Search Penny Hill Press

Tuesday, May 31, 2011

Troubled Asset Relief Program (TARP): Implementation and Status

Baird Webel
Specialist in Financial Economics

The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. 110-343) in October 2008. EESA was enacted to address an ongoing financial crisis that reached near-panic proportions in September 2008. The act granted the Secretary of the Treasury authority to either purchase or insure up to $700 billion in troubled assets owned by financial institutions. This authority was granted for up to two years from the date of enactment and was very broad. In particular, the definitions of both “troubled asset” and “financial institution” allowed the Secretary wide leeway in deciding what assets might be purchased or guaranteed and what might qualify as a financial firm.

The financial crisis grew out of an unprecedented housing boom that turned into a housing bust. Much of the lending for housing during the boom was based on asset-backed securities, which used the repayment of housing loans as the basis for repaying these securities. As housing prices fell and mortgage defaults increased, these securities became illiquid and fell sharply in value, causing capital losses for financial firms. Uncertainty about future losses reduced many firms access to private liquidity, with the loss in liquidity being in some cases catastrophic. September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of AIG, which was saved only by an $85 billion loan from the Federal Reserve. There was widespread lack of trust in the financial markets as participants were unsure which firms might be holding so-called toxic assets that might now be worth much less than previously estimated, and thus might be unreliable counterparties in financial transactions. This prevented firms from accessing credit markets to meet their liquidity needs.

As EESA moved through Congress, most attention was focused on the idea of the government purchasing mortgage-related toxic assets, thus alleviating the widespread uncertainty and suspicion by cleaning up bank balance sheets. The initial TARP Capital Purchase Program, however, directly added capital onto banks’ balance sheets through preferred share purchases, rather than removing assets that had become liabilities through purchasing mortgage-related assets. Several other TARP programs followed, including an asset guarantee program; programs designed to spur consumer and business lending; financial support for companies such as AIG, GM, and Chrysler; and programs to aid homeowners at risk of foreclosure. Eventually, the Public-Private Investment Program resulted in the purchase of some mortgage-related assets from banks, but this has remained a relatively small part of TARP. Most of the TARP programs are now closed, with no additional disbursements expected.

With the immediate crisis subsiding through 2009, congressional attention in financial services turned largely to consideration of broad regulatory changes. The resulting Dodd-Frank Act (P.L. 111-203) amended the TARP authority, including (1) reduction of the overall amount to $475 billion; (2) removal of the ability to reuse TARP funds that had been repaid; and (3) removal of the authority to create new TARP programs or initiatives. The original TARP authority to purchase new assets or enter into new contracts expired on October 3, 2010. Outlays under the existing contracts, however, may continue through the life of these contracts. Overall budget cost estimates for TARP have decreased significantly since the passage of EESA, with the latest Congressional Budget Office estimates foreseeing $19 billion in costs and the latest Administration estimates foreseeing $64 billion in costs. Most of these costs are from aid to homeowners, the insurer AIG, and the automakers. The assistance to banks is generally showing a gain for the government. In the 112
th Congress, several bills have been introduced to repeal all or part of TARP, including H.R. 189, H.R. 430, H.R. 839, S. 162 and S. 527.


Date of Report: May 13, 2011
Number of Pages: 30
Order Number: R41427
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Friday, May 27, 2011

Funding for the Older Americans Act and Other Administration on Aging Programs


Angela Napili
Information Research Specialist

Kirsten J. Colello
Specialist in Health and Aging Policy

The Older Americans Act (OAA) is the major federal vehicle for the delivery of social and nutrition services for older persons. These include supportive services, congregate nutrition services (meals served at group sites such as senior centers, schools, churches, or senior housing complexes), home-delivered nutrition services, family caregiver support, community service employment, the long-term care ombudsman program, and services to prevent the abuse, neglect, and exploitation of older persons. The OAA also supports grants to older Native Americans and research, training, and demonstration activities. The HHS Administration on Aging (AOA) administers most OAA programs except for the Community Service Employment for Older Americans (CSEOA) program, which is administered by the U.S. Department of Labor (DOL). The AOA also administers several programs authorized under the Public Health Service Act, such as the Alzheimer’s Disease Supportive Services Program, the Lifespan Respite Care Program, and the Community Living Assistance and Supportive Services (CLASS) Program. Funding for these programs is provided through appropriations legislation for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (Labor-HHS-Education). The FY2010 Consolidated Appropriations Act (P.L. 111-117) provided $2.328 billion for OAA programs in FY2010. Authorization of appropriations for OAA programs expires at the end of FY2011.

