (USDA) guaranteed 
mortgages. 

MHA Results: 

The incentives offered under MHA are helping homeowners and assisting 
in stabilizing the housing market. As of September 30, 2012, 96 
servicers are actively participating in MHA. Between loans covered by 
these servicers and other loans owned or guaranteed by the GSEs, more 
than 85 percent of first-lien residential mortgage loans in the 
country are now held by servicers participating in the program. As of 
September 30, 2012, OFS has commitments to fund up to $29.9 billion in 
MHA payments and has disbursed $4.0 billion since inception. 

More than 1.2 million[Footnote 14] homeowners participating in the 
HAMP programs have had their mortgage terms modified permanently. This 
includes modifications on both non-GSE loans (for which the cost is 
paid by TARP) and GSE loans (for which the cost is paid by the GSEs). 
Homeowners participating in HAMP programs collectively have 
experienced a 38.0 percent median reduction in their mortgage payments—
more than $539 per month. MHA has also encouraged the mortgage 
industry to adopt similar programs that have helped millions more at 
no cost to the taxpayer. 

OFS publishes quarterly assessments of servicer performance, which 
contain data on compliance with program guidelines as well as program 
results metrics. Going forward, OFS hopes these assessments will set 
the standard for transparency about mortgage servicer efforts to 
assist homeowners and encourage servicers to correct identified 
instances of noncompliance. 

MHA performance highlights for fiscal year 2012 can be found at: 
[hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Mak
ing-Home-Affordable-Program-Performance-Report.aspx]. 

Enhancements to MHA: 

HAMP was originally intended to support financial stability and help 
struggling homeowners grappling with a verifiable financial hardship 
that put them at risk of foreclosure. It focuses on families who could 
sustain their mortgage over the long term if modified. 

In an effort to continue to provide meaningful solutions to the 
housing crisis, OFS made several enhancements to MHA during fiscal 
year 2012. This included extending the application deadline from 
December 31, 2012 to December 31, 2013 and expanding eligibility to 
reach a broader pool of distressed borrowers. Effective June 1, 2012, 
MHA eligibility expanded to include: 

* Homeowners who are applying for a modification on a home that is not 
their primary residence, but the property is currently rented or the 
homeowner intends to rent it. 

* Homeowners who previously did not qualify for HAMP because their 
debt-to-income ratio was 31.0 percent or lower. 

* Homeowners who previously received a HAMP permanent modification, 
but defaulted on their payments, therefore losing good standing. 

To encourage investors to consider or expand the use of principal 
reduction, Treasury issued program guidance on February 16, 2012 
tripling financial incentives under PRA for investors who agree to 
reduce principal for eligible underwater homeowners. The new program 
guidance applies to all permanent modifications of non-GSE loans under 
HAMP that include PRA and have a trial period plan effective date on 
or after March 1, 2012. 

Additional information about the enhancements is available on the MHA 
website: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Mak
ing-Home-Affordable-Program-Performance-Report.aspx]. 

Setting New Standards and Protecting Consumers: 

The impact that MHA has had goes far beyond the individual homeowners 
that are receiving direct assistance under the program. It has had a 
positive indirect effect on the mortgage market. In general, federal 
government efforts to date have contributed to the gradual decline in 
the number of seriously delinquent mortgage loans (loans 90 or more 
days past due or in the process of foreclosure). The latest available 
data shows continued declines in the rate of serious delinquency, 
continuing the trend that began at the end of 2009.[Footnote 15] 

MHA is also helping to make mortgage modifications more affordable 
overall. It has set standards that have been widely followed in the 
industry for making sure that mortgage modifications are affordable 
and sustainable, such as the debt-to-income test, and for determining 
whether modifications make sense for the holder of the mortgage, such 
as the HAMP net present value model. Additionally, MHA helped to 
establish several new reforms throughout the mortgage servicing 
industry aimed at protecting consumers. These include: 

* Requiring the 20 largest participating mortgage servicers to 
establish a single point of contact for homeowners seeking assistance, 
to ensure that a single, knowledgeable case manager can guide them 
through the modification process; 

* Requiring participating mortgage servicers to limit the practice of 
“dual tracking” – where mortgage servicers begin the foreclosure 
process while simultaneously evaluating homeowners for assistance; and 

* Requiring participating mortgage servicers to provide qualified 
unemployed homeowners with a forbearance period of 12 months, subject 
to investor and regulator guidelines, during which their monthly 
payments are temporarily reduced while they look for a new job. 

MHA’s mortgage servicing standards served as the basis for a joint 
state-Federal settlement with the country’s five largest mortgage loan 
servicers (Ally/GMAC, Bank of America, Citigroup, JPMorgan Chase, and 
Wells Fargo). The settlement is intended to provide as much as $25.0 
billion in relief to distressed borrowers and direct payments to 
States and the Federal government. The agreement settled certain 
alleged violations of state and federal law based on the mortgage loan 
servicing activities of the country’s five largest mortgage loan 
servicers, including claims of document-related foreclosure abuses. 
Treasury, including OFS, participated in the negotiation of the 
settlement and shared knowledge gained through implementation of the 
Administration’s foreclosure prevention programs, including MHA. 

Housing Finance Agency Innovation Fund for the Hardest Hit Housing 
Markets (HFA Hardest Hit Fund, or HHF): 

In February 2010, the Obama Administration announced the Housing 
Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing 
Markets (HFA Hardest Hit Fund, or HHF), which allows state HFAs in the 
nation’s hardest hit housing markets and high unemployment markets to 
design innovative, locally targeted foreclosure prevention programs. 
State HFAs design the state programs, tailoring the housing assistance 
to their local needs. A total of $7.6 billion has been allocated for 
the HHF, out of the $45.6 billion committed for the housing programs 
under TARP. Further information on the funded programs is available 
at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/programs/housingp
rograms/hhf/Pages/default.aspx]. 

HHF Results: 

The Hardest Hit Fund provides funding to 18 states and the District of 
Columbia (DC) to provide assistance to struggling homeowners through 
locally-tailored programs. As of September 30, 2012, all 18 states and 
the District of Columbia were operating HHF programs statewide and 
collectively have drawn approximately $1.5 billion (19.7 percent) of 
the $7.6 billion allocated under the program. Each state draws down 
funds as they are needed. States have until December 31, 2017 to 
expend funds and must have no more than 5.0 percent of their 
allocation on hand before they can draw down additional funds. 

All 19 HFAs are fully operational and have created extensive 
infrastructures to operate these programs, including selecting and 
training networks of housing counselors to assist with applications, 
creating homeowner portals to aid homeowners in applying for 
assistance, and hiring underwriters and other staff to review and 
approve applications. The five largest servicers (Bank of America, 
JPMorgan Chase, Wells Fargo, Citibank, and GMAC) are currently 
participating in programs in all 18 states and the District of 
Columbia, primarily through mortgage payment assistance and mortgage 
loan reinstatement assistance. 

Although states needed time to build their operations and refine 
processes, a number of states that have been up and running for longer 
periods of time are starting to show substantial growth in the number 
of borrowers assisted (e.g. California, Florida, Illinois, Michigan, 
North Carolina, Ohio and South Carolina). Each state submits a 
quarterly report on the progress of its program. These reports include 
the states’ performance on metrics set by OFS on various aspects of 
their programs. Direct links to each state’s most recent performance 
report can be found at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/TARPPrograms/hous
ing/Pages/Program-Documents.aspx]. 

During fiscal year 2012, OFS approved 40 program changes submitted by 
individual HFAs. These approved program changes include: 

* A Nevada principal reduction program that leverages refinances under 
the Home Affordable Refinance Program (HARP); and; 

* A California program that uses principal reduction in conjunction 
with a modification or recast. 

OFS continues to hold conversations with HFAs, servicers, the GSEs, 
and other relevant stakeholders on ways to improve the delivery of 
foreclosure prevention assistance. Recent discussion topics included 
enhancing states’ transition assistance programs, new ways to utilize 
funds for principal reduction, and identifying ways to direct 
borrowers exhausting unemployment mortgage assistance to other 
resources available through servicers. OFS is working to identify best 
practices, share lessons learned between states, and develop other 
ways to provide technical assistance to states with lower 
participation volumes. 

Support for the FHA-Refinance Program: 

In March 2010, the Administration announced enhancements to an 
existing FHA program that will permit lenders to provide additional 
refinancing options to homeowners who owe more than their homes are 
worth because of large declines in home prices in their local markets. 
This program, known as the FHA-Refinance program, is intended to 
provide more opportunities for qualifying mortgage loans to be 
restructured and refinanced into FHA-insured loans. 

TARP funds have been made available up to $8.1 billion in the 
aggregate to provide additional coverage to lenders for a share of 
potential losses on these loans and to provide incentives to support 
the write-downs of second liens and encourage participation by 
servicers. 

OFS has entered into a letter of credit (L/C) to fund the FHA-
Refinance Program. Pursuant to this L/C, a reserve account has been 
prefunded with $50 million in funds for OFS’ share of any future loss 
claim payments. OFS will be reimbursed for all unused amounts from 
this account. As of September 30, 2012, there has not been substantial 
activity under the program and no disbursements for loss claim 
payments under the FHA-Refinance Program have been made. 

Housing Scorecard" 

The U.S. Department of Housing and Urban Development (HUD) and OFS 
also release a Monthly Housing Scorecard on the nation’s housing 
market. Each month the scorecard presents key housing market 
indicators and highlights the impact of the Administration’s housing 
recovery efforts, including assistance to homeowners through the FHA 
and HAMP. The Housing Scorecard is available at: [hyperlink, 
http://www.hud.gov/scorecard]. 

Operational Goal Three: Protect Taxpayers’ Interests: 

OFS manages TARP investments to minimize costs to taxpayers and 
receives income on its holdings of preferred interests and other TARP 
investments in the form of interest, dividends and fees. OFS has taken 
a number of steps during fiscal year 2012 to dispose of OFS’ 
outstanding investments in a manner that balances the need to exit 
these investments as quickly as practicable and maximize returns for 
taxpayers. OFS also takes steps to ensure that TARP recipients comply 
with any TARP-related statutory or contractual obligations such as 
executive compensation requirements and restrictions on dividend 
payments. 

OFS is exiting investments as soon as practicable to reduce taxpayers’ 
exposure, return TARP funds to reduce the federal debt, and continue 
to replace government assistance with private capital in the financial 
system. OFS’s strategies for exit depend on the program and investment 
involved. In addition to repayments by participants, OFS has disposed 
of investments to third parties through public and private offerings 
and auctions. 

In disposing TARP investments, OFS takes a disciplined portfolio 
approach – reviewing each investment level and closely monitoring risk 
and performance. In conducting the portfolio management activities, 
OFS employs a mix of dedicated professionals and external asset 
managers. These external asset managers provide market specific 
information such as market prices and valuations as well as detailed 
credit analysis using public information on a periodic basis. OFS has 
also worked with external parties as underwriters and placement agents 
for asset sales. 

Risk Assessment: 

OFS has developed procedures to identify and mitigate investment risk. 
These procedures are designed to identify TARP recipients that face a 
heightened financial risk and determine appropriate responses to 
preserve OFS’ investment, on behalf of taxpayers, while maintaining 
financial stability. Specifically, OFS’ external asset managers review 
publicly available information to identify recipients for which pre-
tax, pre-provision earnings and capital may be insufficient to offset 
future losses and maintain required capital. For certain institutions, 
OFS and its external asset managers engage in heightened monitoring 
and due diligence that reflects the severity and timing of the 
challenges. 

Compliance: 

OFS also takes steps to ensure that TARP recipients comply with their 
TARP-related statutory and contractual obligations. Statutory 
obligations include executive compensation restrictions. Contractual 
obligations vary by investment type. For most of OFS’ preferred stock 
investments, TARP recipients must comply with restrictions on payment 
of dividends and on repurchases of junior securities, so that funds 
are not distributed to junior security holders prior to repayment of 
the federal government. Recipients of exceptional assistance 
(currently AIG, GM, and Ally) must comply with additional restrictions 
on executive compensation, lobbying, corporate expenses and internal 
controls and must provide quarterly compliance reports. 

Additionally, all mortgage servicers voluntarily participating in MHA 
have contractually agreed to follow the MHA program guidelines, which 
require the servicer to offer an MHA modification to all eligible 
borrowers and to have systems that can process all MHA-eligible loans. 
Servicers are subject to periodic, on-site compliance reviews 
performed by OFS’ compliance agent, Making Home Affordable-Compliance 
(MHAC), a separate, independent division of Freddie Mac, to ensure 
that servicers’ obligations under MHA requirements are being met. In 
fiscal year 2011, OFS began publishing quarterly assessments of the 
ten largest servicers and continued publishing assessments throughout 
fiscal year 2012. These assessments have provided a vehicle to 
identify core servicing issues. 

Operational Goal Four: Promote Transparency: 

To protect taxpayers and help ensure that every dollar is directed 
toward promoting financial stability, OFS established comprehensive 
accountability and transparency measures. OFS is committed to 
operating its investment and housing programs in full view of the 
public. This includes providing regular and comprehensive information 
about how TARP funds are being spent, who has received them and on 
what terms, and how much has been collected to date. 

All of this information, along with numerous reports of different 
frequencies are posted on the Financial Stability section of the 
Treasury.gov website, which can be found at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/def
ault.aspx]. 

These reports include: 

* A Daily TARP Update, which features detailed financial data related 
to each TARP investment program including the status of disbursements 
and all collections by category; 

* A monthly report to Congress that details how TARP funds have been 
used, the status of recovery of such funds by program, and information 
on the estimated cost of TARP; 

* A quarterly report on PPIP that provides detailed information on the 
funds, their investments, and returns. It is typically released within 
one month after the end of each quarter; 

* A monthly report on dividend and interest payments; 

* A report of each transaction (such as an investment or repayment) 
within two business days of each transaction; and 

* A semi-annual report on warrant dispositions. 

In addition, OFS posts to its website all investment contracts 
defining the terms of those investments within five to ten business 
days of a transaction’s closing and all contracts with OFS service 
providers involved with TARP programs. 

OFS is equally committed to operating its housing programs 
transparently and making information available and accessible to the 
public. 

In conjunction with the Monthly Housing Scorecard, each month Treasury 
releases a Making Home Affordable Program Performance Report, which 
provides detailed metrics on the Making Home Affordable (MHA) Program. 
Once per quarter, the MHA report is expanded to include detailed 
assessments of the performance of servicers participating in the 
Making Home Affordable program. 

Treasury provides information about servicer performance through two 
types of data: 

* Compliance data, which reflects servicer compliance with specific 
MHA guidelines; and; 

* Program results data, which reflects how timely and effectively 
servicers assist eligible homeowners and report program activity. 

OFS also publishes information about HAMP Activity by Metropolitan 
Statistical Area. These reports, released in conjunction with the 
monthly MHA Program Performance Report, include mortgage modification 
activity under HAMP by metropolitan area. 

Additionally, OFS regularly publishes data files related to MHA and 
transaction reports that show activity related to MHA and HHF. 

In order to improve transparency of the HAMP Net Present Value (NPV) 
model, which is a key component of the eligibility test for HAMP, OFS 
released the NPV white paper to the public. To ensure accuracy and 
reliability, Freddie Mac, acting as OFS’ compliance agent, conducts 
periodic audits of servicers’ implementation of the model and requires 
servicers to use models which meet OFS’ NPV specifications or to 
revert back to OFS’ NPV application. As required by the Dodd-Frank 
Act, OFS established a web portal that borrowers can access to run a 
NPV analysis on their own mortgages, and that borrowers who are turned 
down for a HAMP modification can use. 

In a continued commitment to enhanced reporting and transparency, in 
January 2011, the Administration released the MHA Data File which 
includes characteristics of program participants to date, including 
financial information, mortgage loan information before and after 
entering HAMP, performance in a HAMP modification, and race/ethnicity 
data. The MHA Data File offers mortgage loan-level data and is 
intended to allow for better understanding of the impact of the 
program. 

OFS applied the recommendations of an independent non-profit, non-
partisan policy institute in preparing the MHA Data File to ensure the 
privacy of participating homeowners. The release of the data file 
fulfills a requirement within the Dodd-Frank Act to make available 
loan-level data about the program. OFS will update the file monthly 
and will expand reporting to include newer initiatives that are part 
of Making Home Affordable. Researchers interested in using the MHA 
Data File can access the file and user guide at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/mha
_publicfile.aspx]. 

A. Audited Financial Statements: 

OFS prepares separate financial statements for TARP on an annual 
basis. This is the fourth OFS Agency Financial Report (AFR), and 
includes the audited financial statements for the fiscal years ended 
September 30, 2012 and September 30, 2011. Additional reports for 
prior periods are available at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/Ann
ual-Agency-Financial-Reports.aspx]. 

In its first four years of operation, TARP’s financial statements 
received unqualified audit opinions from its auditors, the GAO. OFS 
also received a Certificate of Excellence in Accountability Reporting 
(CEAR)[Footnote 16] from the Association of Government Accountants for 
fiscal years 2011, 2010 and the period ending September 30, 2009. 

B. TARP Retrospective Reports: 

In October 2011, OFS published the TARP Three-Year Anniversary Report. 
This serves as an update to OFS’ comprehensive TARP Two-Year 
Retrospective report issued in October 2010. OFS anticipates 
publishing a fourth retrospective report in December 2012. These 
reports include information on TARP programs and the effects of TARP 
and additional emergency measures taken by the federal government to 
stabilize the financial system following the 2008 crisis. Readers are 
invited to refer to these documents at: [hyperlink, 
http://www.treasury.gov/initiatives/financialstability/reports/Pages/def
ault.aspx]. 

C. Oversight by Four Separate Agencies: 

Congress also established four avenues of oversight for TARP: 

* The Financial Stability Oversight Board, established by EESA Section 
104; 

* Specific responsibilities for the GAO as set out in EESA Section 116; 

* The Special Inspector General for TARP, established by EESA Section 
121; and 

* The Congressional Oversight Panel (COP), established by EESA Section 
125. COP concluded its operations in accordance with EESA on April 3, 
2011. 

OFS has productive working relationships with all of these bodies, and 
cooperates with each oversight agency’s effort to produce periodic 
audits and reports that focus on the many aspects of TARP. 
Individually and collectively, the oversight bodies’ audits and 
reports have made and continue to make important contributions to the 
development, strengthening, and transparency of TARP programs. 

D. Congressional Hearings and Testimony: 

OFS officials have testified in numerous Congressional hearings since 
TARP was created. Copies of the written testimony are available at: 
[hyperlink, 
http://www.treasury.gov/initiatives/financialstability/news-
room/Pages/default.aspx]. 

[End of section] 

Part 2: Financial Report: 

Message From The Chief Financial Officer (CF0): 

The Office of Financial Stability’s (OFS) Agency Financial Report for 
fiscal year 2012 provides readers information on financial results 
relating to the Troubled Asset Relief Program (TARP) as required by 
the Emergency Economic Stabilization Act (EESA) of 2008 and other 
laws. It is a critical part of our efforts to ensure the highest level 
of transparency and accountability to the American people. 

For fiscal year 2012, the Government Accountability Office (GAO) 
provided OFS unqualified audit opinions on the fair presentation of 
our financial statements and the effectiveness of our internal control 
over financial reporting. In addition, the auditors determined that we 
had no material weaknesses and successfully resolved our one fiscal 
year 2011 significant deficiency relating to internal control over our 
accounting and financial reporting processes. 

I would like to acknowledge senior management’s commitment to good 
governance as well as the discipline, transparency, and care exhibited 
by OFS employees in creating and executing our organization’s policies 
and procedures. We were honored to have received the Certificate of 
Excellence in Accountability Reporting (CEAR) award from the 
Association of Government Accountants for each of the three periods 
from inception through the fiscal year 2011. 

For fiscal year 2012, net income from operations was $7.7 billion, 
resulting in a cumulative net cost of operations of $20.3 billion 
since inception. Cumulative net cost of operations consists of (1) 
total net subsidy cost of $13.5 billion, and (2) housing costs and 
administrative costs of $5.7 billion and $1.1 billion, respectively. 
Total cumulative net subsidy cost consists of net subsidy income from 
the CPP, TIP, AGP, PPIP, SBA and TALF investments totaling $25.7 
billion, primarily offset by net subsidy cost from investments in AIG 
of $15.2 billion, and automobile company investments of $23.8 billion. 
The fiscal year 2012 net income from operations primarily results from 
improvements related to American International Group, Inc. (AIG) since 
September 30, 2011, including an increase in the price per share of 
AIG common stock held as of September 30, 2012, and AIG common stock 
sold during fiscal year 2012, as compared to the price per share of 
AIG common stock held as of September 30, 2011. 

During fiscal year 2012, OFS collected a total of $53.3 billion 
through repayments, sales, dividends, and other receipts. OFS’ gross 
outstanding loan and investment balance as of September 30, 2012, was 
$63.1 billion comprising $37.2 billion in AIFP, $9.8 billion in PPIP, 
$8.7 billion in CPP, $6.7 billion in TARP AIG, and the remainder in 
CDCI and TALF. OFS is committed to exiting investments in a timely 
manner while maximizing collections on behalf of the taxpayer. 

In fiscal year 2012, OFS continued to maintain rigorous internal 
control processes around transaction processing, disbursements, 
collections, and financial reporting. OFS further standardized and 
automated its subsidiary ledger reporting supporting the validation 
and reconciliation of financial data and continued enhancements to the 
Daily TARP Update report promoting transparency. In the upcoming 
fiscal year, OFS will seek to streamline and simplify internal control 
processes in order to accommodate attrition in light of decreasing 
investment balances. OFS will need to continue to rely on our 
operational partners to manage investments and assure that we 
reconcile all transactions and investments balances to protect 
taxpayer interests. 

I feel fortunate to play a role in the continuing tradition of sound 
fiscal stewardship at OFS. This organization recognizes the importance 
of a robust control environment and will continue to uphold the 
highest standards of integrity as we carry out our fiduciary 
responsibilities to the American people. 

Sincerely, 

Signed by: 

Lorenzo Rasetti: 
Chief Financial Officer: 

[End of Message From The Chief Financial Officer] 

[End of section] 

Government Accountability Office Auditor’s Report: 

United States Government Accountability Office: 
Washington, DC 20548: 

Independent Auditor’s Report: 

To the Assistant Secretary for Financial Stability: 

In accordance with the Emergency Economic Stabilization Act of 2008 
(EESA),[Footnote 17] we are required to audit the financial statements 
of the Troubled Asset Relief Program (TARP), which is implemented by 
the Office of Financial Stability (OFS).[Footnote 18] In our audit of 
OFS’s fiscal years 2012 and 2011 financial statements for TARP, we 
found: 

* the financial statements are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles; 

* OFS maintained, in all material respects, effective internal control 
over financial reporting as of September 30, 2012; and; 

* no reportable noncompliance in fiscal year 2012 with provisions of 
laws and regulations we tested. 

The following sections discuss in more detail (1) these conclusions; 
(2) required supplementary information and other information included 
with the financial statements; (3) our audit objectives, scope, and 
methodology; and (4) OFS’s comments on a draft of this report. In 
addition to our responsibility to audit OFS’s annual financial 
statements for TARP, we also are required under EESA to report at 
least every 60 days on the findings resulting from our oversight of 
the actions taken under TARP.[Footnote 19] This report responds to 
both of these requirements. We have issued numerous other reports on 
TARP in connection with this 60-day reporting responsibility, which 
can be found on GAO’s website at [hyperlink, http://www.gao.gov]. 

Opinion on Financial Statements: 

OFS’s financial statements for TARP, including the accompanying notes, 
present fairly, in all material respects, in conformity with U.S. 
generally accepted accounting principles, OFS’s assets, liabilities, 
and net position as of September 30, 2012 and 2011, and its net cost 
of operations, changes in net position, and budgetary resources for 
the fiscal years then ended. 

As discussed in notes 2 and 6 to OFS’s financial statements for TARP, 
the valuation of TARP direct loans, equity investments, and the asset 
guarantee program is based on estimates using economic and financial 
credit subsidy models. The estimates use entity-specific as well as 
relevant market data as the basis for assumptions about future 
performance, and incorporate an adjustment for market risk to reflect 
the variability around any unexpected losses. In valuing the direct 
loans, equity investments, and the asset guarantee program, OFS 
management considered and selected assumptions and data that it 
believed provided a reasonable basis for the estimated subsidy 
allowance and related subsidy cost or income reported in the financial 
statements.[Footnote 20] However, there are numerous factors that 
affect these assumptions and estimates, which are inherently subject 
to substantial uncertainty arising from the likelihood of future 
changes in general economic, regulatory, and market conditions. The 
estimates have an added uncertainty resulting from the unique nature 
of certain TARP assets. As such, there will be differences between the 
net estimated values of the direct loans, equity investments, and 
asset guarantee program as of September 30, 2012 and 2011, which 
totaled $41.2 billion and $80.8 billion, respectively, and the amounts 
that OFS will ultimately realize from these assets, and such 
differences may be material. These differences will also affect TARP’s 
ultimate cost. Further, TARP’s ultimate cost will change as OFS 
continues to incur costs relating to its Treasury Housing Programs. 
[Footnote 21] 

As discussed in note 1 to the financial statements, while OFS’s 
financial statements for TARP reflect activity of OFS in implementing 
TARP, including providing resources to various entities to help 
stabilize the financial markets, the statements do not include the 
assets, liabilities, or results of operations of these entities in 
which OFS has a significant equity interest. According to OFS 
officials, OFS’s investments were not made to engage in the business 
activities of the respective entities, and OFS has determined that 
none of these entities meet the criteria for a federal entity. 

