It is instructive to see how foreign bailouts compare with TARP. Legislative bodies in many countries aside from the United States introduced recapitalization measures during 2008 and 2009 (this is before the eurozone crisis).24 As seen in table 24.1, the US CPP is the largest program in absolute amounts ($205 billion in commitments versus $107 billion for second-ranked Germany); but as a percentage of GDP, the US program was more modest. The Netherlands had the largest exposure with 4.3 percent of GDP committed, while the United States with 1.8 percent committed ranked at the bottom, also below Ireland (3.8 percent), the United Kingdom (3.5 percent), Germany (3.2
percent), and France (2.0 percent). In terms of participation, the US CPP has the largest number of beneficiaries with 707 recipients compared to 18 recipients of the European programs combined. The sheer size of the US CPP is due to the program’s openness to any US financial institution, whether systemically important or not.25 However,
participation as a percentage of total assets in the banking system is highest in France (92.6 percent), followed by the United States (75.8 percent), Ireland (74.2 percent), the Netherlands (65.9 percent), the United Kingdom (34.1 percent), and Germany (18.5 percent). The option for large banks to opt out of the programs in the United Kingdom (Barclays PLC) and Germany (Deutsche Bank) explains the large contrast in participation rates.26
Table 24.1 International CPP comparison
Note: US Government Accountability Office, Troubled Asset Relief Program 1, 5 (Jan. 2015), available at http://www.gao.gov/assets/670/667833.pdf.
a. Converted using October 2008 exchange rate. Japanese programs were converted using the March 1998 and March 1999 exchange rates, respectively.
b. The percentages for the Japanese programs were converted using the 1998 and 1999 GDP, respectively.
c. Percent of total banking assets in program, calculated using data from approximately 12/31/2008.
d. Includes “effective” ban on dividends. For example, the TIP limited dividends to $0.01, and the SSFI prevented AIG from increasing its dividends from $0 for five years.
e. This chart summarizes the CPP terms for public institutions. Terms for public, private, S-corporation, and mutual banks were slightly different.
f. Only effective after nonpayment of dividends for six quarterly periods (whether or no consecutive).
g. TIP is the Targeted Investment Program and it refers to the Treasury’s case-by-case investments in Citigroup and Bank of America.
h. The AIG Investment Program was formerly called the Systematically Significant Failing Institutions Program (SSFI).
i. For each €4.4 million in dividends (€5.9 million in the second Commerzbank tranche), interest rates increase by 0.01 percent.
j. Dexia, not included in the six because its recapitalization arose in different isolated event, was also recapitalized using SPPE funding in coordination with Belgium and Luxembourg.
k. For TSS: EURIBOR +250 bps +5 x CDS (senior 5 years). For preferred shares, the higher of: (1) TSS interest rate
increased by 24 bps every year or (2) rate equal to 105 percent of the dividends per ordinary share in 2009, 110 percent in 2010, 115 percent for 2011–2017, and 125 percent for 2018 and after.
l. 110 percent of the dividends per ordinary share in 2009, 120 percent in 2010, and 125 percent in 2011 and after.
m. Includes convertible preferred shared, nonconvertible preferred share, and subordinated debt. Loan amount, coupon rate, and step-up date varied across institutions.
Analysis of the nonprice conditions set forth in the various recapitalization programs shows the US CPP with a relatively small set of such conditions (i.e., no restructuring requirements, few limits on executive compensation, and no binding lending
requirements).27 By contrast, the United Kingdom prohibited bonuses for 2008 and
required restoration of mortgage lending to small and medium enterprises to 2007 levels, while France prohibited stock options and stock grants to senior executives and required a 3 to 4 percent annual increase in overall lending levels.28
Notes
1. See Cong. Oversight Panel, February Oversight report 27 (Feb. 6, 2009), available at
http://cybercemetery.unt.edu/archive/cop/20110401232131/http://cop.senate.gov/documents/cop- 020609-report.pdf.
2. See Cong. Budget Office, The troubled asset relief program: Report on transactions through December 31, 2008 1 (Jan. 2009), available at
https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/01-16- tarp.pdf(finding a subsidy of $64 billion for transactions through Dec. 31, 2008).