The President signed the FY2011 Department of Defense and Full-Year Continuing Appropriations Act (P.L. 112-10) on April 15, 2011. At this time, total FY2011 funding for all OAA programs can not be determined. The act specifies funding for some, but not all, OAA and other AOA-administered programs. For programs that are not specifically mentioned in the act, AOA has some discretion in determining FY2011 funding allocations. P.L. 112-10 requires agencies, within thirty days of enactment, to submit expenditure and operating plans to congressional appropriations committees, at a level of detail below the account level. The act specifies FY2011 funding of $449.1 million for the CSEOA program, 46% (or $376.3 million) less than the FY2010 level. It maintains funding for congregate and home-delivered nutrition services, and Native American nutrition and supportive services, at FY2010 levels, minus a 0.2% across-the-board rescission. P.L. 112-10 provides AOA Aging Services Programs (programs administered by AOA, which include both OAA and non-OAA authorized programs) with total budget authority of $1,497.3 million, $19.0 million less than the amount appropriated in FY2010 ($1,516.3 million).

The President’s FY2012 budget request proposes $2.251 billion for AOA activities. Within that amount, the budget proposes $2.035 billion for OAA programs, 7% less than the FY2010 level. The reduction is primarily due to a proposed decrease in funding for CSEOA, from $825.4 million in FY2010 to $450.0 million in FY2012, a 45% (or $375.4 million) reduction. The FY2012 budget request would also transfer administration of the CSEOA program from DOL to AOA. The FY2012 budget request proposes a $47.5 million increase over FY2010 levels for AOA services to help families with caregiving responsibilities, and a $21.5 million increase over the FY2010 level for AOA activities to protect vulnerable adults. The FY2012 budget also proposes to transfer administration of the State Health Insurance and Assistance Program from the Centers for Medicare and Medicaid Services to AOA.

This report provides details of FY2010 and FY2011 funding, and the President’s FY2012 budget request, for OAA authorized activities, as well as for other programs administered by AOA under other statutory authorities.



Date of Report: May 18, 2011
Number of Pages: 38
Order Number: RL33880
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Social Security Reform: Current Issues and Legislation


Dawn Nuschler
Specialist in Income Security

Social Security reform has been an issue of political debate in recent years. Currently, there is renewed congressional interest in reform in part due to the National Commission on Fiscal Responsibility and Reform established by President Obama in February 2010, which was tasked with making recommendations on ways to improve the long-term fiscal outlook. On December 1, 2010, the President’s Fiscal Commission released its final report, which includes a number of proposed changes to the Social Security program. On December 3, 2010, a majority of commission members expressed support for the recommendations (11 out of 18 members), three short of the super-majority needed to require congressional action on the recommendations.

The spectrum of ideas for reform ranges from relatively minor changes to the pay-as-you-go social insurance system enacted in the 1930s to a redesigned, “modernized” program based on personal savings and investments modeled after IRAs and 401(k)s. Proponents of the fundamentally different approaches to reform cite varying policy objectives that go beyond simply restoring long-term financial stability to the Social Security system. They cite objectives that focus on improving the adequacy and equity of benefits, as well as those that reflect different philosophical views about the role of the Social Security program and the federal government in providing retirement income. However, the system’s projected long-range financial outlook provides a backdrop for much of the Social Security reform debate in terms of the timing and degree of recommended program changes.

The Social Security Board of Trustees projects that the trust funds will be exhausted in 2036 and that an estimated 77% of scheduled annual benefits will be payable with incoming receipts at that time (under the intermediate projections). The primary reason is demographics. Between 2010 and 2030, the number of people aged 65 and older is projected to increase by 78%, while the number of workers supporting the system is projected to increase by 7%. In addition, the trustees project that the system will run a cash flow deficit in each year of the 75-year projection period. When current Social Security tax revenues are insufficient to pay benefits and administrative costs, federal securities held by the trust funds are redeemed and Treasury makes up the difference with other receipts. When there are no surplus governmental receipts, policymakers have three options: raise taxes or other income, reduce other spending, or borrow from the public (or a combination of these options).

Public opinion polls show that less than 50% of respondents are confident that Social Security can meet its long-term commitments. There is also a public perception that Social Security may not be as good a value for future retirees. These concerns, and a belief that the nation must increase national savings, have led to proposals to redesign the system. At the same time, others suggest that the system’s financial outlook is not a “crisis” in need of immediate action. Supporters of the current program structure point out that the trust funds are projected to have a positive balance until 2036 and that the program continues to have public support and could be affected adversely by the risk associated with some of the reform ideas. They contend that only modest changes are needed to restore long-range solvency to the Social Security system.

During the 111
th Congress, four Social Security reform measures were introduced. None of the measures received congressional action. During the 112th Congress to date, several Social Security reform measures have been introduced.