Opinion on Internal Control: 

OFS maintained, in all material respects, effective internal control 
over financial reporting as of September 30, 2012, that provided 
reasonable assurance that misstatements, losses, or noncompliance 
material in relation to the financial statements would be prevented or 
detected and corrected on a timely basis. Our opinion on internal 
control is based on criteria established under 31 U.S.C. § 3512 (c), 
(d), commonly known as the Federal Managers’ Financial Integrity Act 
(FMFIA). 

During fiscal year 2012, OFS sufficiently addressed the internal 
control issues related to the significant deficiency[Footnote 22] we 
reported for fiscal year 2011 concerning its accounting and financial 
reporting processes such that we no longer consider this to be a 
significant deficiency as of September 30, 2012. 

Compliance with Laws and Regulations: 

Our tests of OFS’s compliance with selected provisions of laws and 
regulations for fiscal year 2012 disclosed no instances of 
noncompliance that would be reportable under U.S. generally accepted 
government auditing standards. The objective of our audit was not to 
provide an opinion on overall compliance with laws and regulations. 
Accordingly, we do not express such an opinion. 

Required Supplementary Information: 

U.S. generally accepted accounting principles require that required 
supplementary information (RSI) be presented to supplement the 
financial statements.23 This information, although not a part of the 
financial statements, is required by the Federal Accounting Standards 
Advisory Board (FASAB), who considers it to be an essential part of 
financial reporting for placing the financial statements in 
appropriate operational, economic, or historical context. We did not 
audit and we do not express an opinion or provide any assurance on the 
RSI because the limited procedures we applied do not provide 
sufficient evidence to express an opinion or provide any assurance. 

Other Information: 

OFS’s other information[Footnote 24] contains a wide range of 
information, some of which is not directly related to the financial 
statements. This information is presented for purposes of additional 
analysis and is not a required part of the financial statements or 
RSI. Our audit was conducted for the purpose of forming an opinion on 
OFS’s financial statements. We did not audit and do not express an 
opinion or provide any assurance on the other information. 

Objectives, Scope, and Methodology: 

OFS management is responsible for (1) preparing the financial 
statements in conformity with U.S. generally accepted accounting 
principles; (2) preparing, measuring, and presenting the RSI in 
accordance with the prescribed guidelines in U.S. generally accepted 
accounting principles; (3) preparing and presenting other information 
included in documents containing the audited financial statements and 
auditor’s report, and ensuring the consistency of that information 
with the audited financial statements and the RSI; (4) establishing 
and maintaining effective internal control over financial reporting 
and evaluating its effectiveness; and (5) complying with applicable 
laws and regulations. OFS management evaluated the effectiveness of OFS’
s internal control over financial reporting as of September 30, 2012, 
based on the criteria established under FMFIA. OFS management’s 
assertion based on its evaluation is included in appendix I. 

We are responsible for planning and performing the audit to obtain 
reasonable assurance and to provide our opinion about whether (1) OFS’
s financial statements are presented fairly, in all material respects, 
in conformity with U.S. generally accepted accounting principles and 
(2) OFS management maintained, in all material respects, effective 
internal control over financial reporting as of September 30, 2012. We 
are also responsible for (1) testing compliance with selected 
provisions of laws and regulations that have a direct and material 
effect on the financial statements and (2) applying certain limited 
procedures to the RSI and other information included with the 
financial statements. 

In order to fulfill these responsibilities, we: 

* examined, on a test basis, evidence supporting the amounts and 
disclosures in OFS’s financial statements; 

* assessed the accounting principles used and significant estimates 
made by OFS management; 

* evaluated the overall presentation of OFS’s financial statements; 

* obtained an understanding of OFS and its operations, including its 
internal control over financial reporting; 

* considered OFS’s process for evaluating and reporting on internal 
control over financial reporting that OFS is required to perform by 
FMFIA and Section 116(c) of EESA; 

* assessed the risk of (1) material misstatement in OFS’s financial 
statements and (2) material weakness in its internal control over 
financial reporting; 

* evaluated the design and operating effectiveness of OFS’s internal 
control over financial reporting based on the assessed risk; 

* tested relevant internal control over OFS’s financial reporting; 

* tested compliance with selected provisions of the following laws and 
regulations: EESA, as amended; the Antideficiency Act; the Federal 
Credit Reform Act of 1990; the Dodd-Frank Wall Street Reform and 
Consumer Protection Act; and the Purpose Statute; 

* conducted inquiries of management about the methods of preparing the 
RSI and compared this information for consistency with management’s 
responses to the auditor’s inquiries, the financial statements, and 
other knowledge we obtained during the audit of the financial 
statements, in order to report omissions or material departures from 
FASAB guidelines, if any, identified by these limited procedures; 

* read the other information included with the financial statements in 
order to identify material inconsistencies, if any, with the audited 
financial statements; and; 

* performed such other procedures as we considered necessary in the 
circumstances. 

An entity’s internal control over financial reporting is a process 
effected by those charged with governance, management, and other 
personnel, the objectives of which are to provide reasonable assurance 
that (1) transactions are properly recorded, processed, and summarized 
to permit the preparation of financial statements in conformity with 
U.S. generally accepted accounting principles, and assets are 
safeguarded against loss from unauthorized acquisition, use, or 
disposition and (2) transactions are executed in accordance with the 
laws governing the use of budget authority and other laws and 
regulations that could have a direct and material effect on the 
financial statements. 

We did not evaluate all internal controls relevant to operating 
objectives as broadly established under FMFIA, such as those controls 
relevant to preparing statistical reports and ensuring efficient 
operations. We limited our internal control testing to testing 
controls over financial reporting. Our internal control testing was 
for the purpose of expressing an opinion on the effectiveness of 
internal control over financial reporting and may not be sufficient 
for other purposes. Consequently, our audit may not identify all 
deficiencies in internal control over financial reporting that are 
less severe than a material weakness. Because of inherent limitations, 
internal control may not prevent or detect and correct misstatements 
due to error or fraud, losses, or noncompliance. We also caution that 
projecting any evaluation of effectiveness to future periods is 
subject to the risk that controls may become inadequate because of 
changes in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate. 

We did not test compliance with all laws and regulations applicable to 
OFS. We limited our tests of compliance to selected provisions of laws 
and regulations that have a direct and material effect on the 
financial statements for fiscal year 2012. We caution that 
noncompliance may occur and not be detected by these tests and that 
such testing may not be sufficient for other purposes. 

We performed our audit in accordance with U.S. generally accepted 
government auditing standards. We believe our audit provides a 
reasonable basis for our opinions and other conclusions. 

Agency Comments: 

In commenting on a draft of this report, the Assistant Secretary for 
Financial Stability stated that OFS is proud to receive unqualified 
opinions on its financial statements and its internal control over 
financial reporting. He also stated that OFS is committed to 
maintaining the high standards and transparency reflected in these 
audit results. The complete text of OFS’s comments is reprinted in its 
entirety in appendix II. 

Signed by: 

Gary T. Engel: 
Director: 
Financial Management and Assurance: 

November 5, 2012: 

[End of section] 

Appendix I: Management’s Report on Internal Control Over Financial 
Reporting: 

Department of The Treasury: 
Assistant Secretary: 
Washington, D.C. 20220: 

Management’s Report on Internal Control over Financial Reporting: 

The Office of Financial Stability’s (OFS) internal control over 
financial reporting is a process affected by those charged with 
governance, management, and other personnel, the objectives of which 
are to provide reasonable assurance that (1) transactions are properly 
recorded, processed, and summarized to permit the preparation of 
financial statements in conformity with U.S. generally accepted 
accounting principles, and assets are safeguarded against loss from 
unauthorized acquisition, use, or disposition; and (2) transactions 
are executed in accordance with the laws governing the use of budget 
authority and other laws and regulations that could have a direct and 
material effect on the financial statements. 

OFS management is responsible for establishing and maintaining 
effective internal control over financial reporting. OFS management 
evaluated the effectiveness of OFS’ internal control over financial 
reporting as of September 30, 2012, based on the criteria established 
under 31 U.S.C. 3512(c), (d) (commonly known as the Federal Managers’ 
Financial Integrity Act). 

Based on that evaluation, we conclude that, as of September 30, 2012, 
OFS’ internal control over financial reporting was effective. 

Office of Financial Stability: 

Signed by: 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

Signed by: 

Lorenzo Rasetti: 
Chief Financial Officer: 

November 5, 2012: 

[End of section] 

Appendix II: OFS Response to Auditor’s Report: 

Department of The Treasury: 
Assistant Secretary:
Washington, D.C. 20220: 

November 7, 2012: 

Mr. Gary T. Engel: 
Director, Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Engel: 

We have reviewed the Independent Auditor’s Report concerning your 
audit of the Office of Financial Stability’s (OFS) fiscal year 2012 
financial statements. OFS is proud to receive unqualified opinions on 
our financial statements and our internal controls over financial 
reporting. We are also pleased that you agree that OFS resolved our 
one fiscal year 2011 significant deficiency relating to internal 
control surrounding accounting and financial reporting processes. 

We appreciate the professionalism and commitment demonstrated by your 
staff throughout the audit process. The process was valuable for us 
and resulted in concrete improvements in our operations and financial 
management efforts. 

OFS is committed to maintaining the high standards and transparency 
reflected in these audit results as we carry out our responsibilities 
for managing the Troubled Asset Relief Program. 

Sincerely, 

Signed by: 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

[End of section] 

Financial Statements: 

The Office of Financial Stability (OFS) prepares financial statements 
for the Troubled Asset Relief Program (TARP) as a critical aspect of 
ensuring the accountability and stewardship for the public resources 
entrusted to it and as required by Section 116 of the Emergency 
Economic Stabilization Act of 2008 (EESA). Preparation of these 
statements is also an important part of the OFS’ financial management 
goal of providing accurate and reliable information that may be used 
to assess performance and allocate resources. The OFS management is 
responsible for the accuracy and propriety of the information 
contained in the financial statements and the quality of internal 
controls. The statements are, in addition to other financial reports, 
used to monitor and control budgetary resources. The OFS prepares 
these financial statements from its books and records in conformity 
with the accounting principles generally accepted in the United States 
for federal entities and the formats prescribed by the Office of 
Management and Budget (OMB). 

While these financial statements reflect activity 

of the OFS in executing its programs, including providing resources to 
various entities to help stabilize the financial markets, they do not 
include, as more fully discussed in Note 1, the assets, liabilities, 
or results of operations of commercial entities in which the OFS has a 
significant equity interest. 

The Balance Sheet summarizes the OFS assets, liabilities and net 
position as of September 30, 2012 and 2011. Intragovernmental assets 
and liabilities resulting from transactions between federal agencies 
are presented separately from assets and liabilities from transactions 
with the public. 

The Statement of Net Cost presents the net cost of (income from) 
operations for the years ended September 30, 2012 and 2011. 

The Statement of Changes in Net Position presents the change in OFS’ 
net position for two components, Cumulative Results of Operations and 
Unexpended Appropriations, for the years ended September 30, 2012 and 
2011. The ending balances of both components of net position are also 
reported on the Balance Sheet. 

The Statement of Budgetary Resources provides information about 
funding and availability of budgetary resources and the status of 
those resources for the years ended September 30, 2012 and 2011. 

The accompanying notes are an integral part of these financial 
statements. 

Office of Financial Stability (Troubled Asset Relief Program): 
Balance Sheet: 
As of September 30, 2012 and 2011 (Dollars in Millions): 

Assets: 

Intragovernmental Assets: 

Fund Balance with Treasury (Note 3); 
2012: $75,495; 
2011: $83,342. 

Asset Guarantee Program (Note 6); 
2012: $967; 
2011: $739. 

Other; 
2012: $1; 
2011: 0. 

Total Intragovernmental Assets; 
2012: $76.463; 
2011: $84,081. 

Cash on Deposit for Housing Program (Note 4): 
2012: $50;
2011: $50. 

Troubled Asset Relief Program: 

Direct Loans and Equity Investments, Net (Note 6); 
2012: $40,231; 
2011: $80,104. 

Total Assets; 
2012: $116,744; 
2011: $164,235. 

Liabilities: 

Intragovernmental Liabilities: 

Accounts Payable and Other Liabilities; 
2012: $2; 
2011: $2. 

Due to the General Fund (Note 7); 
2012: $9,714; 
2011: $4,591. 

Principal Payable to the Bureau of the Public Debt (Note 8); 
2012: $52,828; 
2011: $129,497. 

Total Intragovernmental Liabilities; 
2012: $62,544; 
2011: $134,090. 

Accounts Payable and Other Liabilities; 
2012: $87; 
2011: $93. 

Liability for Treasury Housing Programs Under TARP: 

FHA - Refinance Program (Notes 5 and 6); 
2012: $7; 
2011: $1. 

Making Home Affordable Program and Hardest Hit Fund (Note 5);
2012: $241; 
2011: $343. 

Total Liabilities; 
2012: $62,879; 
2011: $134,527. 

Commitments and Contingencies (Note 9): 

Net Position: 

Unexpended Appropriations; 
2012: $54,572; 
2011: $57,544. 

Cumulative Results of Operations; 
2012: ($707); 
2011: ($27,836). 

Total Net Position; 
2012: $53,865; 
2011: $29,708. 

Total Liabilities and Net Position; 
2012: $116,744; 
2011: $164,235. 

[End of table] 

Statement Of Net Cost: 
For the Years Ended September 30, 2012 and 2011 (Dollars in Millions): 

Strategic Goal: To Ensure The Overall Stability And Liquidity Of The 
Financial System, Prevent Avoidable Foreclosures And Preserve 
Homeownership: 

Gross Cost of (Income from) Operations: 

Program Subsidy Cost (Income) (Note 6): 

Direct Loan and Equity Investment Programs; 
2012: ($10,778); 
2011: $7,208. 

Other Credit Programs; 
2012: ($201); 
2011: $31. 

Total Program Subsidy Cost (Income); 
2012: ($10,979); 
2011: $7,239. 

Interest Expense on Borrowings from the Bureau of the Public Debt 
(Note 10); 
2012: $2,252; 
2011: $3,827. 

Treasury Housing Programs Under TARP (Note 5); 
2012: $2,963; 
2011: $1,943. 

Administrative Cost; 
2012: $268; 
2011: $315. 

Total Gross Cost of (Income from) Operations; 
2012: ($5,496); 
2011: $13,324. 

Earned Revenue: 

Dividend and Interest Income - Programs (Note 6); 
2012: ($2,733); 
2011: ($3,476). 

Interest Income on Financing Account (Note 10); 
2012: ($605); 
2011: ($781). 

Subsidy Allowance Amortization (Note 10); 
2012: $1,086; 
2011: $430. 

Total Earned Revenue; 
2012: ($2,252); 
2011: ($3,827). 

Total Net Cost of (Income from) Operations; 
2012: ($7,748); 
2011: $9,497. 

[End of table] 

Statement Of Changes In Net Position: 
For the Years Ended September 30, 2012 and 2011 (Dollars in Millions): 

Beginning Balances: 
2012 Unexpended Appropriations: $57,544; 
2012 Cumulative Results of Operations: ($27,836); 
2011 Unexpended Appropriations: $79,783; 
2011 Cumulative Results of Operations: ($1,546). 

Budgetary Financing Sources: 

Appropriations Received: 
2012 Unexpended Appropriations: $27,593); 
2012 Cumulative Results of Operations: 0; 
2011 Unexpended Appropriations: $2,278; 
2011 Cumulative Results of Operations: 0. 

Appropriations Used: 
2012 Unexpended Appropriations: ($30,565); 
2012 Cumulative Results of Operations: $30,565; 
2011 Unexpended Appropriations: $($24,517); 
2011 Cumulative Results of Operations: $24,517. 

Other Financing Sources: 
2012 Unexpended Appropriations: 0; 
2012 Cumulative Results of Operations: ($11,184); 
2011 Unexpended Appropriations: 0; 
2011 Cumulative Results of Operations: ($41,310). 

Total Financing Sources: 
2012 Unexpended Appropriations: ($2,972); 
2012 Cumulative Results of Operations: $19,381; 
2011 Unexpended Appropriations: ($$22,239); 
2011 Cumulative Results of Operations: ($16,793). 

Net (Cost of) Income from Operations Net Change; 
2012 Unexpended Appropriations: 0; 
2012 Cumulative Results of Operations: $7,748; 
2011 Unexpended Appropriations: 0; 
2011 Cumulative Results of Operations: ($9,497). 

Net Change: 
2012 Unexpended Appropriations: ($2,972); 
2012 Cumulative Results of Operations: $27,129; 
2011 Unexpended Appropriations: ($22,239); 
2011 Cumulative Results of Operations: ($26,290). 

Ending Balances: 
2012 Unexpended Appropriations: $54,572; 
2012 Cumulative Results of Operations: ($707); 
2011 Unexpended Appropriations: $57,544; 
2011 Cumulative Results of Operations: ($27,836). 

[End of table] 

Statement Of Budgetary Resources: 
For the Years Ended September 30, 2012 and 2011 (Dollars in Millions): 

Budgetary Resources: 

Unobligated Balances Brought Forward: 
2012: 
Budgetary Accounts: $14,166; 
Nonbudgetary Financing Accounts: $21,143;
2011: 
Budgetary Accounts: $11,075; 
Nonbudgetary Financing Accounts: $10,548. 

Recoveries of Prior Year Unpaid Obligations; 
2012: 
Budgetary Accounts: $146; 
Nonbudgetary Financing Accounts: $6,114;
2011: 
Budgetary Accounts: $3,057; 
Nonbudgetary Financing Accounts: $4,664. 

Borrowing Authority Withdrawn; 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($5,832);
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($1,368). 

Actual Repayments of Debt, Prior Year Balances; 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($19,900); 
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($7,996). 

Appropriations: 
2012: 
Budgetary Accounts: $27,593; 
Nonbudgetary Financing Accounts: 0;
2011: 
Budgetary Accounts: $2,278; 
Nonbudgetary Financing Accounts: 0. 

Borrowing Authority: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $2,659;
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $35,596. 

Spending Authority from Offsetting Collections; 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $21,695;
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $45,101. 

Total Budgetary Resources (Note 11): 
2012: 
Budgetary Accounts: $41,905; 
Nonbudgetary Financing Accounts: $25,879;
2011: 
Budgetary Accounts: $16,410; 
Nonbudgetary Financing Accounts: $85,545. 

Status Of Budgetary Resources: 

Obligations Incurred: 
2012: 
Budgetary Accounts: $27,555; 
Nonbudgetary Financing Accounts: $8,248;
2011: 
Budgetary Accounts: $2,244; 
Nonbudgetary Financing Accounts: $65,402. 

Unobligated Balance, Apportioned: 
2012: 
Budgetary Accounts: $41; 
Nonbudgetary Financing Accounts: $3,946;
2011: 
Budgetary Accounts: $36; 
Nonbudgetary Financing Accounts: $511. 

Unapportioned: 
2012: 
Budgetary Accounts: $14,309; 
Nonbudgetary Financing Accounts: $13,685;
2011: 
Budgetary Accounts: $14,130; 
Nonbudgetary Financing Accounts: $20,632. 

Total Unobligated Balance: 
2012: 
Budgetary Accounts: $14,350; 
Nonbudgetary Financing Accounts: $17,631;
2011: 
Budgetary Accounts: $14,166; 
Nonbudgetary Financing Accounts: $21,143. 

Total Status Of Budgetary Resources: 
2012: 
Budgetary Accounts: $41,905; 
Nonbudgetary Financing Accounts: $25,879;
2011: 
Budgetary Accounts: $16,410;
Nonbudgetary Financing Accounts: $86,545. 

Change In Obligated Balances: 

Obligated Balance Brought Forward: 

Unpaid Obligations: 
2012: 
Budgetary Accounts: $43,814; 
Nonbudgetary Financing Accounts: $13,158;
2011: 
Budgetary Accounts: $69,128; 
Nonbudgetary Financing Accounts: $41,918. 

Uncollected Customer Payments from Federal Sources: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($496);
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($23,816). 

Obligated Balance, Net, Brought Forward: 
2012: 
Budgetary Accounts: $43,814; 
Nonbudgetary Financing Accounts: $12,662;
2011: 
Budgetary Accounts: $69,128; 
Nonbudgetary Financing Accounts: $18,102. 

Obligations Incurred: 
2012: 
Budgetary Accounts: $27,555; 
Nonbudgetary Financing Accounts: $8,248;
2011: 
Budgetary Accounts: $2,244; 
Nonbudgetary Financing Accounts: $65,402. 

Gross Outlays: 
2012: 
Budgetary Accounts: ($30,675); 
Nonbudgetary Financing Accounts: ($9,366);
2011: 
Budgetary Accounts: ($24,501); 
Nonbudgetary Financing Accounts: ($89,498). 

Change in Uncollected Customer Payments from Federal Sources: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $147;
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $23,320. 

Recoveries of Prior Year Unpaid Obligations: 
2012: 
Budgetary Accounts: ($146); 
Nonbudgetary Financing Accounts: ($6,114);
2011: 
Budgetary Accounts: ($$3,057); 
Nonbudgetary Financing Accounts: ($4,664). 

Obligated Balance, Net, End of Period: 

Unpaid Obligations: 
2012: 
Budgetary Accounts: $40,548; 
Nonbudgetary Financing Accounts: $5,926;
2011: 
Budgetary Accounts: $43,814; 
Nonbudgetary Financing Accounts: $13,158. 

Uncollected Customer Payments from Federal Sources: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($349);
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($496). 

Obligated Balance, Net, End of Period: 
2012: 
Budgetary Accounts: $40,548; 
Nonbudgetary Financing Accounts: $5,926;
2011: 
Budgetary Accounts: $43,814; 
Nonbudgetary Financing Accounts: $12,662. 

Budget Authority and Outlays, Net: 

Budget Authority, Gross: 
2012: 
Budgetary Accounts: $27,593; 
Nonbudgetary Financing Accounts: $24,354;
2011: 
Budgetary Accounts: $2,278; 
Nonbudgetary Financing Accounts: $80,697. 

Actual Offsetting Collections: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($81,269);
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($107,307). 

Change in Uncollected Customer Payments from Federal Sources: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $147;
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: $23,320. 

Budget Authority, Net; 
2012: 
Budgetary Accounts: $27,593; 
Nonbudgetary Financing Accounts: ($56,768);
2011: 
Budgetary Accounts: $2,278; 
Nonbudgetary Financing Accounts: ($3,290). 

Gross Outlays; 
2012: 
Budgetary Accounts: $30,675; 
Nonbudgetary Financing Accounts: $9,366;
2011: 
Budgetary Accounts: $24,501; 
Nonbudgetary Financing Accounts: $89,498. 

Actual Offsetting Collections: 
2012: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($81,269);
2011: 
Budgetary Accounts: 0; 
Nonbudgetary Financing Accounts: ($107,307). 

Net Outlays: 
2012: 
Budgetary Accounts: $30,675; 
Nonbudgetary Financing Accounts: ($71,903);
2011: 
Budgetary Accounts: ($24,501); 
Nonbudgetary Financing Accounts: ($17,809). 

Distributed Offsetting Receipts; 
2012: 
Budgetary Accounts: ($6,063); 
Nonbudgetary Financing Accounts: 0;
2011: 
Budgetary Accounts: ($61,832); 
Nonbudgetary Financing Accounts: 0. 

Agency Outlays, Net: 
2012: 
Budgetary Accounts: $24,612; 
Nonbudgetary Financing Accounts: ($71,903);
2011: 
Budgetary Accounts: ($37,331); 
Nonbudgetary Financing Accounts: ($17,809). 

[End of table] 

Notes To The Financial Statements: 

Note 1. Reporting Entity: 

The Troubled Asset Relief Program (TARP) was authorized by the 
Emergency Economic Stabilization Act of 2008 (EESA or “the Act”). The 
Act gave the Secretary of the Treasury (the Secretary) broad and 
flexible authority to establish the TARP to purchase and insure 
mortgages and other troubled assets, which permitted the Secretary to 
inject capital into banks and other commercial companies by taking 
equity positions in those entities to help stabilize the financial 
markets. 

The EESA established certain criteria under which the TARP would 
operate, including provisions that impact the budgeting, accounting, 
and reporting of troubled assets acquired under the Act. Section 
101(a) of the EESA provided the authority for the Secretary to 
purchase troubled assets, and Section 101(a)(3) of the EESA 
established the Office of Financial Stability (OFS) to implement the 
TARP. Section 102 of the EESA required the Secretary to establish a 
program to guarantee troubled assets originated or issued prior to 
March 14, 2008, including mortgage-backed securities. Section 115 of 
the EESA limited the authority of the Secretary to purchase troubled 
assets up to $700.0 billion outstanding at any one time, calculated at 
the aggregate purchase prices of all troubled assets held. Amendments 
to Section 115 of the EESA during the period ended September 30, 2009, 
reduced that authority by $1.3 billion, from $700.0 billion to $698.7 
billion. Section 120 of the EESA established that the authorities 
under Sections 101(a), excluding Section 101(a)(3), and Section 102 of 
the EESA would terminate December 31, 2009, unless extended upon 
submission of a written certification to Congress by the Secretary of 
the Treasury. On December 9, 2009, the Secretary extended the program 
authorities through October 3, 2010. In July 2010, the Dodd-Frank Wall 
Street Reform and Consumer Protection Act amended Section 115 of the 
EESA, limiting the TARP’s authority to a total of $475.0 billion 
cumulative obligations (i.e. purchases and guarantees) and prohibiting 
any new obligations for programs or initiatives that had not been 
publicly announced prior to June 25, 2010. Of the maximum $475.0 
billion authority under the EESA, as amended, OFS had utilized 
(including purchases made, legal commitments to make purchases and 
offsets for guarantees made) $467.0 billion as of September 30, 2012 
and $470.1 billion as of September 30, 2011. 

