1.  Jesse Krieger May 4 th, 2011

2.  Subprime Mortgage Crisis  TARP Purpose and Background  TARP and AIG  TARP and GM

3.  Causes of the Crisis: o Housing Prices Peak in 2006 o High Default Rates o Conception of Housing Prices Always Increasing o Housing Loans Approved for Normally Under Qualified Applications o Housing Prices Drop Late 2006-2007 o Led to Increase in Mortgage Defaults and Forclosures

6.  New Century Financial Corporation New Century Financial Corporation  American Freedom Mortgage American Freedom Mortgage  American Home Mortgage American Home Mortgage  Bernard L. Madoff Investment Securities LLC Bernard L. Madoff Investment Securities LLC  Charter Communications Charter Communications  Lehman Brothers Lehman Brothers  Linens 'n Things Linens 'n Things  Mervyns Mervyns  NetBank NetBank  Terra Securities Terra Securities  Sentinel Management Group Sentinel Management Group  Washington Mutual Washington Mutual  Icesave Icesave  Kaupthing Singer & Friedlander Kaupthing Singer & Friedlander  Yamato Life Yamato Life  Circuit City Circuit City  Banco Privado Português Banco Privado Português  Allco Finance Group Allco Finance Group  Waterford Wedgwood Waterford Wedgwood  Saab Automobile Saab Automobile  BearingPoint BearingPoint  Tweeter Tweeter  Chrysler Chrysler  General Motors General Motors

7.  In Economic Uncertainty, Banks Don’t Loan o Want to Maintain Liquidity o Need Either More Capital or Greater Certainty  Natural Business Tendency to NOT Spend During These Times  TARP Created to Encourage Spending

8.  Fundamental Part of the Emergency Economic Stabilization Act of 2008  Gives Secretary of the Treasury Authority to Purchase Troubled Assets o Restore Liquidity o Improve Financial Stability  Other Economic Assistance o Automotive Industry o Private Companies (Toxic Assets) o Fannie and Freddie o AIG

9.  Report Submitted to Congress Reporting the TARP’s Progress o http://www.sigtarp.gov/reports/congress/2011/January2011_Quar terly_Report_to_Congress.pdf http://www.sigtarp.gov/reports/congress/2011/January2011_Quar terly_Report_to_Congress.pdf  If Short, Legislative Proposal to Recuperate o Ensure that National Debt Does Not Increase

10.  American International Group o International Insurance Agency in Over 130 Countries o Reported Losses of $99B in 2008 o Reported Losses of $11B in 2009  Invested in High-Grade Residential Mortgage Backed Securities  Sold Credit Default Swaps to Financial Institutions for Loans Rated AAA  Suffered Great Losses and Liquidity Issues due to Mortgage Crisis

11.  November 25 th, 2008 o TARP Purchased $40B in Preferred Stock o %10/yr Dividends  March 2 nd, 2009 o TARP Purchased $30B More in Preferred Stock  Used Capital to Relieve Liquidity Issues

12.  Repaid $9B  Plans to Repay o Treasury to Sell Stock Gradually Over Time o Sold Several Subsidiaries ALICO to MetLife for $16B  Net Income of $8B in 2010  Operational Goals o Reduce Risk in Investments and Credit Default Swaps o Reduce Operational Costs o Strengthen Financial Position to Repay Taxpayers

13.  General Motors o Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall, Wuling… o Locations in 31 Countries  Downturn in Economy o Reported Losses of $39B in 2007 o Reported Losses of $31B in 2008

14.  US Treasury Purchased $51B in Common Stock o 61% Stake in the Company  Returned $23B  US Received Revenue of $700M to Date

15.  Reorganized Under Chapter 11 Bankruptcy o Primarily Used by Corporate Entities o Ch. 13 Pertains to the Reorganization of Private Individuals o Ch. 7 Pertains to Liquidation Bankruptcies  Listed on the NYSE on November 18 th, 2010  World’s Largest IPO of $23B  “Repaid” Debt Early  Claimed Ability due to Increase in Malibu and LaCrosse Sales  Used Federal Funds to Repay TARP Debt  Net Income of $5B in 2010

16.  Activity to Date o 928 Recipients o $619B Committed 27.3% Banks/Financial Institutions, Cap at $475B 14.1% Fannie and Freddie, No Cap 12% Auto Companies, Included in $475B Cap Toxic Asset Purchases, Cap at $22.4B o $564B Dispersed o $259B Returned o $57B Total Revenue  Notice – Did Not Cost $700B

17.  Was this program effective? Is this even measureable or quantifiable?  Will the TARP encourage institutions to take more risks, knowing that the government will bail them out? o Pros? o Cons?

18.  http://troubled-asset-relief-program.net/ http://troubled-asset-relief-program.net/  http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#cite_note-0 http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#cite_note-0  http://www.brookings.edu/~/media/Files/rc/papers/2009/0123_tarp_elliott/0123_tarp_elliott.pdf http://www.brookings.edu/~/media/Files/rc/papers/2009/0123_tarp_elliott/0123_tarp_elliott.pdf  http://en.wikipedia.org/wiki/Subprime_mortgage_crisis http://en.wikipedia.org/wiki/Subprime_mortgage_crisis  http://en.wikipedia.org/wiki/United_States_housing_bubble http://en.wikipedia.org/wiki/United_States_housing_bubble  http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization  http://www.nytimes.com/2010/05/02/business/02gret.html?_r=1&ref=business http://www.nytimes.com/2010/05/02/business/02gret.html?_r=1&ref=business  http://articles.boston.com/2010-05-14/business/29290548_1_ed-whitacre-gm-general-motors http://articles.boston.com/2010-05-14/business/29290548_1_ed-whitacre-gm-general-motors  http://en.wikipedia.org/wiki/General_Motors http://en.wikipedia.org/wiki/General_Motors  http://en.wikipedia.org/wiki/American_International_Group http://en.wikipedia.org/wiki/American_International_Group  http://projects.propublica.org/bailout/list/index http://projects.propublica.org/bailout/list/index  http://www.creditcards.com/credit-card-news/federal-reserve-g19-consumer-credit-march-10-1276.php http://www.creditcards.com/credit-card-news/federal-reserve-g19-consumer-credit-march-10-1276.php  http://www.thompsonhine.com/publications/pdf/2008/10/summaryofthe1543.pdf http://www.thompsonhine.com/publications/pdf/2008/10/summaryofthe1543.pdf  http://www.britannica.com/EBchecked/topic/1505432/Troubled-Asset-Relief-Program http://www.britannica.com/EBchecked/topic/1505432/Troubled-Asset-Relief-Program  http://www.aigcorporate.com/index.html http://www.aigcorporate.com/index.html  http://en.wikipedia.org/wiki/Credit_default_swap http://en.wikipedia.org/wiki/Credit_default_swap  http://www.aigcorporate.com/investors/AIG_2010_Annual_Report.pdf http://www.aigcorporate.com/investors/AIG_2010_Annual_Report.pdf  http://www.sigtarp.gov/reports/congress/2011/January2011_Quarterly_Report_to_Congress.pdf http://www.sigtarp.gov/reports/congress/2011/January2011_Quarterly_Report_to_Congress.pdf  http://www.gm.com/corporate/ http://www.gm.com/corporate/  http://investor.gm.com/pdfs/Annual%20Report.pdf http://investor.gm.com/pdfs/Annual%20Report.pdf