Date of Report: May 20, 2011
Number of Pages: 37
Order Number: RL33544
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

The Distribution of Household Wealth


Linda Levine
Specialist in Labor Economics

The distribution of wealth or net worth across households may have been an underlying consideration in congressional deliberations on various policy issues ranging from taxation to social welfare. Household wealth is of particular importance to the well-being of the elderly as labor income typically falls upon retirement and some retirees are able to use accumulated assets (e.g., certificates of deposit and mutual funds) to maintain their standard of living. Congress has enacted tax incentives to help people amass savings to be drawn once they have retired. For a variety of reasons, however, some elderly among other households find themselves without sufficient wealth to maintain their customary, or some socially acceptable, living standard in the face of expected and unexpected events. Congress has developed several publicly funded programs that supplement the income and other assets of these households (e.g., retirement, disability, and health benefits under Social Security).

The distribution of wealth across U.S. households is far from equal, according to data from the Survey of Consumer Finances (SCF) in which the Federal Reserve Board (Fed) sponsors every three years. Two summary measures are mean and median household net worth. (Median net worth is the point in the overall distribution of household wealth above and below in which onehalf of all households lie. It is a better indication of the wealth of the “typical” household than is the mean, which can be greatly affected by the upper end of the distribution.) Mean household wealth has been consistently and substantially above the median. In 2007, for example, mean household net worth was $556,800 while median household net worth was $120,800. The large gap between the two measures suggests substantial concentration of wealth at the high end of the distribution.

A more detailed picture of inequality emerges from examining the share of total wealth held by households in selected percentiles of the distribution. If wealth were distributed equally, the share of households in the wealth distribution (e.g., the top 1%) would be the same as its share of total net worth (in this example, 1%). Instead, in 2007, the wealthiest 1% of households accounted for one-third of total net worth. The next 4% of households (the 95
th to 99th percentile) held more than one-fourth of total net worth. Taken together then, in 2007, the top 5% of wealth owners accounted for about 60% of all wealth accumulated by households.

Wealth also has become increasingly concentrated in recent decades, according to the SCF. The share of wealth in the top 10% of the distribution grew from 67% in 1989 to 72% in 2007, with declines occurring among the remaining 90% of wealth-owning households. Households in the 50
th to 90th percentile had the largest decrease: their share of total wealth fell from 30% to 26%.

To assess the impact of the financial crisis and consequent recession on household wealth, the Fed reinterviewed respondents to the 2007 SCF shortly after the recession ended. According to results released in March 2011, the net worth of most households decreased during the recession. Expressed in 2009 dollars, mean household wealth fell from $595,000 in 2007 to $481,000 in 2009, and median wealth fell from $125,000 to $96,000. Declines in home and stock prices seemingly contributed to the drop in net worth. As homes are a more widely held asset than stocks, the bursting of the housing bubble appears to have played the bigger part in reducing household wealth between 2007 and 2009. Although stock prices have rebounded since then, continuing problems in the real estate market suggest that it will be a drag on the wealth of homeowners for some time to come.



Date of Report: May 16, 2011
Number of Pages: 13
Order Number: RL33433
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Commerce, Justice, Science, and Related Agencies: FY2011 Appropriations


Nathan James, Coordinator
Analyst in Crime Policy

Oscar R. Gonzales, Coordinator
Analyst in Economic Development Policy

Jennifer D. Williams, Coordinator
Specialist in American National Government


This report provides an overview of actions taken by Congress to provide FY2011 appropriations for Commerce, Justice, Science, and Related Agencies (CJS). It also provides an overview of FY2010 appropriations for agencies and bureaus funded as a part of the annual appropriation for CJS.

The Consolidated Appropriations Act, 2010 (P.L. 111-117), included a total of $68.705 billion in new budget authority for CJS. Of the $68.705 billion appropriated for FY2010, $14.035 billion was for the Department of Commerce, $28.078 billion was for the Department of Justice, $25.658 billion was for the Science Agencies, and $934.8 million was for the related agencies.

For FY2011, the Administration requested a total of $66.109 billion for CJS, a 4.0% decrease in budget authority compared with FY2010 appropriations. The FY2011 request included $8.968 billion for the Department of Commerce, $29.737 billion for the Department of Justice, $26.431 billion for the Science Agencies, and $973.4 million for the related agencies.

On February 11, 2011, the Full-Year Continuing Appropriations Act, 2011 (H.R. 1) was introduced in the House. The bill passed the House on February 19, 2011. The House-passed version of H.R. 1 would have provided a total of $60.065 billion for agencies and bureaus funded as a part of the annual appropriation for CJS. This included $7.38 billion for the Department of Commerce, $27.123 billion for the Department of Justice, $24.697 billion for the Science Agencies, and $864.8 million for the related agencies.

On April 15, 2011, President Obama signed into law the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10). The act provides a total of $61.092 billion for agencies and bureaus funded as a part of the annual appropriation for CJS. The $61.092 provided by the act includes $7.578 billion for the Department of Commerce, $27.281 billion for the Department of Justice, $25.314 billion for the Science Agencies, and $917.9 million for the related agencies.


Date of Report: May 17, 2011
Number of Pages: 65
Order Number: R41161
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.