The TARP developed the following programs: the Capital Purchase 
Program (CPP); the Targeted Investment Program (TIP); the Community 
Development Capital Initiative (CDCI); the Public-Private Investment 
Program (PPIP); the Term Asset-Backed Securities Loan Facility (TALF); 
the SBA 7(a) Securities Purchase Program (SBA 7(a)); the Automotive 
Industry Financing Program (AIFP); the American International Group, 
Inc. (AIG) Investment Program (formerly known as the Systemically 
Significant Failing Institutions Program); the Asset Guarantee Program 
(AGP); and the Treasury Housing Programs Under TARP (see Notes 5 and 6 
for details regarding all of these programs). 

While these financial statements reflect the activity of the OFS in 
executing its programs, including providing resources to various 
entities to help stabilize the financial markets, they do not include 
the assets, liabilities, or results of operations of commercial 
entities in which the OFS has a significant equity interest. Through 
the purchase of troubled assets, the OFS has entered into several 
different types of direct loan, equity investment, and other credit 
programs (which consist of the AGP and the Federal Housing 
Administration (FHA) Refinance Program) with private entities. These 
direct loans, equity investments, and other credit programs were 
entered into with the intent of helping to stabilize the financial 
markets and mitigating, as best as possible, any adverse impact on the 
economy. These direct loans, equity investments, and other credit 
programs were not entered into to engage in the business activities of 
the respective private entities. Based on this intent, the OFS 
concluded that such direct loans, equity investments, and other credit 
programs are considered “bail outs”, under the provisions of paragraph 
50 of Statement of Federal Financial Accounting Concepts (SFFAC) No. 
2, Entity and Display. In addition, these entities are not included in 
the Federal budget and, therefore, do not meet the conclusive criteria 
in SFFAC No. 2. As such, the OFS determined that none of these 
entities meet the criteria to be classified as a federal entity. 
Consequently, their assets, liabilities, and results of operations 
were not consolidated in these OFS financial statements, but the value 
of OFS’ investments in such entities was recorded in OFS’ financial 
statements. 

In addition, the OFS has made loans and investments in certain Special 
Purpose Vehicles (SPV).[Footnote 25] SFFAC No. 2, paragraphs 43 and 
44, reference indicative criteria such as ownership and control to 
carry out government powers and missions, as criteria in the 
determination about whether an entity should be classified as a 
federal entity. The OFS has concluded that none of the SPVs meet the 
conclusive or indicative criteria to be classified as a federal 
entity. As a result, the assets, liabilities and results of operations 
of the SPVs are not included in these OFS financial statements. 
Additional disclosures regarding certain SPV investments are included 
in Notes 2 and 6; see PPIP, TALF and AIG Investment Program. 

The EESA established the OFS within the Office of Domestic Finance of 
the U. S. Department of the Treasury (Treasury). The OFS prepares 
stand-alone financial statements to satisfy EESA’s requirement for the 
TARP to prepare annual financial statements. Additionally, as an 
office of the Treasury, its financial statements are consolidated into 
Treasury’s Agency Financial Report. 

Note 2. Summary Of Significant Accounting Policies: 

Basis of Accounting and Presentation: 

The accompanying financial statements include the operations of the 
OFS and have been prepared from the accounting records of the OFS in 
conformity with accounting principles generally accepted in the United 
States for federal entities (Federal GAAP), and the OMB Circular A-
136, Financial Reporting Requirements, as amended. Federal GAAP 
includes the standards issued by the Federal Accounting Standards 
Advisory Board (FASAB). The FASAB is recognized by the American 
Institute of Certified Public Accountants (AICPA) as the official 
accounting standards-setting body for the U.S. Government. As such, 
the FASAB is responsible for establishing Federal GAAP for Federal 
reporting entities. 

The FASAB issued the Statement of Federal Financial Accounting 
Standards (SFFAS) No. 34, The Hierarchy of Generally Accepted 
Accounting Principles, Including the Application of Standards Issued 
by the Financial Accounting Standards Board in July 2009. SFFAS No. 34 
identifies the sources of accounting principles and the framework for 
selecting the principles used in the preparation of general purpose 
financial reports of federal reporting entities that are presented in 
conformity with Federal GAAP. 

In addition to the above, Section 123(a) of the EESA requires that the 
budgetary cost of purchases of troubled assets and guarantees of 
troubled assets, and any cash flows associated with authorized 
activities, be determined in accordance with the Federal Credit Reform 
Act of 1990 (FCRA). Section 123(b) (1) of the EESA requires that the 
budgetary costs of troubled assets and guarantees of troubled assets 
be calculated by adjusting the discount rate for market risks. As a 
result of this requirement, the OFS considered market risk in its 
calculation and determination of the estimated net present value of 
its direct loans, equity investments and other credit programs for 
budgetary purposes. Similarly, market risk is considered in the 
valuations for financial reporting purposes (see Note 6 for further 
discussion). 

Consistent with its accounting policy for equity investments in 
private entities, including SPV’s, the OFS accounts for its equity 
investments at fair value. Since fair value is not defined in federal 
accounting standards, following the hierarchy of accounting principles 
established in SFFAS No. 34, the OFS conforms to fair value 
definitions contained in the private sector Financial Accounting 
Standards Codification (ASC) 820, Fair Value Measurement. OFS defines 
fair value of its equity investments as the estimated amount of 
proceeds that would be received if the equity investments were sold to 
a market participant in an orderly transaction. Note 6 presents Direct 
Loan and Equity Investments and the Asset Guarantee Program receivable 
tabulated by the Level of Observation of the inputs used in the 
valuation process. Level 1 assets are measured using quoted market 
prices for identical assets. Level 2 assets are measured using 
observable market inputs other than direct market quotes. Level 3 
assets are measured using unobservable inputs. 

The OFS uses the present value accounting concepts embedded in SFFAS 
No. 2, Accounting for Direct Loans and Loan Guarantees, as amended 
(SFFAS No. 2), to derive fair value measurements for its equity 
investments in Levels 2 and 3. The OFS concluded that some of the 
equity investments, such as preferred stock, were similar to direct 
loans since there was a stated rate and a redemption feature which, if 
elected, required repayment of the amount invested. Furthermore, 
consideration of market risk provided a basis to arrive at a fair 
value measurement. Therefore, the OFS concluded that SFFAS No. 2 (as 
more fully discussed below) should be followed for reporting and 
disclosure requirements of its equity investments. 

Federal loans and loan guarantees are governed by FCRA for budgetary 
accounting and the associated FASAB accounting standard SFFAS No. 2 
for financial reporting. The OFS applies the provisions of SFFAS No. 2 
when accounting and reporting for direct loans and other credit 
programs. Direct loans disbursed and outstanding are recognized as 
assets at the net present value of their estimated future cash flows. 
Outstanding asset guarantees are recognized as liabilities or assets 
at the net present value of their estimated future cash flows. 

Liabilities under the FHA-Refinance Program are recognized at the net 
present value of their estimated future cash flows when the FHA 
guarantees loans. 

For direct loans and equity investments, the subsidy allowance account 
represents the difference between the face value of the outstanding 
direct loan and equity investment balance and the net present value of 
the expected future cash flows or fair value, and is reported as an 
adjustment to the face value of the direct loan or equity investment. 

The OFS recognizes dividend income associated with equity investments 
when declared by the entity in which the OFS has invested and when 
received in relation to any repurchases, exchanges and restructurings. 
The OFS recognizes interest income when earned on performing loans; 
interest income is not accrued on non-performing loans. The OFS 
reflects changes, referred to as reestimates, in its determination of 
the value of direct loans, equity investments, and other credit 
programs in the subsidy cost on the Statement of Net Cost annually. 

The OFS has received common stock warrants, additional preferred stock 
(referred to as warrant preferred stock) or additional notes as 
additional consideration for providing direct loans and equity 
investments and for supporting the Asset Guarantee Program. The OFS 
accounts for the common stock warrants and warrant preferred stock 
received under Section 113 of the EESA as fees under SFFAS No. 2, and, 
as such, the proceeds received in any sales are credited to the 
subsidy allowance rather than to income. 

Use of Estimates: 

The OFS has made certain estimates and assumptions relating to the 
reporting of assets, liabilities, revenues, and cost to prepare these 
financial statements. Actual results could significantly differ from 
these estimates. Major financial statement lines that include 
estimates are TARP Direct Loans and Equity Investments, Net, the Asset 
Guarantee Program and the Liabilities for Treasury Housing Programs 
Under TARP on the Balance Sheet, and related Program Subsidy Cost 
(Income) on the Statement of Net Cost (see Note 6). 

The most significant differences between actual results and estimates 
may occur in the valuation of direct loans, equity investments, and 
other credit programs. These estimates are sensitive to slight changes 
in model assumptions, such as general economic conditions, specific 
stock price volatility of the entities in which the OFS has an equity 
interest, estimates of expected default, and prepayment rates. 
Forecasts of future financial results have inherent uncertainty, and 
the OFS’ TARP Direct Loans and Equity Investments, Net and Asset 
Guarantee Program line items, as of fiscal year ends, primarily 
reflect relatively illiquid assets with values that are sensitive to 
future economic conditions and other assumptions. Estimates are also 
prepared for the FHA-Refinance Program to determine the liability for 
losses. 

Credit Reform Accounting: 

The FCRA provides for the use of program, financing, and general fund 
receipt accounts to separately account for activity related to direct 
loans, equity investments and other credit programs. These accounts 
are classified as either budgetary or non-budgetary in the Statement 
of Budgetary Resources. The budgetary accounts include the program and 
general fund receipt accounts, and the non-budgetary accounts consist 
of the credit reform financing accounts. 

As discussed previously, the OFS accounts for the cost of direct 
loans, equity investments and other credit programs in accordance with 
Section 123(a) of the EESA and the FCRA for budgetary accounting, and 
fair value and SFFAS No. 2 for financial reporting. 

Consistent with SFFAS No. 2 and FCRA, the OFS maintains program 
accounts which receive appropriations and obligate funds to cover the 
subsidy cost of direct loans, equity investments and other credit 
programs, and disburses the subsidy cost to the OFS financing 
accounts. The financing accounts are non-budgetary accounts that are 
used to record all of the cash flows resulting from the OFS direct 
loans, equity investments and other credit programs. Cash flows 
include disbursements, borrower repayments, repurchases, fees, 
recoveries, interest, dividends, proceeds from the sale of stock and 
warrants, borrowings from and repayments to Treasury, negative subsidy 
and the subsidy cost received from the program accounts, as well as 
subsidy reestimates and modifications. 

The financing arrangements specifically for the TARP activities are 
provided for in the EESA as follows: (1) borrowing for program funds 
under Section 118 that constitute appropriations when obligated or 
spent, which are reported as “appropriations” in these financial 
statements; (2) borrowing by financing accounts for non-subsidy cost 
under the FCRA and Section 123; and (3) establishment of the Troubled 
Assets Insurance Financing Fund (TAIFF) for the Asset Guarantee 
Program under Section 102(d). 

The OFS uses general fund receipt accounts to record the receipt of 
amounts paid from the financing accounts when there is a negative 
subsidy or negative modification (a reduction in subsidy cost due to 
changes in program policy or terms that change estimated future cash 
flows) from the original estimate or a downward reestimate. Amounts in 
the general fund receipt accounts are available for appropriations 
only in the sense that all general fund receipts are available for 
appropriations. Any assets in these accounts are non-entity assets and 
are offset by intragovernmental liabilities. At the end of the fiscal 
year, the fund balance transferred to the U.S. Treasury through the 
general fund receipt account is not included in the OFS’ reported Fund 
Balance with Treasury. 

SFFAS No. 2 requires that the actual and expected costs of federal 
credit programs be fully recognized in financial reporting. The OFS 
calculated and recorded initial estimates of the future performance of 
direct loans, equity investments, and other credit programs. The data 
used for these estimates were reestimated annually, at fiscal year-
end, to reflect adjustments for market risk, asset performance, and 
other key variables and economic factors. The reestimate data was then 
used to estimate and report the “Program Subsidy Cost (Income)” in the 
Statement of Net Cost. A detailed discussion of the OFS subsidy 
calculation and reestimate assumptions, process and results is 
provided in Note 6. 

Fund Balance with Treasury: 

The Fund Balance with Treasury includes general, financing and other 
funds available to pay current liabilities and finance authorized 
purchases. Cash receipts and disbursements are processed by the 
Treasury, and the OFS’ records are reconciled with those of the 
Treasury on a regular basis. 

Available unobligated balances represent amounts that are apportioned 
for obligation in the current fiscal year. Unavailable unobligated 
balances represent unanticipated collections in excess of the amounts 
apportioned which are unavailable. Obligated balances not yet 
disbursed include undelivered orders and unpaid expended authority. 
See Note 3. 

Troubled Asset Relief Program Direct Loans and Equity Investments, Net: 

Troubled Asset Relief Program Direct Loans and Equity Investments, Net 
represents the estimated net outstanding amount of the OFS direct 
loans and equity investments. The direct loan and equity investment 
balances have been determined in accordance with the provisions of 
SFFAS No. 2 or at fair value (see Note 6). Write-offs of gross direct 
loan and equity investment balances (presented in Note 6 table) are 
recorded when a legal event occurs, such as a bankruptcy with no 
further chance of recovery or extinguishment of a debt instrument by 
agreement. Under SFFAS No. 2, write-offs do not affect the Statement 
of Net Cost because the written-off asset is fully reserved. 
Therefore, the write-off removes the asset balance and the associated 
subsidy allowance. 

Asset Guarantee Program: 

During fiscal year 2010, the OFS and the Federal Deposit Insurance 
Corporation (FDIC) entered into a termination agreement with the Asset 
Guarantee Program’s sole participant, Citigroup. As a result, in 
fiscal year 2011, the OFS sold securities and warrants held in the 
program. The Intragovernmental Asset line item, Asset Guarantee 
Program, remaining on the Balance Sheet is the estimated value of 
certain Citigroup trust preferred securities including dividends 
collected, currently held by the FDIC for the benefit of OFS. Under 
the termination agreement, the FDIC has agreed to transfer these 
securities to the OFS, less any losses on FDIC’s guarantee of 
Citigroup debt, by December 31, 2012. See Note 6. 

General Property and Equipment: 

Equipment with a cost of $50,000 or more per unit and a useful life of 
two years or more is capitalized at full cost and depreciated using 
the straight-line method over the equipment’s useful life. Other 
equipment not meeting the capitalization criteria is expensed when 
purchased. Software developed for internal use is capitalized and 
amortized over the estimated useful life of the software if the cost 
per project is greater than $250,000. However, OFS may expense such 
software if management concludes that total period costs would not be 
materially distorted and the cost of capitalization is not 
economically prudent. Based upon these criteria, the OFS reports no 
capitalized property, equipment or software on its Balance Sheet as of 
September 30, 2012 and 2011. 

Accounts Payable and Other Liabilities: 

Accounts Payable and Other Liabilities are amounts due to 
intragovernmental or public entities that are anticipated to be 
liquidated during the next operating cycle (within one year from the 
balance sheet date). 

Due to the General Fund: 

Due to the General Fund represents the amount of accrued downward 
reestimates not yet funded, related to direct loans, equity 
investments and other credit programs as of September 30, 2012 and 
2011. See Notes 6 and 7. 

Principal Payable to the Bureau of the Public Debt: 

Principal Payable to the Bureau of the Public Debt (BPD) represents 
the net amount due for equity investments, direct loans and other 
credit programs funded by borrowings from the BPD as of the end of the 
fiscal year. Additionally, OFS borrows from the BPD for payment of 
intragovernmental interest and payment of negative subsidy cost to the 
general fund, as necessary. See Note 8. 

Liabilities for the Treasury Housing Programs Under TARP: 

There are three initiatives in the Treasury Housing Programs: the 
Making Home Affordable Program, the Housing Finance Agency Hardest-Hit 
Fund and the FHA-Refinance Program. The OFS has determined that credit 
reform accounting is not applicable to the Treasury Housing Programs 
Under TARP except for the FHA-Refinance Program. Therefore, 
liabilities for the Making Home Affordable Program and Housing Finance 
Agency Hardest-Hit Fund are accounted for in accordance with SFFAS No. 
5, Accounting for Liabilities of the Federal Government. In accordance 
with this standard, a liability is recognized for any unpaid amounts 
due and payable as of the reporting date. The liability estimate, as 
of September 30, 2012 and 2011, is based on information about loan 
modifications reported by participating servicers for the Making Home 
Affordable Program and participating states for the Housing Finance 
Agency Hardest-Hit Fund. See Note 5. 

At the end of fiscal year 2010, the OFS entered into a loss-sharing 
agreement with the FHA to support a program in which FHA would 
guarantee refinancing for borrowers whose homes are worth less than 
the remaining amounts owed under their mortgage loans, i.e. “underwater”
. The liability for OFS’ share of losses was determined under credit 
reform accounting and is shown as FHA-Refinance Program, one of the 
Liabilities for Treasury Housing Programs Under TARP, on the Balance 
Sheet. See Notes 4, 5 and 6. 

Unexpended Appropriations: 

Unexpended Appropriations represents the OFS undelivered orders and 
unobligated balances in budgetary appropriated funds as of September 
30, 2012 and 2011. 

Cumulative Results of Operations: 

Cumulative Results of Operations, presented on the Balance Sheet and 
on the Statement of Changes in Net Position, represents the net 
results of the OFS operations not funded by appropriations or some 
other source, such as borrowing authority, from inception through 
fiscal year end. At September 30, 2012 and 2011, OFS had $755 million 
and $27.9 billion, respectively, of unfunded upward reestimates that 
resulted in OFS reporting negative Cumulative Results of Operations. 
The fiscal year 2012 unfunded upward reestimates will be funded in 
fiscal year 2013. The fiscal year 2011 unfunded upward reestimates 
were funded in fiscal year 2012. Cumulative Results of Operations in 
2012 and 2011 also included $50 million reported as Cash on Deposit 
for Housing Program on the Balance Sheet, see Note 4. 

Other Financing Sources: 

The Other Financing Sources line in the Statement of Changes in Net 
Position for each year consists primarily of downward reestimates. 
Each program’s reestimates, upward and downward, are recorded 
separately, not netted together. 

Leave: 

A liability for the OFS employees’ annual leave is accrued as it is 
earned and reduced as leave is taken. Each year the balance of accrued 
annual leave is adjusted to reflect current pay rates as well as 
forfeited “use or lose” leave. Amounts are unfunded to the extent 
current or prior year appropriations are not available to fund annual 
leave earned but not taken. Sick leave and other types of non-vested 
leave are expensed as taken. The liability is included in the Balance 
Sheet amount for Accounts Payable and Other Liabilities. 

Employee Health and Life Insurance and Workers’ Compensation Benefits: 

The OFS employees may choose to participate in the contributory 
Federal Employees Health Benefit and the Federal Employees Group Life 
Insurance Programs. The OFS matches a portion of the employee 
contributions to each program. Matching contributions are recognized 
as current operating expenses. 

The Federal Employees’ Compensation Act (FECA) provides income and 
medical cost protection to covered Federal civilian employees injured 
on the job, and employees who have incurred a work-related injury or 
occupational disease. Future workers’ compensation estimates are 
generated from an application of actuarial procedures developed to 
estimate the liability for FECA benefits. The actuarial liability 
estimates for FECA benefits include the expected liability for death, 
disability, medical, and miscellaneous costs for approved compensation 
cases. Any FECA amounts relating to OFS employees are expensed as 
incurred. 

Employee Pension Benefits: 

The OFS employees participate in either the Civil Service Retirement 
System (CSRS) or the Federal Employees’ Retirement System (FERS) and 
Social Security. These systems provide benefits upon retirement and in 
the event of death, disability or other termination of employment and 
may also provide pre-retirement benefits. They may also include 
benefits to survivors and their dependents, and may contain early 
retirement or other special features. The OFS contributions to 
retirement plans and Social Security, as well as imputed costs for 
pension and other retirement benefit costs administered by the Office 
of Personnel Management, are recognized on the Statement of Net Cost 
as Administrative Costs. Federal employee benefits also include the 
Thrift Savings Plan (TSP). For FERS employees, a TSP account is 
automatically established and the OFS matches employee contributions 
to the plan, subject to limitations. The matching contributions are 
recognized as Administrative Costs on the Statement of Net Cost. 

Related Parties: 

The nature of related parties and descriptions of related party 
transactions are discussed within Notes 1 and 6. 

Reclassifications: 

Reclassification of certain items of the 2011 financial statements has 
been made to conform to the 2012 presentation. For example, OMB 
Circular A-136 changed the format of the Statement of Budgetary 
Resources to align with the SF-133 Report on Budget Execution and 
Budgetary Resources for all federal reporting entities. Fiscal year 
2011 balances on the SBR were reclassified to conform to the new 
format. 

Note 3. Fund Balances With Treasury: 

Fund Balances with Treasury, by fund type and status, are presented in 
the following table. 

Fund Balances: 

General Funds: 
As of September 30, 2012: $40,517; 
As of September 30, 2011: $43,542. 

Program Funds: 
As of September 30, 2012: $14,382; 
As of September 30, 2011: $14,438. 

Financing Funds: 
As of September 30, 2012: $20,596; 
As of September 30, 2011: $25,362. 

Total Fund Balances: 
As of September 30, 2012: $75,495; 
As of September 30, 2011: $83,342. 

Status of Fund Balances: 

Unobligated Balances: 

Available: 
As of September 30, 2012: $3,987; 
As of September 30, 2011: $547. 

Unavailable: 
As of September 30, 2012: $27,994; 
As of September 30, 2011: $34,762. 

Obligated Balances Not Yet Disbursed: 
As of September 30, 2012: $43,514;
As of September 30, 2011: $48,033. 

Total Status of Fund Balances: 
As of September 30, 2012: $75,495; 
As of September 30, 2011: $83,342. 

[End of table] 

Collections relating to the AGP are deposited in the Troubled Assets 
Insurance Financing Fund (which is within OFS Financing Funds balance) 
as required by the EESA Section 102(d). In fiscal years 2012 and 2011, 
the TAIFF balance was reduced for AGP-related downward reestimates, 
repayments of AGP-related debt and payments of interest on AGP-related 
debt due to the Bureau of the Public Debt. 

Note 4. Cash On Deposit For Housing Program: 

As of September 30, 2012, and 2011, the OFS had $50 million on deposit 
with a commercial bank to facilitate its payments of claims under the 
FHA-Refinance Program as OFS’ agent. Under terms of its agreement, the 
OFS is required to maintain a minimum amount of funds on deposit, 
depending upon the size of the program and potential claims. Unused 
funds will be returned to the OFS upon the termination of the program 
and agreement. 

Note 5. Treasury Housing Programs Under TARP: 

Fiscal year 2012 saw a continued advancement of programs designed to 
provide stability for both the housing market and homeowners. These 
programs assist homeowners who are experiencing financial hardships to 
remain in their homes until their financial position improves or they 
relocate to a more sustainable living situation. The programs fall 
into three initiatives: 

1) Making Home Affordable Program (MHA); 

2) Housing Finance Agency (HFA) Hardest-Hit Fund; and; 

3) FHA-Refinance Program. 

MHA: 

In early 2009, Treasury launched the Making Home Affordable Program 
(MHA) to help struggling homeowners avoid foreclosure. Since its 
inception, MHA has helped homeowners avoid foreclosure by providing a 
variety of solutions to modify or refinance their mortgages, get 
temporary forbearance if they are unemployed, or transition out of 
homeownership via a short sale or deed-in-lieu of foreclosure. The 
cornerstone of MHA is the Home Affordable Modification Program (HAMP), 
which provides eligible homeowners the opportunity to reduce their 
monthly mortgage payments to more affordable levels. Treasury also 
launched programs under MHA to help homeowners who are unemployed, “
underwater” on their loans (those who owe more on their home than it 
is currently worth), or struggling with second liens. It also includes 
options for homeowners who would like to transition to a more 
affordable living situation through a short sale or deed-in-lieu of 
foreclosure. MHA includes several additional programs to help 
homeowners refinance or address specific types of mortgages, in 
conjunction with the Federal Housing Administration (FHA), the United 
States Department of Agriculture (USDA), and the Department of 
Veterans Affairs (VA). 