3. See Cong. Oversight Panel, July Oversight report 26–27 (Jul. 10, 2009), available at
http://cybercemetery.unt.edu/archive/cop/20110401232134/http://cop.senate.gov/documents/cop- 071009-report.pdf.
4. See Cong. Oversight Panel, December Oversight report 10 (Dec. 2009), available at
http://cybercemetery.unt.edu/archive/cop/20110401233008/http://cop.senate.gov/documents/cop- 120909-report.pdf.
5. See SIGTARP, Assessing Treasury’s process to sell warrants received from TARP recipients 1 (May 10, 2010), available at
https://www.sigtarp.gov/Audit%20Reports/Assessing%20Treasury’s%20Process%20to%20Sell%20Warrants%20Received%20From%20TARP%20Recipients_May_11_2010.pdf 6. See Mark Landler and Eric Dash, Drama behind a $250 billion banking deal, NY Times
(Oct. 15, 2008).
7. See Hal Scott and Maxwell Jenkins, The U.S. Treasury is a public, not a private,
investor, Fin. Times (Mar. 2, 2009), available at http://www.ft.com/cms/s/0/a57eaa72- 073c-11de-9294-000077b07658.html.
8. Tom Braithwaite and Francesco Guerrera, U.S. Treasury sells remaining Citi shares,
Fin. Times (Dec. 7, 2010), available at http://www.ft.com/intl/cms/s/0/f8d42e04- 0181-11e0-9b29-00144feab49a.html#axzz1zpar28rW.
9. US Dept. of Treas., Investment in AIG (Dec. 11, 2013), available at http://www.treasury.gov/initiatives/financial-stability/TARP- Programs/aig/Pages/status.aspx.
10. See Herbert Allison, Written testimony for Domestic Policy Subcommittee of the Oversight and Government Reform Committee 18–21 (Dec. 17, 2009), available at http://www.gpo.gov/fdsys/pkg/CHRG-111hhrg65131/pdf/CHRG-111hhrg65131.pdf.
11. See, for example, Rep. Jim Jordan, Hearing of Committee on Oversight and Government Reform 8 (Dec. 16, 2009), available at
http://www.gpo.gov/fdsys/pkg/CHRG-111hhrg65130/pdf/CHRG-111hhrg65130.pdf.
12. Alan Zibel, Watchdog says Treasury let GM, Ally give executives big raises during TARP, Wall St. J. (Sep. 24, 2014).
13. See Alex Pollock, TARP on a businesslike basis, Statement before the Congressional Oversight Panel of the Troubled Asset Program 3 (Nov. 19, 2009), available at
http://cybercemetery.unt.edu/archive/cop/20110401231809/http://cop.senate.gov/documents/testimony- 111909-pollock.pdf.
14. Id.
15. Id. at 4.
16. Id.
17. See UK Fin. Investments Ltd., UKFI Shareholder relationship framework document (Jan. 2010), available at http://www.ukfi.co.uk/releases/UKFI_FD_180110v2.pdf.
18. Id.
19. Government Accountability Office, Troubled asset relief program: Winding down the capital purchase program, GAO 15–367 4 (Mar. 6, 2015), available at
http://www.gao.gov/assets/670/668904.pdf.
20. Id. at 7, 12.
21. See also Office of the Special Inspector General for the Troubled Asset Relief Program, Quarterly report to Congress 230 (Jan. 28, 2015), available at
http://www.sigtarp.gov/Quarterly%20Reports/January_28_2015_Report_to_Congress.pdf 22. Id. at 230.
23. Id.
24. For a comprehensive list of recapitalization programs, see Da Lin, Lessons for TARP
from abroad: A survey of recent recapitalization programs, appendix I (May 2, 2012), available at http://www.law.harvard.edu/programs/about/pifs/education/llm/2011--- 2012/da-lin.pdf.
25. Id. at 19.
26. Id. at 20.
27. Id. at 21.
28. Id. at table 2. For a summary of nonprice conditions for recapitalization programs, see id. at table 2.
25 Standing Bailout Programs