TARP Reform and Accountability Act

Current Status


Details
According to OpenCongress, the act includes the following provisions:

Modification to TARP and TARP Oversight
 * Requires all firms that receive money under the Troubled Assets Relief Program (TARP) to report quarterly on how they have used the TARP money, including any amount of increased lending that the money has made possible.
 * Directs the Treasury to reach an agreement with any new TARP recipients as to “the manner in which the funds are to be used and benchmarks that the institution is required to meet in using the funding so as to advance the purposes of this Act to strengthen the soundness of the financial system and the availability of credit to the economy.”
 * Restricts mergers and acquisitions involving TARP recipients unless the Treasury determines that they would reduce the risk to taxpayers or that the transaction could have been consummated without money from TARP.
 * Adds the stricter executive compensation limits from the auto bailout bill to firms that receive TARP money. The stricter limits include a ban on bonuses and incentives for to the 25 most highly compensated employees of a company, “any compensation plan that would encourage manipulation of such institution’s reported earnings to enhance the compensation of any of its employees,” and a mandate to divest in private airplanes. Notably, these stricter limits would apply retroactively to executives from companies that have already received TARP money.
 * Authorizes the Treasury to have an observer at board meetings of firms that have received TARP money.
 * Directs the Treasury to promptly make TARP funds available to smaller community financial institutions.
 * Expands the Financial Stability Oversight Board that was set up by the original bailout bill to include the Chairman of the FDIC and two new members from outside of government to be chosen by the President and confirmed by the Senate. It also gives the board new powers to overturn TARP policy decisions from the Treasury Secretary by a 2/3rds vote.

Foreclosure Mitigation Plan
 * Requires that at least $40 billion of the second $350 billion of the financial bailout money is used for a comprehensive foreclosure mitigation plan, which the Treasury must design by March 15, 2009. The plan is required to apply only to owner-occupied residential properties and to leverage private capital to the maximum extent possible.

Auto Industry Refinancing and Restructuring
 * Clarifies and confirms that the original financial bailout bill gave the Treasury the authority to give TARP money to automobile companies.

Other Uses of TARP
 * Clarifies that the bailout bill gave the Treasury authority “to establish or support facilities to support the availability of consumer loans, including loans for autos and other vehicles and student loans, including through purchase of asset-backed securities, directly or through the Board or any Federal reserve bank.”
 * Clarifies that the bailout bill gave the Treasury authority “to provide support to State and local governments, and other issuers of municipal securities, which are having difficulty accessing appropriate financing in the capital markets.” Municipal securities are tax-exempt.

Change to the Hope for Homeowners Program
 * Eliminates the 3 percent upfront premium requirement for homeowners that use the FHA “Hope for Homeowners” program to refinance their mortgages.
 * Reduces the 1.5% annual premium by about two-thirds.
 * Eliminates government profit sharing of any appreciation of home values above what they were at the time of refinancing.

Home Buyer Stimulus
 * Require the Treasury to carry out a program “to stimulate demand for home purchases and reduce unsold inventories of residential properties, which shall include ensuring the availability of affordable interest rates on mortgages made for the purchase, by qualified home buyers, of 1- to 4-family residential properties.” The program is to be run under the Treasury’s authority to buy up loans from the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and any Federal Home Loan Bank.
 * Suggests to the Treasury that, in designing the program, they take into consideration its impact on geographical areas that have the highest number of foreclosed properties.

Permanent Increase in Deposit Insurance Limits
 * Makes permanent the increase in deposit insurance coverage for banks to $250,000, which was part of the original bailout bill.
 * Increases the FDIC’s borrowing authority from $30 billion to $100 billion and allows them to borrow more by submitting a written request to the Treasury.
 * Allows the FDIC to charge insured banks a special systemic risk assessment in order to recover any losses.

House
The measure was introduced by Rep. Barney Frank (D-Mass.) on January 9, 2009. However, just a few days later on January 12, Rep. Frank indicated that he might accept an agreement with the Obama administration on TARP oversight in place of passing H.R. 384. Also on January 12, President George W. Bush notified Congress that, at the request of President-elect Barack Obama, he would formally request the release of the second half of TARP funds. And that same day, Lawrence Summers, the Obama administration's top economic adviser, sent a letter to Congressional leaders asking for authority to release the funds and providing assurances that stricter oversight would be applied to the second release.

Four days later, on January 16, 2009, the Senate approved the second release of TARP funds without any additional oversight requirements.

H.R. 384 eventually passed the House five days after that on January 21, 2009 by a vote of 260-166.



Senate
Reports indicated that Senate Banking Committee Chair Chris Dodd (D-Conn.) would not take up H.R. 384 as passed or introduce a Senate version of the bill. However, Senator Byron Dorgan has introduced a separate bill (S. 195) establishing stronger oversight over the whole financial bailout, including TARP. Differences between that bill, if passed, and H.R. 384 would have to be negotiated in conference committee.