Features of these initiatives follow: 

Housing Program: MHA: Home Affordable Modification Program (HAMP) 
First Lien Modification Program; 
Features: Provides for upfront, monthly and annual incentives to 
servicers, borrowers and investors who participate, whereby the 
investor and OFS share the costs of modifying qualified first liens, 
conditional on borrower performance. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) 
Principal Reduction Alternative Program; 
Features: Pays financial incentives to investors for principal 
reduction in conjunction with a first lien HAMP modification. Home 
Price Depreciation Program (HPDP) Provides financial incentives to 
investors to partially offset losses from home price declines. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) Home 
Affordable Foreclosure Alternatives (HAFA); 
Features: Designed to assist eligible borrowers unable to retain their 
homes through a HAMP modification, by simplifying and streamlining the 
short sale and deed-in-lieu of foreclosure processes and providing 
financial incentives to servicers and investors as well as relocation 
assistance to borrowers who pursue short sales and deeds-in-lieu. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) 
Unemployment Forebearance Program (UP); 
Features: Offers assistance to unemployed homeowners through temporary 
forebearance of a portion of their mortgage payments. This program 
does not require any payments from OFS. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) FHA-
HAMP; 
Features: Provides mortgage modifications similar to HAMP, but for FHA-
insured or guaranteed loans offered by the FHA, VA or USDA. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) 
Second Lien Program (2MP); 
Features: Offers financial incentives to participating servicers who 
modify second liens in conjunction with a HAMP modification. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) 
Treasury/FHA Second Lien Program (FHA 2LP); 
Features: Provides for reduction or elimination of second mortgages on 
homes whose servicers participate in the FHA Refinance Program. 

Housing Program: MHA: Home Affordable Modification Program (HAMP) 
Rural Development Program (RD-HAMP); 
Features: Provides for lower monthly payments on USDA guaranteed loans. 

Housing Program: HHF 
Features: Provides targeted aid to families in the states hardest hit 
by the housing market downturn and unemployment. 

Housing Program: FHA-Refinance Program 
Features: Joint initiative with HUD to encourage refinancing of 
existing underwater mortgage loans not currently insured by FHA into 
FHA insured mortgages. 

In fiscal year 2012, the OFS made three changes to MHA programs, 
designed to provide relief to more homeowners and to accelerate the 
housing market recovery. First, the deadline for homeowners to apply 
for MHA programs was extended from December 31, 2012 to December 31, 
2013. Secondly, HAMP program guidelines were expanded through the 
introduction of a second-level evaluation that expands the population 
of homeowners eligible for the programs by allowing for homes that are 
rental properties, a flexible debt-to-income ratio requirement, and by 
including previous HAMP participants who lost good standing. Finally, 
investor incentives for PRA were tripled on first liens and doubled on 
second liens. 

All MHA disbursements are made to servicers either for themselves or 
for the benefit of borrowers and investors, and all payments are 
contingent on borrowers remaining in good standing. To be considered 
for MHA programs, borrowers must apply by December 31, 2013. 

Fannie Mae, as the MHA Program Administrator, provides direct 
programmatic support as a third party agent on behalf of the OFS. 
Freddie Mac provides compliance oversight of servicers as a third 
party agent on behalf of the OFS, and the servicers work directly with 
the borrowers to modify and service the borrowers’ loans. Fees paid to 
Fannie Mae and Freddie Mac are included in administrative costs 
reported on the Statement of Net Cost. 

HHF: 

The Housing Finance Agency (HFA) Hardest-Hit Fund was implemented in 
fiscal year 2010, and provides targeted aid to families in the states 
hit hardest by the housing market downturn and unemployment. States 
that meet the criteria for this program consist of Alabama, Arizona, 
California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, 
Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode 
Island, South Carolina, Tennessee, as well as the District of 
Columbia. Approved states develop and roll out their own programs with 
timing and types of programs offered targeted to address the specific 
needs and economic conditions of their state. States have until 
December 31, 2017 to enter into agreements with borrowers. 

In fiscal year 2012, HFAs made substantial eligibility changes to 
existing programs (e.g. Florida, New Jersey) and significantly 
modified principal reduction programs (e.g. Arizona, California and 
Nevada) incorporating curtailments (i.e. unmatched principal 
reduction) that can be applied to all eligible loans including GSE 
loans that historically have not participated in principal reduction 
programs. 

FHA-Refinance Program: 

The FHA-Refinance Program is a joint initiative with the Department of 
Housing and Urban Development (HUD) which is intended to encourage 
refinancing of existing underwater (i.e. the borrower owes more than 
the home is worth) mortgage loans not currently insured by FHA into 
FHA-insured mortgages. HUD will pay a portion of the amount refinanced 
to the investor and OFS will pay incentives to encourage the 
extinguishment of second liens associated with the refinanced 
mortgages. OFS established a letter of credit that obligated the OFS 
portion of any claims associated with the FHA-guaranteed mortgages. 
The OMB determined that for budgetary purposes, the FHA-Refinance 
Program cost is calculated under the FCRA, and accordingly OFS 
determined that it was appropriate to follow SFFAS No. 2 for financial 
reporting. Therefore, the liability is calculated at the net present 
value of estimated future cash flows. Homeowners can refinance into 
FHA-guaranteed mortgages through December 31, 2014, and OFS will honor 
its share of claims against the letter of credit through 2020. As of 
September 30, 2012, 1,774 loans had been refinanced. As of September 
30, 2011, 334 loans had been refinanced. 

OFS deposited $50 million with a commercial bank as its agent to 
administer payment of claims under the program; no claim payments have 
been made as of September 30, 2012. See Notes 4 and 6. OFS paid $2 
million each year in fiscal years 2012 and 2011 to maintain the letter 
of credit. 

The table below recaps housing program commitments as of September 30, 
2012, and payments and accruals as of September 30, 2012 and 2011. 

Treasury Housing Programs Under TARP (Dollars in Millions): 

MHA: 
Commitments as of September 30, 2012: $28.871; 
Fiscal Year Payments through September 30, 2012: $2,202; 
Fiscal Year Payments through September 30, 2011: $1,282; 
Accruals as of September 30, 2012: $241; 
Accruals as of September 30, 2011: $343. 

HFA Hardest Hit Fund: 
Commitments as of September 30, 2012: $7,600; 
Fiscal Year Payments through September 30, 2012: $861; 
Fiscal Year Payments through September 30, 2011: %599; 
Accruals as of September 30, 2012: 0; 
Accruals as of September 30, 2011: 0. 

FHA Refinance[A]: 
Commitments as of September 30, 2012: $8,117; 
Fiscal Year Payments through September 30, 2012: $2; 
Fiscal Year Payments through September 30, 2011: $2; 
Accruals as of September 30, 2012: 0; 
Accruals as of September 30, 2011: 0. 

Totals: 
Commitments as of September 30, 2012: $45,588; 
Fiscal Year Payments through September 30, 2012: $3,065; 
Fiscal Year Payments through September 30, 2011: $1,883; 
Accruals as of September 30, 2012: $241; 
Accruals as of September 30, 2011: $343. 

[A] Payments do not include $50 million to establish reserve, shown on 
Balance Sheet as Cash on Deposit for Housing Program, nor the subsidy 
cost to fund OFS' share of defaults, which establishes the liability 
for losses, see Note 6. Payments are for the FHA-Refinance Program 
administrative expense only. 

[End of table] 

Note 6. Troubled Asset Relief Program Direct Loans And Equity 
Investments, Net And Other Credit Programs: 

The OFS administers a number of programs designed to help stabilize 
the financial system and restore the flow of credit to consumers and 
businesses. The OFS made direct loans and equity investments under 
TARP. The OFS also entered into other credit programs, which consist 
of an asset guarantee program and a loss-sharing program under the 
TARP. The table below recaps OFS programs by title and type: 

Direct Loans and Equity Investments: 

Program: Capital Purchase Program; 
Program Type: Equity Investment/Subordinated Debentures. 

Program: Targeted Investment Program; 
Program Type: Equity Investment. 

Program: Community Development Capital Initiative; 
Program Type: Equity Investment/Subordinated Debentures. 

Program: Public-Private Investment Program; 
Program Type: Equity Investment and Direct Loan. 

Program: Term Asset-Backed Securities Loan Facility; 
Program Type: Subordinated Debentures. 

Program: SBA 7(a) Security Purchase Program; 
Program Type: Direct Loan. 

Program: Automotive Industry Financing Program; 
Program Type: Equity Investment and Direct Loan. 

Program: American International Group, Inc. Investment Program; 
Program Type: Equity Investment. 

Other Credit Programs: 

Program: Asset Guarantee Program; 
Program Type: Asset Guarantee. 

Program: FHA-Refinance Program; 
Program Type: Loss-sharing Program with FHA. 

Valuation Methodology: 

The OFS applies fair value and the provisions of SFFAS No. 2 to 
account for direct loans, equity investments and other credit 
programs. This standard requires measurement of the asset or liability 
at the net present value of the estimated future cash flows. The cash 
flow estimates for each transaction reflect the actual structure of 
the instruments. For each of these instruments, analytical cash flow 
models generate estimated cash flows to and from the OFS over the 
estimated term of the instrument. Further, each cash flow model 
reflects the specific terms and conditions of the program, technical 
assumptions regarding the underlying assets, risk of default or other 
losses, and other factors as appropriate. The models also incorporate 
an adjustment for market risk to reflect the additional return 
required by the market to compensate for variability around the 
expected losses reflected in the cash flows (the “unexpected loss”). 

The adjustment for market risk requires the OFS to determine the 
return that would be required by market participants to enter into 
similar transactions or to purchase the assets held by OFS. 
Accordingly, the measurement of the assets attempts to represent the 
proceeds expected to be received if the assets were sold to a market 
participant in an orderly transaction. The methodology employed for 
determining market risk for equity investments generally involves a 
calibration to market prices of similar securities that results in 
measuring equity investments at fair value. The adjustment for market 
risk for loans is intended to capture the risk of unexpected losses, 
but not intended to represent fair value, i.e. the proceeds that would 
be expected to be received if the loans were sold to a market 
participant. The OFS uses market observable inputs, when available, in 
developing cash flows and incorporating the adjustment required for 
market risk. For purposes of this disclosure, the OFS has classified 
its programs’ asset valuations as follows, based on the observability 
of inputs that are significant to the measurement of the asset: 

* Quoted prices for Identical Assets (Level 1): The measurement of 
assets in this classification is based on direct market quotes for the 
specific asset, e.g. quoted prices of common stock. 

* Significant Observable Inputs (Level 2): The measurement of assets 
in this classification is primarily derived from market observable 
data, other than a direct market quote, for the asset. This data could 
be market quotes for similar assets for the same entity. 

* Significant Unobservable Inputs (Level 3): The measurement of assets 
in this classification is primarily derived from inputs which 
generally represent management’s best estimate of how a market 
participant would assess the risk inherent in the asset. These 
unobservable inputs are used because there is little to no direct 
market activity. 

The table below displays the assets held by the observability of 
inputs significant to the measurement of each value: 
(Dollars in Millions): 

Program: Capital Purchase Program; 
Quoted Prices for Identical Assets (Level 1): $327; 
Significant Observable Inputs (Level 2): 0;
Significant Unobservable Inputs (Level 3): $5,407; 
Total: $5,734. 

Program: CDCI and TALF; 
Quoted Prices for Identical Assets (Level 1): $9; 
Significant Observable Inputs (Level 2): 0;
Significant Unobservable Inputs (Level 3): $1,095; 
Total: $1,104. 

Program: Public-Private Investment Program; 
Quoted Prices for Identical Assets (Level 1): 0;
Significant Observable Inputs (Level 2): 0;
Significant Unobservable Inputs (Level 3): $10,778; 
Total: $10,778. 

Program: Automotive Industry Financing Program; 
Quoted Prices for Identical Assets (Level 1): $11,376; 
Significant Observable Inputs (Level 2): 0;
Significant Unobservable Inputs (Level 3): $6,170; 
Total: $17,546. 

Program: American International Group Inc. Investment Program; 
Quoted Prices for Identical Assets (Level 1): $5,067; 
Significant Observable Inputs (Level 2): 0;
Significant Unobservable Inputs (Level 3): $2; 
Total: $5,069. 

Program: Asset Guarantee Program; 
Quoted Prices for Identical Assets (Level 1): 0;
Significant Observable Inputs (Level 2): $967; 
Significant Unobservable Inputs (Level 3): 0;
Total: $967. 

Total TARP Programs; 
Quoted Prices for Identical Assets (Level 1): $16,779; 
Significant Observable Inputs (Level 2): $967; 
Significant Unobservable Inputs (Level 3): $23,452; 
Total: $41,198. 

As of September 30, 2011: 

Program: Capital Purchase Program 
Quoted Prices for Identical Assets: $202; 
Significant Observable Inputs: 0; 
Significant Unobservable Inputs: $12,240; 
Total: $12,442. 

Program: American International Group Inc. Investment Program; 
Quoted Prices for Identical Assets: $21,076; 
Significant Observable Inputs: $9,294; 
Significant Unobservable Inputs: 0; 
Total: $30,370. 

Program: Targeted Investment Program; 
Quoted Prices for Identical Assets: 0; 
Significant Observable Inputs: 0; 
Significant Unobservable Inputs: 0; 
Total: $0. 

Program: Automotive Industry Financing Program; 
Quoted Prices for Identical Assets: $10,091;
Significant Observable Inputs: 0; 
Significant Unobservable Inputs: $7,747; 
Total: $17,838. 

Program: Consumer and Business Lending Initiative, which includes TALF,
SBA 7(a) Securities and CDCI; 
Quoted Prices for Identical Assets: 0;
Significant Observable Inputs: $126; 
Significant . Unobservable Inputs: $951; 
Total: $1,077 

Program: Public-Private Investment Program; 
Quoted Prices for Identical Assets: 0;
Significant Observable Inputs: 0;
Significant Unobservable Inputs: $18,377; 
Total: $18,377. 

Program: Asset Guarantee Program; 
Quoted Prices for Identical Assets: 0;
Significant Observable Inputs: $739; 
Significant Unobservable Inputs: 0; 
Total: $739. 

Total TARP Programs: 
Quoted Prices for Identical Assets: $31,369; 
Significant Observable Inputs: $10,159; 
Significant Unobservable Inputs: $39,315; 
Total: $80,843. 

[End of table] 

The following provides a description of the methodology used to 
develop the cash flows and incorporate the market risk into the 
measurement of the OFS assets. 

Financial Institution Equity Investments[Footnote 26]: 

The estimated values of preferred equity investments are the net 
present values of the expected dividend payments and proceeds from 
repurchases and sales. The model assumes that the key decisions 
affecting whether or not institutions pay their preferred dividends 
are made by each institution based on the strength of their balance 
sheet. The model assumes a probabilistic evolution of each institution’
s asset-to-liability ratio (the asset-to-liability ratio is based on 
the estimated fair value of the institution’s assets against its 
liabilities). Each institution’s assets are subject to uncertain 
returns and institutions are assumed to manage their asset-to-
liability ratio in such a way that it reverts over time to a target 
level. Historical volatility is used to scale the likely evolution of 
each institution’s asset-to-liability ratio. 

In the model, when equity decreases, i.e. the asset-to-liability ratio 
falls, institutions are increasingly likely to default, either because 
they enter bankruptcy or are closed by regulators. The probability of 
default is estimated based on the performance of a large sample of US 
banks over the period 1990-2011. At the other end of the spectrum, 
institutions call their preferred shares when the present value of 
expected future dividends exceeds the call price; this occurs when 
equity is high and interest rates are low. Inputs to the model include 
institution specific accounting data obtained from regulatory filings, 
an institution’s stock price volatility, historical bank failure 
information, as well as market prices of comparable securities trading 
in the market. The market risk adjustment is obtained through a 
calibration process to the market value of certain trading securities 
of financial institutions within TARP programs or other comparable 
financial institutions. The OFS estimates the values and projects the 
cash flows of warrants using an option-pricing approach based on the 
current stock price and its volatility. Investments in common stock 
which are exchange traded are valued at the quoted market price as of 
year end. 

Public-Private Investment Program (PPIP): 

For the PPIP investments and loans made in the Public Private 
Investment Fund (PPIF) SPVs, the OFS estimates cash flows to the PPIF 
by simulating the performance of the collateral supporting the 
residential mortgage-backed securities (RMBS) and commercial mortgage-
backed securities (CMBS) held by the PPIF (i.e. performance of the 
residential and commercial mortgages). Inputs used to simulate the 
cash flows, which consider market risks, include unemployment 
forecasts, home price appreciation/depreciation forecasts, the current 
term structure of interest rates and historical pool performance as 
well as estimates of the net income and value of commercial real 
estate supporting the CMBS. The simulated cash flows are then run 
through a financial model that defines distributions of the RMBS/CMBS 
to determine the estimated cash flows to the PPIF. Once determined, 
these cash flows are run through the waterfall of the PPIF to 
determine the expected cash flows to the OFS through both the equity 
investments and loans. 

Term Asset-Backed Securities Loan Facility (TALF): 

For the loan associated with the TALF, the OFS model derives the cash 
flows to the Federal Reserve Bank of New York (FRBNY) TALF LLC SPV, 
and ultimately the OFS, by simulating the performance of underlying 
collateral. Loss probabilities on the underlying collateral are 
calculated based on analysis of historical loan loss and charge-off 
experience by credit sector and subsector. Historical mean loss rates 
and volatilities are significantly stressed to reflect recent and 
projected performance. Simulated losses are run through cash flow 
models to project impairment to the TALF-eligible securities. Impaired 
securities are projected to be purchased by the SPV, which could 
require additional OFS funding. Simulation outcomes consisting of a 
range of loss scenarios are probability-weighted to generate the 
expected net present value of future cash flows. 

SBA 7(a) Securities Purchase Program (SBA 7(a)): 

OFS held no SBA 7(a) securities as of September 30, 2012. As of 
September 30, 2011, the valuation of SBA 7(a) securities was based on 
the discounted estimated cash flows of the securities. 

Automotive Industry Financing Program (AIFP): 

As of September 30, 2012 and 2011 the OFS held 500 million shares of 
common stock in General Motors Company (New GM) that were valued by 
multiplying the publicly traded share price by the number of shares 
held. 

As of September 30, 2012 and 2011, for investments in Ally Financial’s 
(Ally, formerly known as GMAC, Inc.) common equity and mandatorily 
convertible preferred stock, which is valued on an “if-converted” 
basis, the OFS used certain valuation multiples such as price-to-
earnings, price-to-tangible book value, and asset manager valuations 
to estimate the value of the shares. The multiples were based on those 
of comparable publicly-traded entities. The adjustment for market risk 
is incorporated in the data points used to determine the measurement 
for Ally, since all points rely on market data. 

American International Group, Inc. (AIG) Investment Program: 

As of September 30, 2012, and 2011, the OFS held 154 million and 960 
million shares, respectively, of AIG common stock. Investments in AIG 
common stock were valued at the quoted market price as of September 
30, 2012 and 2011. 

The OFS also held interests in certain AIG SPVs at September 30, 2011. 
To estimate the value of the assets underlying the preferred interests 
in the SPVs, OFS summed the value of the common equity shares held by 
the SPVs, any cash held in escrow from previous asset sales, and the 
weighted average value of the remaining assets under different 
scenarios. Because the resulting value greatly exceeded the 
liquidation preference of the investments in the SPVs, the SPVs were 
valued at the liquidation preference. These interests were liquidated 
during fiscal year 2012. 

Asset Guarantee Program (AGP): 

During fiscal year 2010, an agreement was entered into to terminate 
the guarantee of OFS to pay for any defaults on certain loans and 
securities held by Citibank. As of September 30, 2012 and 2011, the 
instruments within the AGP, consisting of Citigroup Trust Preferred 
Securities receivable from the FDIC with an $800 million liquidation 
preference value plus accrued dividends and interest, were valued in a 
manner broadly analogous to the previously described methodology used 
for financial institution equity investments. 

Direct Loan and Equity Investment Programs 

The following table recaps gross direct loans or equity investments, 
subsidy allowance, and net direct loans or equity investments by TARP 
program. Detailed tables providing the net composition, subsidy cost 
for new disbursements, modifications and reestimates, along with a 
reconciliation of subsidy cost allowances as of and for the years 
ended September 30, 2012 and 2011, are provided at the end of this 
Note for Direct Loans and Equity Investments, detailed by program, and 
for the other credit programs separately. 

Descriptions and chronology of significant events by program are after 
the summary table. 
(Dollars in Millions): 

As of September 30, 2012: 

Program: Capital Purchase Program; 
Gross Direct Loan or Equity Investment: $8,664; 
Subsidy Allowance: ($2,930); 
Net Direct Loan or Equity Investment: $5,734. 

Program: TALF and CDCI; 
Gross Direct Loan or Equity Investment: $667; 
Subsidy Allowance: $434; 
Net Direct Loan or Equity Investment: $1,104. 

Program: Public-Private Investment Program; 
Gross Direct Loan or Equity Investment: $9,763; 
Subsidy Allowance: $1,015; 
Net Direct Loan or Equity Investment: $10,778. 

Program: Automotive Industry Financing Program; 
Gross Direct Loan or Equity Investment: $37,252; 
Subsidy Allowance: ($19,706); 
Net Direct Loan or Equity Investment: $17,546. 

Program: American International Group Inc. Investment Program; 
Gross Direct Loan or Equity Investment: $6,727; 
Subsidy Allowance: ($1,658); 
Net Direct Loan or Equity Investment: $5,069. 

Program: Total Direct Loan and Equity Investment Programs; 
Gross Direct Loan or Equity Investment: $163,073; 
Subsidy Allowance: ($22,842); 
Net Direct Loan or Equity Investment: $40,231. 

As of September 30, 2011: 

Program: Capital Purchase Program; 
Gross Direct Loan or Equity Investment: $17,299; 
Subsidy Allowance: ($4,857); 
Net Direct Loan or Equity Investment: $12,442. 

Program: TALF, CDCI, and SBA 7(a); 
Gross Direct Loan or Equity Investment: $798; 
Subsidy Allowance: $279; 
Net Direct Loan or Equity Investment: $1,077. 

Program: Public-Private Investment Program; 
Gross Direct Loan or Equity Investment: $15,943; 
Subsidy Allowance: $2,434; 
Net Direct Loan or Equity Investment: $18,377. 

Program: Automotive Industry Financing Program; 
Gross Direct Loan or Equity Investment: $37,278; 
Subsidy Allowance: ($19,440); 
Net Direct Loan or Equity Investment: $17,838. 

Program: American International Group Inc. Investment Program; 
Gross Direct Loan or Equity Investment: $51,087; 
Subsidy Allowance: ($20,717); 
Net Direct Loan or Equity Investment: $30,370. 

Program: Total Direct Loan and Equity Investment Programs; 
Gross Direct Loan or Equity Investment: $122,405; 
Subsidy Allowance: ($42,301); 
Net Direct Loan or Equity Investment: $80,104. 

[End of table] 

Capital Purchase Program: 

In October 2008, the OFS began implementation of the TARP with the 
Capital Purchase Program (CPP), designed to help stabilize the 
financial system by assisting in building the capital base of certain 
viable U.S. financial institutions to increase the capacity of those 
institutions to lend to businesses and consumers and support the 
economy. 

The OFS invested a total of $204.9 billion in 707 institutions under 
the CPP program between October 2008 and December 2009. 

Under this program, the OFS purchased senior perpetual preferred stock 
from qualifying U.S. controlled banks, savings associations, and 
certain bank and savings and loan holding companies (Qualified 
Financial Institution or QFI). The senior preferred stock has a stated 
dividend rate of 5.0 percent through year five, increasing to 9.0 
percent in subsequent years. The dividends are cumulative for bank 
holding companies and subsidiaries of bank holding companies and non-
cumulative for others; they are payable when and if declared by the 
institution’s board of directors. QFIs that are Subchapter S 
corporations issued subordinated debentures in order to maintain 
compliance with the Internal Revenue Code. The maturity of the 
subordinated debentures is 30 years and interest rates are 7.7 percent 
for the first 5 years and 13.8 percent for the remaining years. QFIs, 
subject to regulator approval, may repay the OFS’ investment at any 
time. 

In addition to the senior preferred stock, the OFS received warrants, 
with a ten-year term, as required by section 113(d) of EESA, from 
public QFIs to purchase a number of shares of common stock. Subsequent 
to December 31, 2009, the OFS may exercise any warrants held in whole 
or in part at any time. The OFS received warrants from nonpublic QFIs 
for the purchase of additional senior preferred stock (or subordinated 
debentures if appropriate) with a stated dividend rate of 9.0 percent 
(13.8 percent interest rate for subordinate debentures) and a 
liquidation preference equal to 5.0 percent of the total senior 
preferred stock (additional subordinate debenture) investment. These 
warrants were immediately exercised and resulted in the OFS holding 
additional senior preferred stock (subordinated debentures) 
(collectively referred to as “warrant preferred stock”) of non-public 
QFIs. 

In fiscal year 2009, OFS entered into an exchange agreement with the 
banking institution Citigroup, under which OFS exchanged its original 
$25.0 billion CPP investment in senior preferred stock for 7.7 billion 
common shares of Citigroup stock, at $3.25 per share. Between April 
2010 and January 2011, OFS sold all of its stock and warrants. During 
fiscal year 2011, OFS received $15.8 billion from the sale of 
Citigroup common stock and warrants, resulting in proceeds from sales 
in excess of cost of $3.9 billion. Total gross proceeds from Citigroup 
sales between April 2010 and January 2011 were $31.9 billion. 

