An Investment Banker's Take On Life: Update: Beneficiaries Of The TARP Capital Purchase Program

Tuesday, November 25, 2008

Update: Beneficiaries Of The TARP Capital Purchase Program

UPDATE - November 25, 2008

If you want the latest update on the $700 billion TARP Fund, as reported by The New York Times today, click on this link. It already includes the additional capital infusion to Citigroup which was announced over the weekend, and shows more details than my earlier slide show below.

For a quick recap of the TARP Fund's status as of November 24, 2008, here goes (click to enlarge):

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November 12, 2008

We know that the first $250 billion of the $700-billion Troubled Assets Relief Program (TARP) has been earmarked for the purchase of senior preferred shares in a broad array of financial institutions under a so-called voluntary Capital Purchase Program (CPP), which was announced by the U.S. Treasury Secretary Henry Paulson on October 14. We also know that these equity investments will be made under standardized terms, including a 5 percent dividend for five years, which then increases to 9 percent. We further know that the first $125 billion of this $250-billion CPP fund has been allocated to some nine (9) major financial institutions.

Beyond that, however, unless you have meticulously kept track of news developments regarding the U.S. federal government's capital injection program, you must be wondering (just like me) whatever happened to that program so far. It's a good thing, therefore, that the Securities Industry and Financial Markets Association (SIFMA) convened a Summit on the TARP on Monday and invited Neel Kashkari, the Treasury's "$700-billion man," to discuss the current status of TARP implementation and outline the future of the program. If you want the complete text of Mr. Kashkari's remarks, click this link.

The deadline for banks and financial institutions to voluntarily apply for equity funding under the CPP is on November 14. However, this has been extended for privately held banks, according to Mr. Kashkari. Although, the first deadline was yet four (4) days away at the time he made his remarks before the SIFMA last Monday, I feel short-changed somehow by Mr. Kaskari's prepared text because he skipped what I thought was an important part of any status report on a program like this--i.e., how much and to whom CPP funds have been committed so far? So much for transparency...

But where there's a will, there's a way and you can see the results below. I found the raw data from Reuters, then made a Powerpoint slide show out of it via SlideShare.com. The presentation shows that, as of Nov. 10, 2008 31 financial institutions have voluntarily availed of the Treasury's capital injection program, with total committed CPP funds reaching $203.08 billion and its largest (and most recent) availee being AIG.