In addition to the above transactions, the OFS entered into other 
transactions with various financial institutions including exchanging 
existing preferred shares for a like amount of non tax-deductible 
Trust Preferred Securities, exchanging preferred shares for shares of 
mandatorily convertible preferred securities and selling preferred 
shares to financial institutions that were acquiring the QFIs that had 
issued the preferred shares. Generally the transactions are entered 
into with financial institutions in poor financial condition with a 
high likelihood of failure. As such, in accordance with SFFAS No. 2, 
these transactions are considered workouts and not modifications. The 
changes in cost associated with these transactions are captured in the 
year-end reestimates. 

During fiscal year 2012, OFS elected to sell selected CPP investments 
to the public in auction sales. Because auction sales were not 
considered in the budget formulation estimate for the CPP program, OFS 
recorded a modification increasing the cost of the program by $973 
million. 

In fiscal year 2012, OFS sold 40 CPP investments in six separate 
auctions for total net proceeds of $1.3 billion. These auction sales 
resulted in net proceeds less than cost of $180 million. All other 
sales and redemptions in the program for the fiscal year resulted in 
net proceeds less than cost of $105 million. 

During fiscal year 2011, certain financial institutions participating 
in CPP became eligible to exchange their OFS-held stock investments to 
preferred stock in the Small Business Lending Fund (SBLF), a separate 
Department of the Treasury program not a part of the TARP. Because 
this refinance was not considered in the formulation estimate for the 
CPP program, a modification was recorded in May 2011, resulting in a 
subsidy cost reduction of $1.0 billion. 

OFS made no write-offs of CPP investments in fiscal years 2012 or 
2011. During fiscal year 2012, five institutions, in which OFS had 
invested $41 million, were either closed by their regulators or 
declared bankruptcy. During fiscal year 2011, eight institutions, in 
which OFS had invested $190 million, were closed by their regulators. 
The OFS does not anticipate recovery on these investments and 
therefore the values of these investments are reflected at zero as of 
September 30, 2012 and 2011. The ultimate amount received, if any, 
from the investments in institutions that filed for bankruptcy and 
institutions closed by regulators will depend primarily on the outcome 
of the bankruptcy proceedings and of each institution’s receivership. 

The following tables provide key data points related to the CPP for 
the fiscal years ending September 30, 2012 and 2011: 

CPP Participating Institutions: 

Cumulative Number of Institutions Participating:
As of September 30, 2012: 707; 
As of September 30, 2011: 707. 

Cumulative Institutions Paid in Full, Merged or Investments Sold: 
As of September 30, 2012: (234); 
As of September 30, 2011: (139. 

Institutions Transferred to CDCI: 
As of September 30, 2012: (28); 
As of September 30, 2011: (28). 

Institutions Refinanced to SBLF: 
As of September 30, 2012: (137); 
As of September 30, 2011: (137). 

Institutions Written Off After Bankruptcy or Receivership: 
As of September 30, 2012: (2); 
As of September 30, 2011: (2). 

Number of Institutions with Outstanding OFS Investments: 
As of September 30, 2012: 306; 
As of September 30, 2011: 401. 

Institutions in Bankruptcy or Receivership: 
As of September 30, 2012: (6); 
As of September 30, 2011: (11). 

Number of CPP Institutions Valued at Year-End: 
As of September 30, 2012: 290; 
As of September 30, 2011: 390. 

Of the Institutions Valued, Number that Have Missed One or More 
Dividend Payments: 
As of September 30, 2012: 158; 
As of September 30, 2011: 181. 

[End of table] 

Table: 

CPP Investments (Dollars in Millions): 

Outstanding Beginning Balance, Investment in CPP Institutions, Gross: 
Fiscal Year 2012: $17,299; 
Fiscal Year 2011: $49,779. 

Repayments and Sales of Investments: 
Fiscal Year 2012: ($8,223)
Fiscal Year 2011: ($30,188). 

Losses from Sales and Repurchases of Assets in Excess of Cost: 
Fiscal Year 2012: ($412); 
Fiscal Year 2011: ($85). 

Refinanced to SBLF: 
Fiscal Year 2012: 0; 
Fiscal Year 2011: ($2,207). 

Outstanding Balance, Investment in CPP Institutions, Gross: 
Fiscal Year 2012: $8,664; 
Fiscal Year 2011: $17,299. 

Interest and Dividend Collections: 
Fiscal Year 2012: $572; 
Fiscal Year 2011: $1,283. 

Net Proceeds from Sales and Repurchases of Assets in Excess of Cost: 
Fiscal Year 2012: ($285); 
Fiscal Year 2011: $4,540. 

[End of table] 

Targeted Investment Program: 

The Targeted Investment Program (TIP) was designed to prevent a loss 
of confidence in financial institutions that could result in 
significant market disruptions, threatening the financial strength of 
similarly situated financial institutions, impairing broader financial 
markets, and undermining the overall economy. 

Under TIP, the OFS invested $20.0 billion in Citigroup in December, 
2008 and $20.0 billion in Bank of America in January, 2009. In 
December 2009, both institutions repaid the amounts invested along 
with dividends through the date of repayment. In fiscal year 2011, OFS 
sold its warrant from Citigroup under TIP for $190 million and closed 
the program. 

Community Development Capital Initiative: 

In February 2010, the OFS announced the Community Development Capital 
Initiative (CDCI) to invest lower cost capital in Community 
Development Financial Institutions (CDFIs). Under the terms of the 
program, the OFS purchased senior preferred stock (or subordinated 
debt) from eligible CDFIs. The senior preferred stock had an initial 
dividend rate of 2 percent. CDFIs could apply to receive capital up to 
5 percent of risk-weighted assets. To encourage repayment while 
recognizing the unique circumstances facing CDFIs, the dividend rate 
increases to 9 percent after eight years. 

For CDFI credit unions, the OFS purchased subordinated debt at rates 
equivalent to those offered to CDFIs and with similar terms. These 
institutions could apply for up to 3.5 percent of total assets - an 
amount approximately equivalent to the 5 percent of risk-weighted 
assets available to banks and thrifts. 

CDFIs participating in the CPP, subject to certain criteria, were 
eligible to exchange, through September 30, 2010, their CPP preferred 
shares (subordinated debt) then held by OFS for CDCI preferred shares 
(subordinated debt). These exchanges were treated as disbursements 
from CDCI and repayments to CPP. OFS invested a total of $570 million 
($363 million as a result of exchanges from CPP) in 84 institutions 
under the CDCI. During fiscal year 2012, one CDCI institution, in 
which the OFS invested $7 million, was closed by its regulator. The 
OFS does not anticipate recovery on this investment and therefore the 
value of the shares is reflected at zero as of September 30, 2012. 

In fiscal year 2012, OFS received $3 million in repayments and $11 
million in dividends and interest from its CDCI investments. In fiscal 
year 2011, OFS received no repayments and $11 million in dividends and 
interest; no CDCI institutions were closed. 

Public-Private Investment Program: 

The PPIP is part of the OFS’ efforts to help restart the financial 
securities market and provide liquidity for legacy securities. Under 
this program, the OFS (as a limited partner) made equity investments 
in and loans to nine investment vehicles (referred to as Public 
Private Investment Funds or “PPIFs”) established by private investment 
managers between September and December 2009. The OFS equity 
investments were used to match private capital and equal 49.9 percent 
of the total equity invested. Each PPIF elected to receive a loan 
commitment equal to 100 percent of partnership equity. The loans bear 
interest at one month LIBOR, plus one percent, payable monthly. The 
maturity date of each loan is the earlier of 10 years or the 
termination of the PPIF. The loan can be prepaid without penalty. Each 
PPIF terminates eight years from its commencement, if not previously 
terminated or extended with two 1-year extensions, subject to approval 
of the OFS. The loan agreements also require cash flows from purchased 
securities received by the PPIFs to be distributed in accordance with 
a priority of payments schedule (waterfall) designed to help protect 
the interests of secured parties. Security cash flows collected are 
disbursed: 1) to pay administrative expenses; 2) to pay margin 
interest on permitted hedges; 3) to pay current period interest to 
OFS; 4) to maintain a required interest reserve account; 5) to pay 
principal on the OFS loan when the minimum Asset Coverage Ratio Test 
is not satisfied; 6) to pay other amounts on interest rate hedges if 
not paid under step 2 ; 7) for additional temporary investments or to 
prepay loans (both at the discretion of the PPIF); 8) for 
distributions to equity partners up to the lesser of 12 months’ net 
interest collected or 8 percent of the funded capital commitments; 9) 
for loan prepayments to OFS; and 10) for distribution to equity 
partners. 

Each loan carries a financial covenant, the Asset Coverage Ratio Test. 
The Asset Coverage Ratio Test generally requires the PPIF to maintain 
an Asset Coverage Ratio equal to or greater than 150 percent. The 
Asset Coverage Ratio is a percentage obtained by dividing total assets 
of the PPIF by the principal amount of the loan and accrued and unpaid 
interest on the loan. Failure to comply with the test could require 
accelerated repayment of loan principal and prohibit the PPIF from 
borrowing additional funds under the loan agreement. 

As a condition of its investment, the OFS also received a warrant from 
each of the PPIFs entitling the OFS to 2.5 percent of investment 
proceeds (excluding those from temporary investments) otherwise 
allocable to the non-OFS partners after the PPIFs return of 100 
percent of the non-OFS partners’ capital contributions. Distributions 
relating to the warrants generally occur upon the final distribution 
of each partnership. 

The PPIFs are allowed to purchase commercial and non-agency 
residential mortgage-backed securities (CMBS and RMBS, respectively) 
issued prior to January 1, 2009, that were originally rated AAA or an 
equivalent rating by two or more nationally recognized statistical 
rating organizations without external credit enhancement and that are 
secured directly by the actual mortgage loans, leases or other assets 
(eligible assets) and not other securities. The PPIFs may invest in 
the aforementioned securities for a period of 3 years using proceeds 
from capital contribution, loans and amounts generated by previously 
purchased investments (subject to the requirements of the waterfall). 
The three-year investment periods for the remaining PPIFs end by 
December 2012. The PPIFs are also permitted to invest in certain 
temporary securities, including bank deposits, U.S. Treasury 
securities, and certain money market mutual funds. At least 90 percent 
of the assets underlying any eligible asset must be situated in the 
United States. As of September 30, 2012, the PPIFs’ portfolios were 
comprised of approximately 74 percent RMBS and 26 percent CMBS. As of 
September 30, 2011, they held approximately 79 percent RMBS and 21 
percent CMBS. 

The PPIFs pay a management fee to the fund manager from the OFS’ share 
of investment proceeds. During the Investment Period, the management 
fee is equal to 0.2 percent per annum of the OFS’ capital commitment 
as of the last day of the applicable quarter. Thereafter, the 
management fee is 0.2 percent per annum of the lesser of (a) the OFS’ 
capital commitment as of the last day of the applicable quarter or (b) 
the OFS Interest Value as of the last day of the quarter. 

During fiscal year 2012, OFS disbursed $245 million as equity 
investments and $803 million as loans to PPIFs. During fiscal year 
2011, OFS disbursed $1.1 billion as equity investments and $2.3 
billion as loans to PPIFs. 

During fiscal year 2012, the OFS received $124 million in interest on 
loans and $5.6 billion in loan principal repayments from the PPIFs and 
received $3.2 billion in equity distributions, of which $1.3 billion 
was recognized as investment income, $223 million as proceeds in 
excess of cost and $1.7 billion as a reduction of the gross investment 
outstanding. One PPIF partnership fully repaid its investors, 
including OFS, in 2012. Another terminated its investment period and 
repaid all equity capital by September 30, 2012; it is expected to 
distribute additional funds and cease operations by December 2012. 

During fiscal year 2011, the OFS received $123 million in interest on 
loans and $868 million in loan principal repayments from the PPIFs and 
received $735 million in equity distributions, of which $306 million 
was recognized as dividend income, $91 million of proceeds in excess 
of cost and $338 million as a reduction of the gross investment 
outstanding. 

As of September 30, 2012, OFS had equity investments in six PPIFs 
outstanding of $4.1 billion and loans outstanding of $5.7 billion for 
a total of $9.8 billion. These investments and loans were valued at 
$10.8 billion. 

As of September 30, 2011, OFS had equity investments in eight PPIFs 
outstanding of $5.5 billion and loans outstanding of $10.4 billion for 
a total of $15.9 billion, valued at $18.4 billion. As of September 30, 
2012, and 2011, OFS had legal commitments to disburse up to $3.1 
billion and $4.3 billion, respectively, for additional investments and 
loans to remaining PPIFs. 

Term Asset-Backed Securities Loan Facility: 

The Term Asset-Backed Securities Loan Facility (TALF) was created by 
the Federal Reserve Board (FRB) to provide low cost funding to 
investors in certain classes of Asset-Backed Securities (ABS). The OFS 
agreed to participate in the program by providing liquidity and credit 
protection to the FRB. 

Under the TALF, the Federal Reserve Bank of New York (FRBNY), as 
implementer of the TALF program, originated loans on a non-recourse 
basis to purchasers of certain AAA rated ABS secured by consumer and 
commercial loans and commercial mortgage backed securities (CMBS). The 
FRBNY ceased issuing new loans on June 30, 2010. 

As of September 30, 2012, approximately $1.5 billion of loans due to 
the FRBNY remained outstanding. At September 30, 2011, approximately 
$11.3 billion of loans due to the FRBNY remained outstanding. 

As part of the program, the FRBNY created the TALF, LLC, a special 
purpose vehicle that agreed to purchase from the FRBNY any collateral 
it has seized due to borrower default. The TALF, LLC would fund 
purchases from the accumulation of monthly fees paid by the FRBNY as 
compensation for the agreement. Only if the TALF, LLC had insufficient 
funds to purchase the collateral did the OFS commit to invest up to 
$20.0 billion in nonrecourse subordinated notes issued by the TALF, 
LLC. In July 2010, the OFS’ commitment was reduced to $4.3 billion. In 
June 2012, the OFS’ commitment was reduced further, from $4.3 billion 
to $1.4 billion, in consultation with the FRBNY. 

The OFS disbursed $100 million upon creation of the TALF, LLC and the 
remainder can be drawn to purchase collateral in the event the fees 
are not sufficient to cover purchases. The subordinated notes bear 
interest at 1 Month LIBOR plus 3.0 percent and mature 10 years from 
the closing date, subject to extension. Any amounts needed in excess 
of the OFS commitment and the fees would be provided through a loan 
from the FRBNY. Upon wind-down of the TALF, LLC (collateral defaults, 
reaches final maturity or is sold), available cash will be disbursed 
first to FRBNY and then to the OFS principal balances, secondly to 
FRBNY and then to the OFS interest balances and finally any remaining 
cash 10 percent to the FRBNY and 90 percent to the OFS. 

As of September 30, 2012 and 2011, no TALF loans were in default and 
consequently no collateral was purchased by the TALF, LLC. 

SBA 7(a) Securities Purchase Program: 

In March 2010, the OFS began the purchase of securities backed by 
Small Business Administration 7(a) loans (7(a) Securities) as part of 
the Unlocking Credit for Small Business Initiative. Under this program 
OFS purchased 7(a) Securities collateralized with 7(a) loans (these 
loans are guaranteed by the full faith and credit of the United States 
Government) packaged on or after July 1, 2008. In May 2011, OFS began 
selling its securities to investors. Sales were completed in January 
of 2012 and the program closed. 

The OFS invested a total of $367 million (excluding purchased accrued 
interest) and received $363 million in principal payments and sales 
proceeds, as well as $13 million in interest on its securities over 
the course of the program. During fiscal year 2012, the OFS sold its 
remaining SBA securities and received proceeds of $127 million, 
including interest. During fiscal year 2011, the OFS received $236 
million in principal payments and $11 million in interest on its 
securities. As of September 30, 2012, OFS held no investment in SBA 
7(a) securities. As of September 30, 2011, OFS held $128 million of 
SBA 7(a) securities. 

Automotive Industry Financing Program: 

The Automotive Industry Financing Program (AIFP) was designed to help 
prevent a significant disruption of the American automotive industry, 
which could have had a negative effect on the economy of the United 
States. 

General Motors Company (New GM) and General Motors Corporation (Old 
GM): 

In the period ended September 30, 2009, the OFS provided $49.5 billion 
to General Motors Corporation (Old GM) through various loan agreements 
including the initial loan for general and working capital purposes 
and the final loan for debtor in possession (DIP) financing while Old 
GM was in bankruptcy. The OFS assigned its rights in these various 
loans (with the exception of $986 million which remained in Old GM for 
wind down purposes and $7.1 billion that would be assumed) and 
previously received common stock warrants to a newly created entity, 
General Motors Company (New GM). New GM used the assigned loans and 
warrants to credit bid for substantially all of the assets of Old GM 
in a sale pursuant to Section 363 of the Bankruptcy Code. During 
fiscal year 2009, upon closing of the Section 363 sale, the credit bid 
loans and warrants were extinguished and the OFS received $2.1 billion 
in 9.0 percent cumulative perpetual preferred stock and 60.8 percent 
of the common equity in New GM. In addition, New GM assumed $7.1 
billion of the DIP loan, simultaneously paying $361 million (return of 
warranty program funds), resulting in a net balance of $6.7 billion. 
The assets received by the OFS as a result of the assignment and 
Section 363 sale were considered recoveries of the original loans for 
subsidy cost estimation purposes. During fiscal year 2010, the OFS 
received the remaining $6.7 billion as full repayment of the DIP loan 
assumed. 

During fiscal year 2011, New GM repurchased its preferred stock for 
102 percent of its liquidation amount, $2.1 billion. As part of an 
initial public offering by New GM in fiscal year 2011, the OFS sold 
412 million shares of its common stock for $13.5 billion, at a price 
of $32.75 per share (net of fees). The sale resulted in net proceeds 
less than cost of $4.4 billion. During fiscal year 2012, OFS did not 
sell any of its New GM common stock shares. 

At both September 30, 2012, and 2011, the OFS held 500 million shares 
of the common stock of New GM that represented approximately 32 
percent of the common stock of New GM outstanding. Market value of the 
shares as of September 30, 2012 and 2011 was $11.4 billion and $10.1 
billion, respectively. 

On March 31, 2011, the Plan of Liquidation for Old GM became effective 
and OFS’ $986 million loan was converted to an administrative claim. 
OFS retains the right to recover additional proceeds but recoveries 
are dependent on actual liquidation proceeds and pending litigation. 
OFS recovered $26 million in fiscal year 2012 and $111 million in 
fiscal year 2011 on the administrative claim. OFS does not expect to 
recover any significant additional proceeds from this claim. 

GMAC LLC Rights Offering: 

In December 2008, the OFS agreed, in principal, to lend up to $1.0 
billion to Old GM for participation in a rights offering by GMAC LLC 
(now known as Ally Financial, Inc.) in support of GMAC LLC’s 
reorganization as a bank holding company. The loan was secured by the 
GMAC LLC common interest acquired in the rights offering. The loan was 
funded for $884 million. In May 2009, the OFS exercised its exchange 
option under the loan and received 190,921 membership interests, 
representing 35.4 percent of the voting interest at the time, in GMAC 
LLC in full satisfaction of the loan. As of September 30, 2012 and 
2011, the OFS continued to hold the ownership interests obtained in 
this transaction (see further discussion of OFS’ GMAC holdings under 
Ally Financial Inc. in this note). 

Chrysler Group LLC (New Chrysler) and Chrysler Holding LLC (Old 
Chrysler): 

In the period ended September 30, 2009, the OFS invested $5.9 billion 
in Chrysler Holding LLC (Old Chrysler), consisting of $4 billion for 
general and working capital purposes (the general purpose loan) and 
$1.9 billion for DIP financing while Old Chrysler was in bankruptcy. 
Upon entering bankruptcy, a portion of Old Chrysler was sold to a 
newly created entity, Chrysler Group LLC (New Chrysler). Under the 
terms of the bankruptcy agreement, $500 million of the general purpose 
loan was assumed by New Chrysler. In fiscal year 2010, the OFS 
received $1.9 billion on the general purpose loan and wrote off the 
remaining $1.6 billion. Recovery of the $1.9 billion DIP loan was 
subject to the liquidation of collateral remaining with Old Chrysler. 
In fiscal year 2010, as part of a liquidation plan, OFS’ DIP loan to 
Old Chrysler was extinguished, and OFS retained a right to receive 
proceeds from a liquidation trust. 

Under the terms of the bankruptcy agreement, the OFS committed to make 
a $7.1 billion loan to New Chrysler, consisting of $6.6 billion of new 
commitments (of which $4.6 billion was funded) and $500 million of 
assumed debt from the general purpose loan with Old Chrysler. The loan 
was secured by a first priority lien on the assets of New Chrysler. 
The OFS also obtained other consideration including a 9.9 percent 
equity interest in New Chrysler and additional notes with principal 
balances of $284 million and $100 million. Fiat SpA (the Italian 
automaker), the Canadian government and the United Auto Workers (UAW) 
retiree healthcare trust were the other shareholders in New Chrysler. 

In May 2011, New Chrysler repaid the $5.1 billion in loans outstanding 
($4.6 billion in funded commitments and $500 million assumed from Old 
Chrysler), the additional notes totaling $384 million and all interest 
due. New Chrysler’s ability to draw the remaining $2.1 billion loan 
commitment was terminated. In July 2011, Fiat SpA paid the OFS $560 
million for its remaining equity interest in New Chrysler and for OFS’ 
rights under an agreement with the UAW retiree healthcare trust 
pertaining to the trust’s shares in New Chrysler. 

As a result of the fiscal year 2011 transactions, OFS had no remaining 
interest in New Chrysler as of September 30, 2012 and 2011. Total net 
proceeds received relating to the 2011 transactions were $896 million 
less than OFS’ cost. OFS continues to hold a right to receive proceeds 
from a bankruptcy liquidation trust but no significant cash flows are 
expected. OFS received $9 million and $8 million from the liquidation 
trust during fiscal years 2012 and 2011, respectively. 

Ally Financial Inc. (formerly known as GMAC): 

The OFS invested a total of $16.3 billion in GMAC between December 
2008 and December 2009, to help support its ability to originate new 
loans to GM and Chrysler dealers and consumers and to help address GMAC’
s capital needs. In May, 2010, GMAC changed its corporate name to Ally 
Financial, Inc. (Ally). As a result of original investments, 
exchanges, conversions and warrant exercises, at September 30, 2010, 
the OFS held 450,121 shares of Ally common stock (representing 56.3 
percent of the company’s outstanding common stock including ownership 
interests from the GMAC LLC Rights Offering previously discussed), 2.7 
million shares of 8 percent cumulative Trust Preferred Securities 
(TruPS) with a $1,000 per share liquidation preference and 229 million 
shares of Ally’s Series F-2 Mandatorily Convertible Preferred 
Securities. The Series F-2, with a $50 per share liquidation 
preference and a stated dividend rate of 9 percent, is convertible 
into Ally common stock at Ally’s option, subject to the approval of 
the Federal Reserve and consent by the OFS or pursuant to an order by 
the Federal Reserve compelling such conversion. The Series F-2 
security is also convertible at the option of the OFS upon certain 
specified corporate events. Absent an optional conversion, any Series 
F-2 remaining will automatically convert to common stock after 7 years 
from the issuance date. The applicable conversion rate is the greater 
of the (i) initial conversion rate (0.00432) or (ii) adjusted 
conversion rate (i.e., the liquidation amount per share of the Series 
F-2 divided by the weighted average price at which the shares of 
common equity securities were sold or the price implied by the 
conversion of securities into common equity securities, subject to 
antidilution provisions). 

In December 2010, 110 million shares of the Series F-2 preferred were 
converted into 531,850 shares of Ally common stock, resulting in the 
OFS holdings of Series F-2 preferred decreasing to 119 million shares, 
and OFS holdings in common stock of Ally increasing to 981,971 shares, 
representing 73.8 percent of Ally’s outstanding common stock. 

During fiscal year 2011, the agreement between Ally and OFS regarding 
its TruPS was amended to facilitate OFS’ sale of its TruPS in the open 
market. Because this amendment to agreement terms was not considered 
in the formulation subsidy cost estimate for the AIFP program, the OFS 
recorded a modification resulting in a subsidy cost reduction of $174 
million. In March 2011, the OFS sold its TruPS for $2.7 billion, 
resulting in proceeds in excess of cost of $127 million. 

As of September 30, 2012 and 2011, the OFS held 981,971 shares of 
common stock (73.8 percent of Ally’s outstanding common stock) and 119 
million shares of the Series F-2 preferred securities. The Series F-2 
are convertible into at least 513,000 shares of common stock, which, 
if combined with the common stock currently owned, would represent 81 
percent ownership of Ally common stock by the OFS. In fiscal year 
2012, the OFS received $534 million in dividends from Ally. In fiscal 
year 2011, the OFS received $839 million in dividends. 

American International Group, Inc. (AIG) Investment Program: 

The OFS provided assistance to systemically significant financial 
institutions on a case by case basis in order to help provide 
stability to institutions that were deemed critical to a functioning 
financial system and were at substantial risk of failure as well as to 
help prevent broader disruption to financial markets. OFS invested in 
one institution, AIG, under the program. 

In November 2008, the OFS invested $40.0 billion in AIG in the form of 
Series D 10 percent cumulative perpetual preferred stock (the “Series D”
 preferred stock) The OFS also received a warrant for the purchase of 
54 million shares (adjusted to 2.7 million shares after a 20:1 reverse 
stock split) of AIG common stock. On April 17, 2009, AIG and the OFS 
restructured their November 2008 agreement. Under the restructuring, 
the OFS exchanged $40.0 billion of Series D preferred stock for $41.6 
billion of AIG Series E 10 percent non-cumulative perpetual preferred 
stock (the “Series E” preferred stock). Additionally, the OFS agreed 
to make available to AIG a $29.8 billion equity capital facility from 
which AIG could draw funds, if needed, to assist in its restructuring. 
Under the equity capital facility, the OFS received AIG Series F 10 
percent noncumulative perpetual preferred stock with no initial 
liquidation preference (the “Series F” preferred stock) and a warrant 
for the purchase of 3,000 shares (adjusted to 150 shares after a 20:1 
reverse stock split of AIG common stock). 

The Series F liquidation preference increased with any draw down by 
AIG on the facility, and the dividend rate applicable to these shares 
was payable quarterly, if declared, on the outstanding liquidation 
preference. In fiscal year 2011, AIG drew $20.3 billion from the 
capital facility, for a cumulative total of $27.8 billion drawn. 

On September 30, 2010, the Treasury, FRBNY and AIG announced plans for 
a restructuring of the Federal Government’s investments in AIG. The 
restructuring, which occurred January 14, 2011, converted OFS’ $27.8 
billion investment in Series F preferred stock into $20.3 billion of 
interests in two AIG SPVs subsidiaries (the “AIG SPVs”) and 168 
million shares of AIG common stock. The remaining $2.0 billion of 
undrawn Series F capital facility shares were exchanged for 20,000 
shares of a new Series G Cumulative Mandatory Convertible Preferred 
Stock (the “Series G” preferred stock) equity capital facility under 
which AIG had the right to draw up to $2 billion. OFS’ $41.6 billion 
of Series E preferred stock was converted into 925 million shares of 
AIG common stock.[Footnote 27] On May 27, 2011, pursuant to agreement 
between the OFS and AIG, and as a result of AIG’s primary public 
offering of its common stock, the Series G equity capital facility, 
which was undrawn, was canceled. 

According to the terms of the preferred stock, OFS had the right to 
appoint members to the AIG board of directors if AIG missed four 
scheduled dividend payments. As a result of the nonpayment of 
dividends, in April 2010, OFS named two directors to the AIG board, 
increasing the total size from ten directors to twelve directors. In 
2012, one of the two OFS-appointed directors resigned from the AIG 
board, and as of September 30, 2012, the AIG board consists of eleven 
total directors. Additionally, until Treasury’s overall ownership 
falls below 5 percent, OFS retains the right to have observers at 
board meetings. All directors are subject to election annually by a 
majority shareholder vote at the Company’s annual meeting. 

In fiscal year 2012, OFS received $9.6 billion in distributions from 
the AIG SPVs, paying off the investment balance of $9.1 billion, 
recording proceeds in excess of cost of $127 million, and collecting 
$395 million of investment income (including $204 million capitalized 
and recognized as income in fiscal year 2011). OFS also sold 806 
million shares of common stock for $25.2 billion. These proceeds were 
less than OFS’ cost by $9.9 billion. 

In fiscal year 2011, OFS received $11.5 billion in distributions from 
the AIG SPVs, reduced its outstanding balance relating to the AIG SPVs 
by $11.2 billion and received investment income of $246 million. OFS 
also capitalized investment income of $204 million. Additionally, OFS 
received fees of $165 million from AIG. In May 2011, OFS sold 132 
million shares of its AIG common stock for $3.8 billion. These 
proceeds were less than OFS’ cost by $1.9 billion. 

At September 30, 2012, the OFS owned 154 million shares of AIG common 
stock, approximately 10.5 percent of AIG’s common stock 
equity.[Footnote 28] Market value of the common stock shares was $5.1 
billion. 

At September 30, 2011, the OFS owned 960 million shares of AIG common 
stock, approximately 50.8 percent of AIG’s common stock equity. 
[Footnote 29] Market value of the common stock shares was $21.1 
billion. OFS also owned preferred units in an AIG SPV with an 
outstanding balance of $9.3 billion, including capitalized investment 
income. 

Subsidy Cost and Reestimates: 

The recorded subsidy cost of a direct loan, equity investment or other 
credit program is based upon the calculated net present value of 
expected future cash flows. The OFS’ actions, as well as changes in 
legislation that change these estimated future cash flows change 
subsidy cost, and are recorded as modifications. The cost or reduction 
in cost of a modification is recognized when it occurs. 

During fiscal year 2012, a modification occurred in the CPP, 
increasing subsidy cost by $973 million. During fiscal year 2011, 
modifications occurred in the AIFP (see Ally Financial Inc.) and CPP, 
reducing subsidy cost by $1.2 billion. 

The purpose of reestimates is to update original program subsidy cost 
estimates to reflect actual cash flow experience as well as changes in 
equity investment valuations or forecasts of future cash flows. 
Forecasts of future cash flows are updated based on actual program 
performance to date, additional information about the portfolio, 
additional publicly available relevant historical market data on 
securities performance, revised expectations for future economic 
conditions, and enhancements to cash flow projection methods. 

For 2012 and 2011, financial statement reestimates for all programs 
were performed using actual financial transaction data through 
September 30. For 2012, a mix of market and security specific data 
publicly available as of August 31 and September 30, 2012, was used 
for all programs. For 2011, a mix of market and security specific data 
publicly available as of August 31 and September 30, 2011, was used 
for all programs, with the exception of security specific data as of 
June 30, 2011 that was used for TALF and PPIP. 

Net downward reestimates for the fiscal years ended September 30, 2012 
and 2011, totaled $11.9 billion and $11.6 billion, respectively. 
Descriptions of the reestimates, by OFS Program, are as follows: 

CPP: 

The $2.9 billion downward reestimate for CPP for the year ended 
September 30, 2012 was the result of improved market values of the 
outstanding investments and the effect of receiving $8.2 billion in 
repayments, which reduced the remaining investment by about one-half, 
in fiscal year 2012. 

The downward reestimate for CPP of $816 million for the year ended 
September 30, 2011, was the net result of receipts significantly 
greater than cost on the sale of Citigroup common stock offset by a 
decline in the estimated market values of the remaining outstanding 
investments due to market conditions at September 30, 2011. 

TIP: 

The TIP program was closed in fiscal year 2011, with a final downward 
reestimate of $192 million, primarily due to a better than projected 
return on warrant sales. OFS received cumulative receipts of $4.4 
billion on total investments of $40.0 billion. 

CDCI: 

The CDCI program continued to reflect improved investment performance, 
resulting in a $30 million downward reestimate for the year ended 
September 30, 2012. 

The CDCI program reported improved investment performance, resulting 
in a $99 million downward reestimate, for the year ended September 30, 
2011. 

PPIP: 

The $240 million upward reestimate for the PPIP for the year ended 
September 30, 2012, was due primarily to accelerated repayments and 
changes in projected performance of the PPIP portfolio. 

The $1.8 billion downward reestimate for the PPIP for the year ended 
September 30, 2011, was due primarily to a decline in market risk 
projections, program repayments, and changes in projected performance 
of the PPIP portfolio. 

TAL:F 

The investments in the TALF continued to experience improved market 
conditions and accelerated repayments, resulting in a $96 million 
downward reestimate for the year ended September 30, 2012. 

In fiscal year 2011, the TALF program showed improved market 
conditions, resulting in a $105 million downward reestimate. 

SBA 7(a): 

The SBA 7(a) Securities Purchase Program was closed in fiscal year 
2012, with a $1 million downward closing reestimate. 

The program reported a $6 million downward reestimate for fiscal year 
2011, due to improved investment performance. 

AIFP: 

The $230 million upward reestimate for the year ended September 30, 
2012, was due to a decline of $1.6 billion in the value of the Ally 
investment, partially offset by an increase in the common stock market 
price of New GM, from $20.18 per share at September 30, 2011 to $22.75 
per share at September 30, 2012. 

The $9.9 billion in upward reestimate for the AIFP for the year ended 
September 30, 2011, was due to a decline of over $7.0 billion due to 
changes in the common stock price of New GM since its IPO and a 
decline in the estimated value of Ally investments due to market 
conditions. 

AIG Investment Program: 

The $9.2 billion downward reestimate for the year ended September 30, 
2012 was due primarily to sales of 806 million shares of common stock 
at prices higher than the September 30, 2011 price of $21.95 per share 
and the effect of valuing the remaining 155 million shares at the 
September 30, 2012 price of $32.79 per share. 

The $18.5 billion downward reestimate for the year ended September 30, 
2011 for the AIG Investment Program was due primarily to subsidy cost 
estimates recorded for $20.3 billion of new disbursements during the 
fiscal year. Under budget rules, the subsidy cost estimate for these 
new disbursements was determined based upon subsidy rates formulated 
in April 2009, the period in which OFS originally agreed to make the 
funding available to AIG. At that time, OFS calculated a subsidy rate 
of 98.98 percent, which resulted in an estimated subsidy cost of $20.1 
billion associated with the $20.3 billion disbursed in fiscal year 
2011. OFS calculated a $16.7 billion downward reestimate relating to 
these fiscal year 2011 disbursements that reflects improvements in AIG’
s financial condition since the original subsidy rate was formulated. 
The remainder of the downward reestimate was due to the restructuring 
of the AIG investment to common stock offset by AIG’s financial 
condition at September 30, 2011. At year end, the subsidy allowance 
represented about 41 percent of the gross outstanding AIG Investment 
Program balance. 

Summary Tables: 

The following detailed tables provide the net composition, subsidy 
cost, modifications and reestimates and a reconciliation of the 
subsidy cost allowance for each TARP Direct Loan or Equity Investment 
Program for the years ended September 30, 2012 and 2011. Other Credit 
Program narrative and detailed tables follow these summary tables. 

Troubled Asset Relief Program Loans and Equity Investments (Dollars in 
Millions): 

As of September 30, 2012: 

Direct Loans and Equity Investment Programs: 

Direct Loans and Equity Investments Outstanding, Gross; 
Total: $63,073; 
CPP: $8,664; 
PPIP: $9,763.
AIFP: $37,252; 
AIG: $6,727; 
CDCI-TALF-SBA: $667. 

Subsidy Cost Allowance; 
Total: ($22,842); 
CPP: ($2,930); 
PPIP: $1,015;
AIFP: ($19,760); 
AIG: ($1,658); 
CDCI-TALF-SBA: $437. 

Direct Loans and Equity Investments Outstanding, Net; 
Total: $40,231; 
CPP: $5,734; 
PPIP: $10,778;
AIFP: $17,546; 
AIG: $5,069; 
CDCI-TALF-SBA: $1,104. 

New Loans or Investments Disbursed; 
Total: $1,048; 
CPP: 0; 
PPIP: $1,048; 
AIFP: 0; 
AIG: 0; 
CDCI-TALF-SBA: 0. 

Obligations for Loans and Investments not yet Disbursed; 
Total: $4,358; 
CPP: 0; 
PPIP: $3,058; 
AIFP: 0; 
AIG: 0; 
CDCI-TALF-SBA: $1,300. 

Reconciliation of Subsidy Cost Allowance: 

Balance, Beginning of Period; 
Total: $42,301; 
CPP: $4,857; 
PPIP: ($2,434);
AIFP: $19,440; 
AIG: $20,717; 
CDCI-TALF-SBA: ($279). 

Subsidy Cost (Income) for Disbursements and Modifications; 
Total: $942; 
CPP: $973; 
PPIP: ($31);
AIFP: 0; 
AIG: 0; 
CDCI-TALF-SBA: 0. 

Dividend and Interest Income; 
Total: $2,733; 
CPP: $572; 
PPIP: $1,426; 
AIFP: $534; 
AIG: $191; 
CDCI-TALF-SBA: $10. 

Net Proceeds from Sales and Repurchases of Assets in Excess of (Less 
than) Cost; 
Total: ($9,788; 
CPP: ($285); 
PPIP: $223; 
AIFP: $9; 
AIG: ($9,735); 
CDCI-TALF-SBA: 0. 

Net Interest Income (Expense) on Borrowings from BPD and Financing 
Account Balance; 
Total: ($1,626); 
CPP: ($290); 
PPIP: ($439); 
AIFP: ($507); 
AIG: ($349); 
CDCI-TALF-SBA: ($41). 

Balance, End of Period, Before Reestimates; 
Total: $34,562; 
CPP: $5,827; 
PPIP: ($1,255); 
AIFP: $19,476; 
AIG: $10,842; 
CDCI-TALF-SBA: ($310). 

Subsidy Reestimates - Upward (Downward); 
Total: ($11,720); 
CPP: ($2,897); 
PPIP: $240; 
AIFP: $230; 
AIG: ($9,166); 
CDCI-TALF-SBA: ($127). 

Balance, End of Period; 
Total: $22,842; 
CPP: $2,930; 
PPIP: ($1,015); 
AIFP: $19,706; 
AIG: $1,658; 
CDCI-TALF-SBA: ($437). 

Reconciliation of Subsidy Cost (Income): 

Subsidy Cost (Income) for Disbursements; 
Total: ($31); 
CPP: 0; 
PPIP: ($31); 
AIFP: 0; 
AIG: 0; 
CDCI-TALF-SBA: 0. 

Subsidy Cost (Income) for Modifications; 
Total: $973; 
CPP: $973; 
PPIP: 0; 
AIFP: 0; 
AIG: 0; 
CDCI-TALF-SBA: 0. 

Subsidy Reestimates - Upward (Downward); 
Total: ($11,720); 
CPP: ($2,897); 
PPIP: $240; 
AIFP: $230; 
AIG: ($9,166); 
CDCI-TALF-SBA: ($127). 

Total Direct Loan and Equity Investment Programs Subsidy Cost (Income); 
Total: ($10,778); 
CPP: ($1,924); 
PPIP: $209; 
AIFP: $230; 
AIG: ($9,166); 
CDCI-TALF-SBA: ($127). 

Note: There are no budget execution rates for FY 2012; the OFS 
authority expired October 3, 2010 with no additional commitments made 
alter September 30, 2010. 

[End of table] 

Direct Loans and Equity Investment Programs: 
(Dollars in millions): 

Direct Loans and Equity Investments Outstanding, Gross; 
Total: $122,405; 
CPP: $17,299; 
PPIP: $15,943. 
AIFP: ($19,440); 
AIG: $51,087; 
CDCI-TALF-SBA: $798. 

Subsidy Cost Allowance; 
Total: ($42,301); 
CPP: ($4,857); 
PPIP: $2,434. 
AIFP: ($19,440); 
AIG: ($20,717); 
CDCI-TALF-SBA: $279. 

Direct Loans and Equity Investments Outstanding, Net; 
Total: $80,104; 
CPP: $12,442; 
PPIP: $18,377. 
AIFP: $17,838; 
AIG: $30,370; 
CDCI-TALF-SBA: $1,077. 

New Loans or Investments Disbursed; 
Total: $23,839; 
CPP: $0;
PPIP: $3,421. 
AIFP: $0;
AIG: $20,292; 
CDCI-TALF-SBA: $126. 

Obligations for Loans and Investments not yet Disbursed; 
Total: $8,479; 
CPP: $0;
PPIP: $4,279. 
AIFP: $0;
AIG: $0;
CDCI-TALF-SBA: $4,200. 

Reconciliation of Subsidy Cost Allowance: 

Balance, Beginning of Period; 
Total: $36,745; 
CPP: $1,546; 
PPIP: ($676); 
AIFP: $14,529; 
AIG: $21,405; 
CDCI-TALF-SBA: ($59). 

Subsidy Cost (Income) for Disbursements and Modifications; 
Total: $18,887; 
CPP: ($1,010); 
PPIP: ($15). 
AIFP: ($174); 
AIG: $20,085; 
CDCI-TALF-SBA: $1. 

Interest and Dividend Revenue; 
Total: $3,461; 
CPP: $1,283; 
PPIP: $428. 
AIFP: $1,280; 
AIG: $450;
CDCI-TALF-SBA: $20. 

Fee Income; 
Total: $165;
CPP: $0;
PPIP: $0. 
AIFP: $0;
AIG: $165; 
CDCI-TALF-SBA: 0. 

Net Proceeds from Sales and Repurchases of Assets in Excess of (Less 
than) Cost; 
Total: ($2,262); 
CPP: $4,540; 
AIFP: ($5,165); 
PPIP: $91. 
AIG: ($1,918); 
CDCI-TALF-SBA: $190. 

Net Interest Income (Expense) on Borrowings from BPD and Financing 
Account Balance; 
Total: ($3,016); 
CPP: ($686); 
PPIP: ($418). 
AIFP: ($945); 
AIG: ($938); 
CDCI-TALF-SBA: ($29). 

Balance, End of Period, Before Reestimates; 
Total: $53,980; 
CPP: $5,673; 
PPIP: ($590). 
AIFP: $9,525; 
AIG: $39,249; 
CDCI-TALF-SBA: $123. 

Subsidy Reestimates - Upward (Downward); 
Total: ($11,679); 
CPP: ($816); 
PPIP: ($1,844). 
AIFP: $9,915; 
AIG: ($18,532); 
CDCI-TALF-SBA: ($402). 

Balance, End of Period; 
Total: $42,301; 
CPP: $4,857; 
PPIP: ($2,434). 
AIFP: $19,440; 
AIG: $20,717; 
CDCI-TALF-SBA: ($279). 

Reconciliation of Subsidy Cost (Income): 

Subsidy Cost (Income) for Disbursements; 
Total: $20,071; 
CPP: $0;
PPIP: ($15). 
AIFP: $0;
AIG: $20,085; 
CDCI-TALF-SBA: $1. 

Subsidy Cost (Income) for Modifications; 
Total: ($1,184); 
CPP: ($1,010); 
PPIP: $0. 
AIFP: ($174); 
AIG: $0;
CDCI-TALF-SBA: 0. 

Subsidy Reestimates - Upward (Downward); 
Total: ($11,679); 
CPP: ($816); 
PPIP: ($1,844). 
AIFP: $9,915; 
AIG: ($18,532); 
CDCI-TALF-SBA: ($402). 

Total Direct Loan and Equity Investment Programs Subsidy Cost (Income); 
Total: $7,208; 
CPP: ($1,826); 
AIFP: $9,741;
PPIP: ($1,859). 
AIG: $1,553; 
CDCI-TALF-SBA: ($401). 

Note: There are no budget execution rates for FY 2011; the OFS 
authority expired October 3, 2010 with no additional commitments made 
alter September 30, 2010. 

[End of table] 

Other Credit Programs: 

Asset Guarantee Program: 

The Asset Guarantee Program (AGP) provided guarantees for assets held 
by systemically significant financial institutions that faced a risk 
of losing market confidence due in large part to a portfolio of 
distressed or illiquid assets. 

Section 102 of the EESA required the Secretary to establish the AGP to 
guarantee troubled assets originated or issued prior to March 14, 
2008, including mortgage-backed securities, and established the 
Troubled Assets Insurance Financing Fund (TAIFF). The OFS completed 
its only transaction under the AGP in January 2009, when it finalized 
the terms of a guarantee agreement with Citigroup. Under the 
agreement, the OFS, the Federal Deposit Insurance Corporation (FDIC), 
and the FRBNY (collectively the USG Parties) provided protection 
against the possibility of large losses on an asset pool of 
approximately $301.0 billion of loans and securities backed by 
residential and commercial real estate and other such assets, which 
remained on Citigroup’s balance sheet. The OFS’ guarantee was limited 
to $5.0 billion. 

As a premium for the guarantee, Citigroup issued $7.0 billion of 
cumulative perpetual preferred stock (subsequently converted to Trust 
Preferred Securities with similar terms) with an 8 percent stated 
dividend rate and a warrant for the purchase of common stock; $4.0 
billion and the warrant were issued to the OFS, and $3.0 billion was 
issued to the FDIC. The OFS received $15 million in dividends on the 
preferred stock during fiscal year 2011. These dividends were 
deposited into the TAIFF. The OFS had also invested in Citigroup 
through CPP and the TIP. 

In December 2009, the USG Parties and Citigroup agreed to terminate 
the guarantee agreement. Under the terms of the termination agreement 
Citigroup canceled $1.8 billion of the preferred stock previously 
issued to OFS. In addition, the FDIC agreed to transfer to the OFS 
$800 million of their Trust Preferred Securities (TruPS) plus 
dividends by December 31, 2012. The amount OFS will receive would be 
reduced by any losses FDIC incurs on its Citigroup guaranteed debt. 
The additional preferred shares from the FDIC were included in the 
subsidy calculation for AGP, based on the net present value of 
expected future cash inflows. 

In fiscal year 2011, the OFS sold its TruPS for $2.2 billion and sold 
additional warrants for $67 million, leaving only the $800.0 million 
of TruPS-related receivable from the FDIC valued at $967 million on 
the OFS Balance Sheet at September 30, 2012. This receivable was 
valued at $739 million as of September 30, 2011. 

For fiscal year 2012, the AGP program recorded a $207 million downward 
reestimate, due to revised expectations about the timing of receipt of 
dividends, interest on the dividends and the TruPS from the FDIC. OFS 
expects to receive a cash transfer of dividends and interest, along 
with the TruPS certificates from the FDIC, as scheduled, on December 
31, 2012. For fiscal year 2011, the program recorded an upward 
reestimate of $30 million due to a decline in market conditions. 

The following table details the changes in the receivable account and 
the AGP subsidy cost during fiscal years 2012 and 2011: 

Reconciliation of Asset Guarantee Program Receivable: 
(Dollars in Millions): 

Balance, Beginning of Period; 
Fiscal Year 2012: $739; 
Fiscal Year 2011: $3,055. 

Dividend Revenue; 
Fiscal Year 2012: 0; 
Fiscal Year 2011: ($15). 

Proceeds from Sales in Excess of Cost; 
Fiscal Year 2012: 0; 
Fiscal Year 2011: ($2,301). 

Net Interest Expense on Borrowings from BPD and Financing Account; 
Balance 
Fiscal Year 2012: $21; 
Fiscal Year 2011: $30. 

Balance, End of Period, Before Reestimates; 
Fiscal Year 2012: $760; 
Fiscal Year 2011: $769. 

Subsidy Reestimates - (Upward) Downward; 
Fiscal Year 2012: $207; 
Fiscal Year 2011: ($30). 

Balance, End of Period; 
Fiscal Year 2012: $967; 
Fiscal Year 2011: $739. 

Reconciliation of Subsidy Cost (Income): 

Subsidy Reestimates - Upward (Downward); 
Fiscal Year 2012: ($207); 
Fiscal Year 2011: $30. 

Total Subsidy Cost (Income); 
Fiscal Year 2012: ($207); 
Fiscal Year 2011: $30. 

[End of table] 

FHA-Refinance Program 

The OFS has entered into a loss-sharing agreement with the FHA to 
support a program in which FHA guarantees refinancing of borrowers 
whose homes were worth less than the remaining amounts owed under 
their mortgage loans. In fiscal year 2011, the OFS established a $50 
million account, held by a commercial bank, serving as its agent, from 
which any required reimbursements for losses will be paid to third 
party claimants, including banks or other investors. 

During fiscal year 2012, $234 million of loans were disbursed by the 
FHA. As of September 30, 2012, 1,774 loans that FHA had guaranteed, 
with a total value of $307 million, had been refinanced under the 
program. During fiscal year 2011, $73 million of loans were guaranteed 
by the FHA. As of September 30, 2011, 334 loans that FHA had 
guaranteed, with a total value of $73 million, had been refinanced. OFS’
maximum exposure related to FHA’s guarantee totaled $41 million and $6 
million at September 30, 2012 and 2011, respectively. OFS’ guarantee 
resulted in a liability of $7 million at September 30, 2012 and a 
liability of $1 million at September 30, 2011. The liability was 
calculated, using credit reform accounting, as the present value of 
the estimated future cash outflows for the OFS’ share of losses 
incurred on any defaults of the disbursed loans. As of September 30, 
2012, no claims have been paid under the program. 

Budget subsidy rates for the program, entirely for defaults, excluding 
modifications and reestimates, were set at 4.0 percent and 1.26 
percent for loans guaranteed in fiscal years 2012 and 2011, 
respectively. 

The program recorded a $3 million downward reestimate for the year 
ended September 30, 2012, due to a reduction in market risks and lower 
than projected defaults. 

The following table details the changes in the FHA-Refinance Program 
Liability and the Subsidy Cost for the program during fiscal years 
2012 and 2011: 

Reconciliation of FHA-Refinance Program Liability: 
(Dollars in Millions): 

Balance, Beginning of Period; 
Fiscal Year 2012: $1; 
Fiscal Year 2011: $0. 

Subsidy Cost for Guarantees (Defaults); 
Fiscal Year 2012: $9; 
Fiscal Year 2011: $1. 

Balance, End of Period, Before Reestimates; 
Fiscal Year 2012: $10; 
Fiscal Year 2011: $1. 

Subsidy Reestimates - Upward (Downward); 
Fiscal Year 2012: ($3); 
Fiscal Year 2011: 0. 

Balance, End of Period; 
Fiscal Year 2012: $7; 
Fiscal Year 2011: $1. 

Reconciliation of Subsidy Cost (Income): 

Subsidy Cost for Guarantees (Defaults); 
Fiscal Year 2012: $9; 
Fiscal Year 2011: $1. 

Subsidy Reestimates - Upward (Downward); 
Fiscal Year 2012: ($3); 
Fiscal Year 2011: 0. 

Total Subsidy Cost (Income); 
Fiscal Year 2012: $6; 
Fiscal Year 2011: $1. 

[End of table] 

Note 7. Due To The General Fund: 

As of September 30, 2012, the OFS accrued $9.7 billion of downward 
reestimates payable to the General Fund. As of September 30, 2011, the 
OFS accrued $4.6 billion of downward reestimates payable to the 
General Fund. Due to the General Fund is a Non-Entity liability on the 
Balance Sheet. 

Note 8. Principal Payable To The (BPD) Bureau Of The Public Debt: 

Equity investments, direct loans and other credit programs accounted 
for under federal credit reform are funded by subsidy appropriations 
and borrowings from the BPD. The OFS also borrows funds to pay the 
Treasury General Fund for negative program subsidy costs and downward 
reestimates (these reduce program subsidy cost) in advance of 
receiving the expected cash flows that cause the negative program 
subsidy or downward reestimate. The OFS makes periodic principal 
repayments to the BPD based on the analysis of its cash balances and 
future disbursement needs. All debt is intragovernmental and covered 
by budgetary resources. See additional details on borrowing authority 
in Note 11, Statement of Budgetary Resources. 

Debt transactions for the fiscal years ended September 30, 2012 and 
2011, were as follows: 

Beginning Balance, Principal Payable to the BPD; 
As of September 30, 2012: $129,497; 
As of September 30, 2011: $140,404. 

New Borrowings; 
As of September 30, 2012: $2,658; 
As of September 30, 2011: $35,974. 

Repayments; 
As of September 30, 2012: ($79,327); 
As of September 30, 2011: ($46,881). 

Ending Balance, Principal Payable to the BPD; 
As of September 30, 2012: $52,828; 
As of September 30, 2011: $129,497. 

[End of table] 

Borrowings from the BPD by TARP program, outstanding as of September 
30, 2012 and 2011, were as follows: 

Capital Purchase Program; 
As of September 30, 2012: $5,150; 
As of September 30, 2011: $19,003. 

CDCI, TALF, and SBA 7(a); 
As of September 30, 2012: $1,020; 
As of September 30, 2011: $1,165. 

Public-Private Investment Program; 
As of September 30, 2012: $16,317; 
As of September 30, 2011: $23,792. 

Automotive Industry Financing Program; 
As of September 30, 2012: $17,845; 
As of September 30, 2011: $32,419. 

American International Group, Inc. Investment Program; 
As of September 30, 2012: $11,736; 
As of September 30, 2011: $52,285. 

Asset Guarantee Program; 
As of September 30, 2012: $760;
As of September 30, 2011: $833. 

Total Borrowings Outstanding; 
As of September 30, 2012: $52,828;
As of September 30, 2011: $129,497. 

[End of table] 

As of September 30, 2012, borrowings carried remaining terms ranging 
from 2 to 29 years, with interest rates from 1.0 percent to 4.4 
percent. As of September 30, 2011, borrowings carried remaining terms 
ranging from 3 to 30 years, with interest rates from 1.0 percent to 
4.7 percent. 

Note 9. Commitments And Contingencies: 

The OFS is party to various legal actions and claims brought by or 
against it. In the opinion of management and the Chief Counsel, the 
ultimate resolution of these legal actions and claims will not have a 
material effect on the OFS financial statements. The OFS has not 
incurred any loss contingencies that would be considered probable or 
reasonably possible for these cases; therefore, no liability was 
established. Refer to Note 5 for additional commitments relating to 
the TARP’s Housing Programs and Note 6 relating to Direct Loan and 
Equity Investment Programs. 

Note 10. Statement Of Net Cost: 

The Statement of Net Cost (SNC) presents the net cost of (income from) 
operations for the OFS under the strategic goal of ensuring the 
overall stability and liquidity of the financial system, preventing 
avoidable foreclosures and preserving homeownership. The OFS has 
determined that all initiatives and programs under the TARP fall 
within this strategic goal. 

The OFS SNC reports the annual accumulated full cost of the TARP’s 
output, including both direct and indirect costs of the program 
services and output identifiable to TARP, in accordance with SFFAS No. 
4, Managerial Cost Accounting Concepts and Standards. 

The OFS SNC for fiscal year 2012 includes $2.3 billion of 
intragovernmental costs relating to interest expense on borrowings 
from the BPD and $605 million in intragovernmental revenues relating 
to interest income on financing account balances. The OFS SNC for 
fiscal year 2011 includes $3.8 billion of intragovernmental costs 
relating to interest expense on borrowings from the BPD and $781 
million in intragovernmental revenues relating to interest income on 
financing account balances. 

Subsidy allowance amortization on the SNC is the difference between 
interest income on financing fund account balances, dividends and 
interest income on direct loans, equity investments and other credit 
programs from TARP participants, and interest expense on borrowings 
from the BPD. Credit reform accounting requires that only subsidy 
cost, not the net of other costs (interest expense and dividend and 
interest income), be reflected in the SNC. The subsidy allowance 
account is used to present the loan or equity investment at the 
estimated net present value of future cash flows. The OFS SNC includes 
$1.1 billion and $430 million of subsidy allowance amortization for 
fiscal years 2012 and 2011, respectively. 

Note 11. Statement Of Budgetary Resources: 

The Statement of Budgetary Resources (SBR) presents information about 
total budgetary resources available to the OFS and the status of those 
resources. For the year ended September 30, 2012, the OFS’ total 
resources in budgetary accounts were $41.9 billion and resources in 
non-budgetary financing accounts, including borrowing authority and 
spending authority from collections of loan principal, liquidation of 
equity investments, interest, dividends and fees were $25.9 billion. 
For the year ended September 30, 2011, the OFS’ total resources in 
budgetary accounts were $16.4 billion and resources in non-budgetary 
financing accounts were $86.5 billion. 

Permanent Indefinite Appropriations: 

The OFS receives permanent indefinite appropriations annually, if 
necessary, to fund increases in the projected subsidy costs of direct 
loans, equity investment and other credit programs as determined by 
the reestimation process required by the FCRA. 

Additionally, Section 118 of the EESA states that the Secretary may 
issue public debt securities and use the resulting funds to carry out 
the Act and that any such funds expended or obligated by the Secretary 
for actions authorized by this Act, including the payment of 
administrative expenses, shall be deemed appropriated at the time of 
such expenditure or obligation. 

Borrowing Authority: 

The OFS is authorized to borrow from the BPD whenever funds needed to 
disburse direct loans and equity investments, and to enter into asset 
guarantee and loss-sharing arrangements, exceed subsidy costs and 
collections in the non-budgetary financing accounts. For the year 
ended September 30, 2012, the OFS had borrowing authority available of 
$2.6 billion. For the year ended September 30, 2011, the OFS had 
borrowing authority available of $8.4 billion. 

The OFS uses dividends and interest received as well as principal 
repayments on direct loans and liquidation of equity investments to 
repay debt in the non-budgetary direct loan, equity investment and 
other credit program financing accounts. These receipts are not 
available for any other use per credit reform accounting guidance. 

Apportionment Categories of Obligations Incurred: Direct versus 
Reimbursable Obligations: 

All of the OFS apportionments are Direct and are Category B. Category 
B apportionments typically distribute budgetary resources on a basis 
other than calendar quarters, such as by activities, projects, objects 
or a combination of these categories. The OFS obligations incurred are 
direct obligations (obligations not financed from intragovernmental 
reimbursable agreements). 

Undelivered Orders: 

Undelivered orders as of September 30, 2012 were $40.2 billion in 
budgetary accounts and $5.9 billion in non-budgetary financing 
accounts. Undelivered orders as of September 30, 2011 were $43.4 
billion in budgetary accounts and $13.2 billion in nonbudgetary 
financing accounts. 

Explanation of Differences Between the Statement of Budgetary 
Resources and the Budget of the United States Government: 

Federal agencies and entities are required to explain material 
differences between amounts reported in the SBR and the actual amounts 
reported in the Budget of the U. S. Government (the President’s 
Budget). 

The President’s Budget for 2014, with the “Actual” column completed 
for fiscal year 2012, has not yet been published as of the date of 
these financial statements. The President’s Budget is currently 
expected to be published and delivered to Congress in early February 
2013. It will be available from the Government Printing Office. 

The 2013 President’s Budget, with the “Actual” column completed for 
the year ended September 30, 2011, was published in February 2012, and 
reconciled to the SBR. The only differences between the two documents 
were due to: 

* Rounding; 

* Expired funds that are not shown in the Actual column of the 
President’s Budget; and; 

* A $32 million downward modification shown as an outlay and as a 
corresponding distributed offsetting receipt in the SBR in 2011 that 
was included in the President’s Budget in fiscal year 2010. 

Note 12. Reconciliation Of Obligations Incurred To Net Cost of (Income 
From) Operations: 

The OFS presents the SNC using the accrual basis of accounting. This 
differs from the obligation-based measurement of total resources 
supplied, both budgetary and from other sources, on the SBR. The 
reconciliation of obligations incurred to net cost of operations shown 
below categorizes the differences between the two, and illustrates 
that the OFS maintains reconcilable consistency between the two types 
of reporting. 

The Reconciliation of Obligations Incurred to Net Cost of (Income 
from) Operations for the fiscal years ended September 30, 2012 and 
2011 is as follows: 

Resources Used to Finance Activities: 
(Dollars in millions): 

Budgetary Resources Obligated: 

Obligations Incurred; 
2012: $35,803; 
2011: $67,646. 

Spending Authority from Offsetting Collections and Recoveries; 
2012: ($87,383)
2011: ($91,708). 

Offsetting Receipts; 
2012: ($6,063); 
2011: ($61,832). 

Net Obligations; 
2012: ($57,642); 
2011: ($85,894). 

Other Resources; 
2012: $1; 
2011: $1. 

Total Resources Used to Finance Activities; 
2012: ($57,642); 
2011: ($85,893). 

Resources Used to Finance Items Not Part of Net Cost of (Income from) 
Operations: 

Net Obligations in Direct Loan, Equity Investment and Asset Guarantee 
Financing Funds; 
2012: $78,988; 
2011: $23,249. 

Change in Resources Obligated for Goods, Services and Benefits Ordered 
but not yet Provided; 
2012: $3,157; 
2011: $25,330. 

Resources that Fund the Acquisition of Assets; 
2012: 0; 
2011: ($50). 

Resources that Fund Prior Period Expenses and Net Downward 
Reestimates; 
2012: ($23,294); 
2011: $23,562. 

Total Resources Used to Finance Items Not Part of Net Cost of (Income 
from) Operations; 
2012: $58,851; 
2011: $72,091. 

Total Resources Used to Finance the Net Cost of (Income from) 
Operations; 
2012: $1.209; 
2011: ($13,802). 

Components of Net Cost of (Income from) Operations that Will Not 
Require or Generate Resources in the Current Period: 

Accrued Upward (Downward) Reestimates at Year-End; 
2012: ($8.958); 
2011: $23,293. 

Other; 
2012: $1; 
2011: $6. 

Total Components of Net Cost of (Income from) Operations that Will Not 
Require or Generate Resources in the Current Period; 
2012: ($8,957); 
2011: $23,299. 

Net Cost of (Income from) Operations; 
2012: ($7,748); 
2011: $9,497. 

[End of table] 

Office Of Financial Stability (Troubled Asset Relief Program): 
Required Supplementary Information Combined Statement Of Budgetary 
Resources For the Year Ended September 30, 2012 (Unaudited): 
Dollars in Millions: 

Budgetary Resources: 

Unobligated Balances Brought Forward; 
2012 Combined Budgetary Accounts: $14,166; 
2012 Combined Nonbudgetary Financing Accounts: $21,143; 
2012 TARP Programs Budgetary Accounts: $13,967; 
2012 TARP Programs Nonbudgetary Financing Accounts: $21,143; 
2012 TARP Administrative Budgetary Accounts: $199; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Recoveries of Prior Year Unpaid Obligations; 
2012 Combined Budgetary Accounts: $146; 
2012 Combined Nonbudgetary Financing Accounts: $6,114; 
2012 TARP Programs Budgetary Accounts: $104; 
2012 TARP Programs Nonbudgetary Financing Accounts: $6,114;
2012 TARP Administrative Budgetary Accounts: $42; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Borrowing Authority Withdrawn; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: ($5,832); 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: ($5,832); 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Actual Repayment of Debt, Prior Year Balance; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: ($19,900); 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: ($19,900); 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Unobligated Balance from Prior Year Budget Authority, Net: 
2012 Combined Budgetary Accounts: $14,312;
2012 Combined Nonbudgetary Financing Accounts: $15,245; 
2012 TARP Programs Budgetary Accounts: $14,071;
2012 TARP Programs Nonbudgetary Financing Accounts: $1,525; 
2012 TARP Administrative Budgetary Accounts: $241;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Appropriations; 
2012 Combined Budgetary Accounts: 0; 
2012 Combined Nonbudgetary Financing Accounts: 0;
2012 TARP Programs Budgetary Accounts: $27,270; 
2012 TARP Programs Nonbudgetary Financing Accounts: 0; 
2012 TARP Administrative Budgetary Accounts: $323; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Budget Authority: 
2012 Combined Budgetary Accounts: $27,593; 
2012 Combined Nonbudgetary Financing Accounts: $2,659;
2012 TARP Programs Budgetary Accounts: 0; 
2012 TARP Programs Nonbudgetary Financing Accounts: $2,659; 
2012 TARP Administrative Budgetary Accounts: 0; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Spending Authority from Offsetting Collections; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: $21,695; 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: $21,695; 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Change in Unfilled Orders Without Advance; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: ($23,320); 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: ($23,320); 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Total Budget Resources (Note 11); 
2012 Combined Budgetary Accounts: $41,905; 
2012 Combined Nonbudgetary Financing Accounts: $25,879; 
2012 TARP Programs Budgetary Accounts: $41,341; 
2012 TARP Programs Nonbudgetary Financing Accounts: $25,879; 
2012 TARP Administrative Budgetary Accounts: $564; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Status Of Budgetary Resources: 

Obligations Incurred; 
2012 Combined Budgetary Accounts: $27,555; 
2012 Combined Nonbudgetary Financing Accounts: $8,248; 
2012 TARP Programs Budgetary Accounts: $27,270; 
2012 TARP Programs Nonbudgetary Financing Accounts: $8,248; 
2012 TARP Administrative Budgetary Accounts: $285; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Unobligated Balance: Apportioned; 
2012 Combined Budgetary Accounts: $41; 
2012 Combined Nonbudgetary Financing Accounts: $3,946; 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: $3,946; 
2012 TARP Administrative Budgetary Accounts: $41; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Unapportioned; 
2012 Combined Budgetary Accounts: $14,309; 
2012 Combined Nonbudgetary Financing Accounts: $13,685; 
2012 TARP Programs Budgetary Accounts: $14,071; 
2012 TARP Programs Nonbudgetary Financing Accounts: $13,685; 
2012 TARP Administrative Budgetary Accounts: $238; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Total Unobligated Balance; 
2012 Combined Budgetary Accounts: $14,350; 
2012 Combined Nonbudgetary Financing Accounts: $17,631; 
2012 TARP Programs Budgetary Accounts: $14,071; 
2012 TARP Programs Nonbudgetary Financing Accounts: $17,631; 
2012 TARP Administrative Budgetary Accounts: $279; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Total Status Of Budgetary Resources; 
2012 Combined Budgetary Accounts: $41,905; 
2012 Combined Nonbudgetary Financing Accounts: $25,879; 
2012 TARP Programs Budgetary Accounts: $41,341; 
2012 TARP Programs Nonbudgetary Financing Accounts: $25,879; 
2012 TARP Administrative Budgetary Accounts: $564; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Change In Obligated Balances: 

Obligated Balance Brought Forward: 

Unpaid Obligations; 
2012 Combined Budgetary Accounts: $43,814; 
2012 Combined Nonbudgetary Financing Accounts: $13,158; 
2012 TARP Programs Budgetary Accounts: $43,618; 
2012 TARP Programs Nonbudgetary Financing Accounts: $13,158; 
2012 TARP Administrative Budgetary Accounts: $196; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Uncollected Customer Payments from Federal Sources; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: ($496); 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: ($496); 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligated Balance, Net, Brought Forward; 
2012 Combined Budgetary Accounts: $43,814 
2012 Combined Nonbudgetary Financing Accounts: $12,662; 
2012 TARP Programs Budgetary Accounts: $43,618; 
2012 TARP Programs Nonbudgetary Financing Accounts: $12,662; 
2012 TARP Administrative Budgetary Accounts: $196; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligations Incurred;
2012 Combined Budgetary Accounts: $27,555; 
2012 Combined Nonbudgetary Financing Accounts: $8,248; 
2012 TARP Programs Budgetary Accounts: $27,270; 
2012 TARP Programs Nonbudgetary Financing Accounts: $8,248; 
2012 TARP Administrative Budgetary Accounts: $285; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Gross Outlays; 
2012 Combined Budgetary Accounts: ($30,675); 
2012 Combined Nonbudgetary Financing Accounts: ($9,366); 
2012 TARP Programs Budgetary Accounts: ($30,400); 
2012 TARP Programs Nonbudgetary Financing Accounts: ($9,366); 
2012 TARP Administrative Budgetary Accounts: ($275); 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Recoveries of Prior Year Unpaid Obligations; 
2012 Combined Budgetary Accounts: ($146); 
2012 Combined Nonbudgetary Financing Accounts: ($6,114); 
2012 TARP Programs Budgetary Accounts: ($104); 
2012 TARP Programs Nonbudgetary Financing Accounts: ($6,114); 
2012 TARP Administrative Budgetary Accounts: ($42); 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligated Balance, Net, End of Period: 

Unpaid Obligations, Gross, End of Period; 
2012 Combined Budgetary Accounts: $40,548; 
2012 Combined Nonbudgetary Financing Accounts: $5,926; 
2012 TARP Programs Budgetary Accounts: $40,384; 
2012 TARP Programs Nonbudgetary Financing Accounts: $5,926; 
2012 TARP Administrative Budgetary Accounts: $164; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Uncollected Customer Payments from Federal Sources; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: $349; 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: $349; 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligated Balance, Net, End of Period; 
2012 Combined Budgetary Accounts: $40,548; 
2012 Combined Nonbudgetary Financing Accounts: $5,577; 
2012 TARP Programs Budgetary Accounts: $40,384; 
2012 TARP Programs Nonbudgetary Financing Accounts: $5,577; 
2012 TARP Administrative Budgetary Accounts: $164; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Budget Authority and Outlays, Net: 

Budget Authority, Gross; 
2012 Combined Budgetary Accounts: $27,593; 
2012 Combined Nonbudgetary Financing Accounts: $24,354; 
2012 TARP Programs Budgetary Accounts: $27,270; 
2012 TARP Programs Nonbudgetary Financing Accounts: $24,354; 
2012 TARP Administrative Budgetary Accounts: $323; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Actual Offsetting Collections; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: ($81,269); 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: ($81,269); 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Change in Uncollected Customer Payments from Federal Sources; 
2012 Combined Budgetary Accounts: 0;
2012 Combined Nonbudgetary Financing Accounts: $147; 
2012 TARP Programs Budgetary Accounts: 0;
2012 TARP Programs Nonbudgetary Financing Accounts: $147; 
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Budget Authority, Net: 
2012 Combined Budgetary Accounts: $27,593); 
2012 Combined Nonbudgetary Financing Accounts: ($56,768); 
2012 TARP Programs Budgetary Accounts: $27,270; 
2012 TARP Programs Nonbudgetary Financing Accounts: ($56,768); 
2012 TARP Administrative Budgetary Accounts: $323; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Gross Outlays: 
2012 Combined Budgetary Accounts: $30,675; 
2012 Combined Nonbudgetary Financing Accounts: $9,366; 
2012 TARP Programs Budgetary Accounts: $30,400; 
2012 TARP Programs Nonbudgetary Financing Accounts: $9,366; 
2012 TARP Administrative Budgetary Accounts: $275; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Actual Offsetting Collections: 
2012 Combined Budgetary Accounts: 0; 
2012 Combined Nonbudgetary Financing Accounts: ($81,269); 
2012 TARP Programs Budgetary Accounts: 0; 
2012 TARP Programs Nonbudgetary Financing Accounts: ($81,269); 
2012 TARP Administrative Budgetary Accounts: 0; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Net Outlays: 
2012 Combined Budgetary Accounts: $30,675; 
2012 Combined Nonbudgetary Financing Accounts: ($71,903); 
2012 TARP Programs Budgetary Accounts: $30,400; 
2012 TARP Programs Nonbudgetary Financing Accounts: ($71,903); 
2012 TARP Administrative Budgetary Accounts: $275; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Distributed Offsetting Receipts; 
2012 Combined Budgetary Accounts: ($6,063); 
2012 Combined Nonbudgetary Financing Accounts: 0;
2012 TARP Programs Budgetary Accounts: ($6,063); 
2012 TARP Programs Nonbudgetary Financing Accounts: 0;
2012 TARP Administrative Budgetary Accounts: 0;
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Agency Outlays, Net; 
2012 Combined Budgetary Accounts: $24,612; 
2012 Combined Nonbudgetary Financing Accounts: ($71,903); 
2012 TARP Programs Budgetary Accounts: $24,337; 
2012 TARP Programs Nonbudgetary Financing Accounts: ($71,903); 
2012 TARP Administrative Budgetary Accounts: $275; 
2012 TARP Administrative Nonbudgetary Financing Accounts: 0. 

[End of table] 

Office Of Financial Stability (Troubled Asset Relief Program): 
Required Supplementary Information Combined Statement Of Budgetary 
Resources For the Year Ended September 30, 2011 (Unaudited): 
Dollars in Millions: 

Budgetary Resources: 

Unobligated Balances Brought Forward; 
2011 Combined Budgetary Accounts: $11,075; 
2011 Combined Nonbudgetary Financing Accounts: $10,548; 
2011 TARP Programs Budgetary Accounts: $10,949; 
2011 TARP Programs Nonbudgetary Financing Accounts: $10,548; 
2011 TARP Administrative Budgetary Accounts: $126; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Recoveries of Prior Year Unpaid Obligations; 
2011 Combined Budgetary Accounts: $3,057; 
2011 Combined Nonbudgetary Financing Accounts: $4,664; 
2011 TARP Programs Budgetary Accounts: $3,018; 
2011 TARP Programs Nonbudgetary Financing Accounts: $4,664;
2011 TARP Administrative Budgetary Accounts: $39; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Budget Authority: 

Appropriations; 
2011 Combined Budgetary Accounts: $2,278; 
2011 Combined Nonbudgetary Financing Accounts: 0;
2011 TARP Programs Budgetary Accounts: $1,886; 
2011 TARP Programs Nonbudgetary Financing Accounts: 0; 
2011 TARP Administrative Budgetary Accounts: $392; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Borrowing Authority; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: $77,914; 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: $77,914; 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Spending Authority from Offsetting Collections Earned: Collected; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: $107,307; 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: $107,307; 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Change in Unfilled Orders Without Advance; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: ($23,320); 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: ($23,320); 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Anticipated for Rest of Year w/o Advances; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: 0;
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: 0;
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Total Budget Authority; 
2011 Combined Budgetary Accounts: $16,410; 
2011 Combined Nonbudgetary Financing Accounts: $177,113; 
2011 TARP Programs Budgetary Accounts: $15,853; 
2011 TARP Programs Nonbudgetary Financing Accounts: $177,113; 
2011 TARP Administrative Budgetary Accounts: $557; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Permanently Not Available; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: ($90,568); 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: ($90,568); 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Total Budgetary Resources (Note 10); 
2011 Combined Budgetary Accounts: $16,410; 
2011 Combined Nonbudgetary Financing Accounts: $86,545; 
2011 TARP Programs Budgetary Accounts: $15,853; 
2011 TARP Programs Nonbudgetary Financing Accounts: $86,545; 
2011 TARP Administrative Budgetary Accounts: $557; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Status Of Budgetary Resources: 

Obligations Incurred - Direct; 
2011 Combined Budgetary Accounts: $2,244; 
2011 Combined Nonbudgetary Financing Accounts: $65,402; 
2011 TARP Programs Budgetary Accounts: $1,886; 
2011 TARP Programs Nonbudgetary Financing Accounts: $65,402; 
2011 TARP Administrative Budgetary Accounts: $358; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Unobligated Balance: Apportioned and Available; 
2011 Combined Budgetary Accounts: $36; 
2011 Combined Nonbudgetary Financing Accounts: $511; 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: $511; 
2011 TARP Administrative Budgetary Accounts: $36; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Not Available; 
2011 Combined Budgetary Accounts: $14,130; 
2011 Combined Nonbudgetary Financing Accounts: $20,632; 
2011 TARP Programs Budgetary Accounts: $13,967; 
2011 TARP Programs Nonbudgetary Financing Accounts: $20,632; 
2011 TARP Administrative Budgetary Accounts: $163; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Total Status Of Budgetary Resources; 
2011 Combined Budgetary Accounts: $16,410; 
2011 Combined Nonbudgetary Financing Accounts: $86,545; 
2011 TARP Programs Budgetary Accounts: $15,853; 
2011 TARP Programs Nonbudgetary Financing Accounts: $86,545; 
2011 TARP Administrative Budgetary Accounts: $557; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Change In Obligated Balances: 

Obligated Balance Brought Forward: 

Unpaid Obligations; 
2011 Combined Budgetary Accounts: $69,128; 
2011 Combined Nonbudgetary Financing Accounts: $41,918; 
2011 TARP Programs Budgetary Accounts: $68,898; 
2011 TARP Programs Nonbudgetary Financing Accounts: $41,918; 
2011 TARP Administrative Budgetary Accounts: $230; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Uncollected Customer Payments from Federal Sources; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: ($23,816); 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: ($23,816); 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligated Balance, Net, Brought Forward; 
2011 Combined Budgetary Accounts: $69,128; 
2011 Combined Nonbudgetary Financing Accounts: $18,102; 
2011 TARP Programs Budgetary Accounts: $68,898; 
2011 TARP Programs Nonbudgetary Financing Accounts: $18,102; 
2011 TARP Administrative Budgetary Accounts: $230; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligations Incurred;
2011 Combined Budgetary Accounts: $2,244; 
2011 Combined Nonbudgetary Financing Accounts: $65,402; 
2011 TARP Programs Budgetary Accounts: $1,886; 
2011 TARP Programs Nonbudgetary Financing Accounts: $65,402; 
2011 TARP Administrative Budgetary Accounts: $358; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Gross Outlays; 
2011 Combined Budgetary Accounts: ($24,501); 
2011 Combined Nonbudgetary Financing Accounts: ($89,498); 
2011 TARP Programs Budgetary Accounts: ($24,148); 
2011 TARP Programs Nonbudgetary Financing Accounts: ($89,498); 
2011 TARP Administrative Budgetary Accounts: ($353); 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Recoveries of Prior Year Unpaid Obligations; 
2011 Combined Budgetary Accounts: ($3,057); 
2011 Combined Nonbudgetary Financing Accounts: ($4,664); 
2011 TARP Programs Budgetary Accounts: ($3,018); 
2011 TARP Programs Nonbudgetary Financing Accounts: ($4,664); 
2011 TARP Administrative Budgetary Accounts: ($39); 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Change in Uncollected Customer Payments from Federal Sources; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: $23,320 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: $23,320 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligated Balance, Net, End of Period: 

Unpaid Obligations; 
2011 Combined Budgetary Accounts: $43,814; 
2011 Combined Nonbudgetary Financing Accounts: $13,158; 
2011 TARP Programs Budgetary Accounts: $43,618; 
2011 TARP Programs Nonbudgetary Financing Accounts: $13,158; 
2011 TARP Administrative Budgetary Accounts: $196; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Uncollected Customer Payments from Federal Sources; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: ($496); 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: ($496); 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Obligated Balance, Net, End of Period; 
2011 Combined Budgetary Accounts: $43,814; 
2011 Combined Nonbudgetary Financing Accounts: $12,662; 
2011 TARP Programs Budgetary Accounts: $43,618; 
2011 TARP Programs Nonbudgetary Financing Accounts: $12,662; 
2011 TARP Administrative Budgetary Accounts: $196; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Net Outlays: 

Gross Outlays; 
2011 Combined Budgetary Accounts: $24,501; 
2011 Combined Nonbudgetary Financing Accounts: $89,498; 
2011 TARP Programs Budgetary Accounts: $24,148; 
2011 TARP Programs Nonbudgetary Financing Accounts: $89,498; 
2011 TARP Administrative Budgetary Accounts: $353; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Offsetting Collections; 
2011 Combined Budgetary Accounts: 0;
2011 Combined Nonbudgetary Financing Accounts: ($107,307); 
2011 TARP Programs Budgetary Accounts: 0;
2011 TARP Programs Nonbudgetary Financing Accounts: ($107,307); 
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Distributed Offsetting Receipts; 
2011 Combined Budgetary Accounts: ($61,832); 
2011 Combined Nonbudgetary Financing Accounts: 0;
2011 TARP Programs Budgetary Accounts: ($61,832); 
2011 TARP Programs Nonbudgetary Financing Accounts: 0;
2011 TARP Administrative Budgetary Accounts: 0;
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

Net Outlays: 
2011 Combined Budgetary Accounts: ($37,331); 
2011 Combined Nonbudgetary Financing Accounts: ($17,809); 
2011 TARP Programs Budgetary Accounts: ($37,684); 
2011 TARP Programs Nonbudgetary Financing Accounts: ($17,809); 
2011 TARP Administrative Budgetary Accounts: $353; 
2011 TARP Administrative Nonbudgetary Financing Accounts: 0. 

[End of table] 

Other Accompanying Information – Schedule of Spending: 
For the years ended September 30, 2012 and 2011: 
(Unaudited) 
Dollars in Millions: 

What Is Available To Spend? 

Total Resources per Statement of Budgetary Resources (SBR); 
2012: Budgetary Accounts: $41,905; 
2012 Nonbudgetary Financing Accounts: $25,879; 
2011 Budgetary Accounts: $16,410; 
2011 Nonbudgetary Financing Accounts: $86,545. 

Less Amount Apportioned (not yet agreed to be spent); 
2012: Budgetary Accounts: ($41); 
2012 Nonbudgetary Financing Accounts: ($3,946); 
2011 Budgetary Accounts: ($36); 
2011 Nonbudgetary Financing Accounts: ($511). 

Less Amount Unapportioned (not yet available to be spent); 
2012: Budgetary Accounts: ($14,309); 
2012 Nonbudgetary Financing Accounts: ($13,685); 
2011 Budgetary Accounts: ($14,130); 
2011 Nonbudgetary Financing Accounts: ($20,632). 

Amount Available To Spend - Obligations Incurred Per SBR; 
2012: Budgetary Accounts: $27,555; 
2012 Nonbudgetary Financing Accounts: $8,248; 
2011 Budgetary Accounts: $2,244; 
2011 Nonbudgetary Financing Accounts: $65,402. 

How Was The Amount Spent? 

Personnel Compensation; 
2012: Budgetary Accounts: $20; 
2012 Nonbudgetary Financing Accounts: 0;
2011 Budgetary Accounts: $24; 
2011 Nonbudgetary Financing Accounts: 0. 

Personnel Benefits; 
2012: Budgetary Accounts: $6; 
2012 Nonbudgetary Financing Accounts: 0; 
2011 Budgetary Accounts: $6; 
2011 Nonbudgetary Financing Accounts: 0. 

Travel and Transportation; 
2012: Budgetary Accounts: $1; 
2012 Nonbudgetary Financing Accounts: 0; 
2011 Budgetary Accounts: $1; 
2011 Nonbudgetary Financing Accounts: 0. 

Supplies and Materials; 
2012: Budgetary Accounts: $2; 
2012 Nonbudgetary Financing Accounts: 0; 
2011 Budgetary Accounts: 0; 
2011 Nonbudgetary Financing Accounts: 0. 

Other Services; 
2012: Budgetary Accounts: $244; 
2012 Nonbudgetary Financing Accounts: $3; 
2011 Budgetary Accounts: $322; 
2011 Nonbudgetary Financing Accounts: 0. 

Housing Program Incentive Payments;
2012: Budgetary Accounts: $3,066; 
2012 Nonbudgetary Financing Accounts: 0; 
2011 Budgetary Accounts: $1,935; 
2011 Nonbudgetary Financing Accounts: 0. 

Investments and Loans; 
2012: Budgetary Accounts: 0; 
2012 Nonbudgetary Financing Accounts: $1,048; 
2011 Budgetary Accounts: 0; 
2011 Nonbudgetary Financing Accounts: $23,839. 

Interest; 
2012: Budgetary Accounts: 0; 
2012 Nonbudgetary Financing Accounts: $2,252; 
2011 Budgetary Accounts: 0; 
2011 Nonbudgetary Financing Accounts: $3,828. 

Subsidies, including Reestimates for Previously Disbursed Loans and 
Investments Outstanding[Footnote 30]; 
2012: Budgetary Accounts: $27,336; 
2012 Nonbudgetary Financing Accounts: $6,063; 
2011 Budgetary Accounts: $22,213; 
2011 Nonbudgetary Financing Accounts: $61,831. 

Total Spending - Outlays Per SBR; 
2012: Budgetary Accounts: $30,675; 
2012 Nonbudgetary Financing Accounts: $9,366; 
2011 Budgetary Accounts: $24,501; 
2011 Nonbudgetary Financing Accounts: $89,498. 

Amount Remaining To Be Spent (Spent From Previously Obligated 
Authority); 
2012: Budgetary Accounts: ($3,120); 
2012 Nonbudgetary Financing Accounts: ($1,118); 
2011 Budgetary Accounts: ($22,257); 
2011 Nonbudgetary Financing Accounts: ($24,096). 

Amount Available To Spend - Obligations Incurred Per SBR; 
2012: Budgetary Accounts: $27,555; 
2012 Nonbudgetary Financing Accounts: $8,248; 
2011 Budgetary Accounts: $2,244; 
2011 Nonbudgetary Financing Accounts: $65,402. 

[End of table] 

The Schedule of Spending presents an overview of how and where the OFS 
is obligating and disbursing funds. Obligations are legally binding 
agreements that result in outlays, immediately or in the future. The 
Schedule presents total budgetary resources, gross outlays, and total 
obligations in further detail than that provided on the Statement of 
Budgetary Resources, although the data used to populate both is the 
same. 

The section “How Was the Amount Spent” presents disbursements, or 
outlays, for services received, supplies purchased, subsidies paid and 
program loans or investments made during 2012 or 2011, even if 
obligations for those outlays were made in prior years. 

[End of section] 

Part 3: Appendices: 

Appendix A: TARP Glossary: 

Asset-Backed Security (ABS): A financial instrument representing an 
interest in a pool of other assets, typically consumer loans. Most ABS 
are backed by credit card receivables, auto loans, student loans, or 
other loan and lease obligations. 

Asset Guarantee Program (AGP): A TARP program under which OFS, 
together with the Federal Reserve and the FDIC, agreed to share losses 
on certain pools of assets held by systemically significant financial 
institutions that faced a high risk of losing market confidence due in 
large part to a portfolio of distressed or illiquid assets. 

Automotive Industry Financing Program (AIFP): A TARP program under 
which OFS provided loans or equity investments in order to avoid a 
disorderly bankruptcy of one or more auto companies that would have 
posed a systemic risk to the country’s financial system. 

Capital Purchase Program (CPP): A TARP program pursuant to which OFS 
invested in preferred equity securities and other securities issued by 
financial institutions. 

Commercial Mortgage-Backed Securities (CMBS): A financial instrument 
representing an interest in a commercial real estate mortgage or a 
group of commercial real estate mortgages. 

Commercial Paper (CP): An unsecured debt instrument with a short 
maturity period, 270 days or less, typically issued by large financial 
institutions or other large commercial firms. 

Community Development Capital Initiative (CDCI): A TARP program that 
provides lowcost capital to Community Development Financial 
Institutions to encourage lending to small businesses and help 
facilitate the flow of credit to individuals in underserved 
communities. 

Community Development Financial Institution (CDFI): A financial 
institution that focuses on providing financial services to low- and 
moderate-income, minority and other underserved communities, and is 
certified by the CDFI Fund, an office within OFS that promotes 
economic revitalization and community development. 

Debtor-In-Possession (DIP): A debtor-in-possession in U. S. bankruptcy 
law has filed a bankruptcy petition but still remains in possession of 
its property. DIP financing usually has priority over existing debt, 
equity and other claims. 

Emergency Economic Stabilization Act (EESA): The law that created the 
Troubled Asset Relief Program (TARP). 

Government-Sponsored Enterprises (GSEs): Private corporations created 
by the U.S. Government. Fannie Mae and Freddie Mac are GSEs. 

Home Affordable Modification Program (HAMP): A TARP program OFS 
established to help responsible but struggling homeowners reduce their 
mortgage payments to affordable levels and avoid foreclosure. 

Legacy Securities: CMBS and non-agency RMBS issued prior to 2009 that 
were originally rated AAA or an equivalent rating by two or more 
nationally recognized statistical rating organizations without ratings 
enhancement and that are secured directly by actual mortgage loans, 
leases or other assets and not other securities. 

Making Home Affordable (MHA): A comprehensive plan to stabilize the 
U.S. housing market and help responsible, but struggling, homeowners 
reduce their monthly mortgage payments to more affordable levels and 
avoid foreclosure. HAMP is part of MHA. 

Mortgage-Backed Securities (MBS): A type of ABS representing an 
interest in a pool of similar mortgages bundled together by a 
financial institution. 

Non-Agency Residential Mortgage-Backed Securities: RMBS that are not 
guaranteed or issued by Freddie Mac, Fannie Mae, any other GSE, Ginnie 
Mae, or a U.S. federal government agency. 

Preferred Stock: Equity ownership that usually pays a fixed dividend 
and gives the holder a claim on corporate earnings superior to common 
stock owners. Preferred stock also has priority in the distribution of 
assets in the case of liquidation of a bankrupt company. 

Public-Private Investment Fund (PPIF): An investment fund established 
to purchase Legacy Securities from financial institutions under PPIP. 

Public-Private Investment Program (PPIP): A TARP program designed to 
support the secondary market in mortgage-backed securities. The 
program is designed to increase the flow of credit throughout the 
economy by partnering with private investors to purchase Legacy 
Securities from financial institutions. 

Qualifying Financial Institution (QFI): Private and public U.S.-
controlled banks, savings associations, bank holding companies, 
certain savings and loan holding companies, and mutual organizations. 

Residential Mortgage-Backed Securities (RMBS): A financial instrument 
representing an interest in a group of residential real estate 
mortgages. 

SBA: U.S. Small Business Administration. 

SBA 7(a) Securities Purchase Program: A TARP program under which OFS 
purchased securities backed by the guaranteed portions of the SBA 7(a) 
loans. 

Servicer: An administrative third party that collects mortgage 
payments, handles tax and insurance escrows, and may even bring 
foreclosure proceedings on past due mortgages for institutional loan 
owners or originators. The loan servicer also generates reports for 
borrowers and mortgage owners on the collections. 

Targeted Investment Program (TIP): A TARP program created to stabilize 
the financial system by making investments in institutions that are 
critical to the functioning of the financial system. 

Term Asset-Backed Securities Loan Facility (TALF): A program under 
which the Federal Reserve Bank of New York made term nonrecourse loans 
to buyers of AAA-rated Asset-Backed Securities in order to stimulate 
consumer and business lending. 

Troubled Asset Relief Program (TARP): The Troubled Asset Relief 
Program, which was established under EESA to stabilize the financial 
system and prevent a systemic collapse. 

Trust Preferred Security (TruPS): A security that has both equity and 
debt characteristics, created by establishing a trust and issuing debt 
to it. TruPS are treated as capital, not debt, for regulatory purposes. 

Warrant: A financial instrument that represents the right, but not the 
obligation, to purchase a certain number of shares of common stock of 
a company at a fixed price 

[End of section] 

Appendix B: Abbreviations And Acronyms: 

ABS: Asset-Backed Securities: 

AGP: Asset Guarantee Program: 

AIFP: Automotive Industry Financing Program: 

AIG: American International Group, Inc. 

CBO: Congressional Budget Office: 

CDFI: Community Development Financial Institution: 

CMBS: Commercial Mortgage-Backed Securities: 

CP: Commercial Paper: 

COP: Congressional Oversight Panel: 

CPP: Capital Purchase Program: 

CDCI: Community Development Capital Initiative: 

DIP: Debtor-In-Possession: 

EESA: Emergency Economic Stabilization Act of 2008: 

FCRA: Federal Credit Reform Act of 1990: 

FHA: Federal Housing Administration: 

FRBNY: Federal Reserve Bank of New York: 

GAO: Government Accountability Office: 

GSE: Government-Sponsored Enterprise: 

HAFA: Home Affordable Foreclosure Alternatives: 

HHF: Hardest Hit Fund: 

HAMP: Home Affordable Modification Program: 

HPDP: Home Price Decline Protection: 

IPO: Initial Public Offering: 

LIBOR: London Interbank Offered Rate: 

LTV: Loan-to-Value Ratio: 

MBS: Mortgage-Backed Security: 

MHA: Making Home Affordable Program: 

NPV: Net Present Value: 

OFS: Office of Financial Stability: 

OMB: Office of Management and Budget: 

PPIF: Public-Private Investment Fund: 

PPIP: Public-Private Investment Program: 

PRA: Principal Reduction Alternative: 

QFI: Qualifying Financial Institution: 

RMBS: Residential Mortgage-Backed Securities: 

SIGTARP: Special Inspector General for the Troubled Asset Relief 
Program: 

SPV: Special Purpose Vehicle: 

TAIFF: Troubled Assets Insurance Financing Fund: 

TALF: Term Asset-Backed Securities Loan Facility: 

TARP: Troubled Asset Relief Program: 

TIP: Targeted Investment Program: 

TruPS: Trust Preferred Securities: 

USDA: U. S. Department of Agriculture: 

[End of section] 

Websites: 

Office of Financial Stability Websites:  

[hyperlink, http://www.FinancialStability.gov] 

[hyperlink, http://www.MakingHomeAffordable.gov] 

Documents Referenced in the AFR: 

Monthly Reports to Congress: 

[hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Pages/Monthly-Report-to-Congress.aspx] 

The Financial Crisis Response in Charts — April 2012: 

[hyperlink, http://www.treasury.gov/resource-center/data-chart-
center/Documentsd/201220413_FinancialCrisiResponse.aspx] 

Anniversary Reports: 

[hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Pages/TARP-Annual-Retrospectives.aspx] 

Agency Financial Reports, including 2012, 2011, 2010 and 2009:  

[hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Pages/Annual-Agency-Financial-Reports.aspx] 

Housing Scorecard:  

[hyperlink, 
http://portal.hud.gov/hudportal/HUD?src=/initiaives/Housing_Scorecard] 

Warrant Disposition Report: 

[hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Pages/Warrent-Disposition-Reports.aspx] 

PPIP Quarterly Reports:  

[hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Documents/External%20Report%20-%2009-12%20vFinal.pdf] 
  
Making Home Affordable Monthly Reports:  

[hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Pages/Making-Home-Affordable-Program-Performance-
Report.aspx] 

[End of section] 

Footnotes: 

[1] Because the Treasury AIG common stock has consisted of both “TARP 
shares” and “non-TARP shares” as discussed herein, a portion of the 
proceeds received as well as the remaining common shares held are not 
included in the TARP financial statements. OFS manages the sale of 
both the TARP and non-TARP AIG common shares on a pro-rata basis. 
During fiscal year 2012, the collections from common stock sales 
consisted of $25.2 billion in respect of TARP shares (representing 
proceeds less than cost of $9.9 billion) and $13.0 billion in respect 
of Treasury’s non-TARP shares (which were provided to Treasury at no 
cost). 

[2] Treasury’s shares consist of approximately 154 million TARP shares 
(10.5 percent of the total AIG common shares outstanding) and 80 
million non-TARP shares (5.4 percent). The fair value of TARP and non-
TARP shares as of September 30, 2012, was $5.1 billion and $2.6 
billion, respectively. 

[3] The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(P.L. 111-203) amended EESA Section 115 authority to cap total 
purchase and guarantee authority at a cumulative $475.0 billion. 

[4] The Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-
22, Div. A, amended the act and reduced the maximum allowable amount 
of outstanding troubled assets under the act by $1.3 billion, from 
$700.0 billion to $698.7 billion. 

[5] Pub. L. 111-203. 

[6] OFS tracks costs in accordance with Federal budget procedures. 
First, OFS enters into legally binding “obligations” to invest or 
spend the funds for TARP programs. Then, funds are disbursed over time 
pursuant to the obligations. In any given case, it is possible that 
the full amount obligated will not be disbursed. 

[7] The subsidy cost in Table 1 and on the Statement of Net Cost, is 
composed of (1) the change in the subsidy cost allowance, net of write-
offs, (2) net intra-governmental interest cost, (3) certain inflows 
from the direct loans and equity investments (e.g., dividends, 
interest, net proceeds from sales and repurchases of assets in excess 
of cost, and other realized fees), and (4) the change in the estimated 
discounted net cash flows related to the asset guarantee program and 
FHA-Refinance Program. 

[8] During this modified Dutch auction process, Treasury, with advice 
from its external asset managers and the auction agents, publicly 
discloses a minimum bid for each auction. Bidders are able to submit 
one or more independent bids at different price-quantity combinations 
at or above the set minimum price. The auction agent does not provide 
bidders with any information about the bids of other bidders or 
auction trends, or with advice regarding bidding strategies, in 
connection with the auction. 

[9] GM $51.0 billion of assistance consists of a $49.5 billion loan to 
Old GM, $884 million loan to old GM to purchase GMAC rights, and $651 
million in loans for Supplier and Warranty Programs. 

[10] The independent trust established to manage the Department of 
Treasury’s beneficial interest in Series C preferred AIG shares. 

[11] GSEs involved in MHA include Fannie Mae and Freddie Mac. 

[12] 726,253 of these actions were TARP funded modifications. 

[13] This amount includes $29.9 billion for MHA, $7.6 billion for HHF, 
and $8.1 billion for FHA-Refinance programs. 

[14] 726,253 of these actions were TARP funded modifications. 

[15] Source: The Mortgage Bankers Association 2012 National 
Delinquency Survey. 

[16] The Certificate of Excellence recognizes outstanding 
accountability reporting and is the highest form of recognition in 
Federal government management reporting. AGA established the CEAR 
program in 1997 in conjunction with the Chief Financial Officers 
Council and the U.S. Office of Management and Budget to improve 
financial and program accountability by streamlining reporting and 
improving the effectiveness of such reports. 

[17] Pub. L. No. 110-343, div. A, 122 Stat 3765 (Oct. 3, 2008), 
codified in part, as amended, at 12 U.S.C. §§ 5201-5261. Section 
116(b) of EESA, 12 U.S.C. § 5226(b), requires that the Department of 
the Treasury (Treasury) annually prepare and submit to Congress and 
the public audited fiscal year financial statements for the Troubled 
Asset Relief Program (TARP) that are prepared in accordance with 
generally accepted accounting principles. Section 116(b) further 
requires that GAO audit TARP’s financial statements annually in 
accordance with generally accepted auditing standards. 

[18] Section 101 of EESA, 12 U.S.C. § 5211, established OFS within 
Treasury to implement TARP. 

[19] Section 116 of EESA, 12 U.S.C. § 5226, requires the Comptroller 
General to report at least every 60 days on findings under section 116. 

[20] The subsidy cost or income is composed of (1) the change in the 
subsidy cost allowance, net of write-offs; (2) net intragovernmental 
interest cost; (3) certain inflows from the direct loans and equity 
investments (e.g., dividends, interest, net proceeds from sales and 
repurchases of assets in excess of cost, and other realized fees); and 
(4) the change in the estimated discounted net cash flows related to 
other credit programs (asset guarantee program and Federal Housing 
Administration refinance program). 

[21] The Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Pub. L. No. 111-203, title XIII, § 1302, 124 Stat. 1376, 2133 (July 
21, 2010), (1) limited Treasury’s authority to purchase or guarantee 
troubled assets to a maximum of $475 billion; (2) changed this limit 
to a cap on all purchases and guarantees made without regard to 
subsequent sale, repayment, or cancellation of assets or guarantees; 
and (3) prohibited Treasury, under EESA, from incurring any 
obligations for a program or initiative unless the program or 
initiative had already been initiated prior to June 25, 2010. 

[22] A significant deficiency is a deficiency, or a combination of 
deficiencies, in internal control that is less severe than a material 
weakness, yet important enough to merit attention by those charged 
with governance. A material weakness is a deficiency, or a combination 
of deficiencies, in internal controls such that there is a reasonable 
possibility that a material misstatement of the entity’s financial 
statements will not be prevented, or detected and corrected, on a 
timely basis. A deficiency in internal control exists when the design 
or operation of a control does not allow management or employees, in 
the normal course of performing their assigned functions, to prevent 
or detect and correct misstatements on a timely basis. 

[23] RSI is comprised of “Management’s Discussion and Analysis” and 
the “Combined Statement of Budgetary Resources” that are included with 
the financial statements. 

[24] Other information is comprised of information included with the 
financial statements, other than RSI and the auditor’s report. 

[25] During 2012 and 2011, the OFS held investments in SPVs
under the TALF, PPIP and AIG Investment Programs. 

[26] This consists of equity investments made under CPP and CDCI. 

[27] Additionally, the AIG Credit Facility Trust between the Federal 
Reserve Bank of New York and AIG was terminated and the Department of 
the Treasury separately, not the OFS, received 563 million shares of 
AIG common stock as part of the restructuring transaction. At the 
completion of the restructuring per the agreement, the Department of 
the Treasury, including OFS, held 92.1 percent of AIG’s common stock. 
See the Agency Financial Report for the Department of the Treasury for 
its separate presentation and valuation of its shares of AIG common 
stock. 

[28] The Department of the Treasury, not OFS, owned 80 million shares 
of AIG common stock, approximately 5.4 percent of AIG’s common stock 
equity, at September 30, 2012. 

[29] The Department of the Treasury, not OFS, owned 495 million shares 
of AIG common stock, approximately 26.1 percent of AIG’s common stock 
equity, at September 30, 2011. 

[30] Subsidies disbursed from nonbudgetary financing accounts consist 
of negative subsidies and downward reestimates, which are reductions 
of subsidy cost, transferred from the financing accounts to the 
Treasury General Fund. 

[End of section] 

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