Committee for a Responsible Federal Budget

Treasury Ends Capital Assistance Program

Nov 10, 2009 | Budgets & Projections

Yesterday, the Treasury announced that the Capital Assistance Program (CAP), one of TARP’s several programs, will close, having made no investments since its creation in February 2009.

The is program was designed to restore market confidence that the nation’s largest banks had a sufficient capital cushion against potential larger future losses. Through CAP the Treasury would have provided capital buffers to banking institutions should conditions warrant such a move. If the results from the “stress tests” of the nation’s largest 19 banks in May 2009 had found certain banks to be in need of immediate capital, the Treasury would have provided support through CAP.

The Treasury’s announcement came at the same time that the Federal Reserve announced that nine of the ten bank holding companies determined to need to raise capital—through stress tests—have sufficiently increased their capital buffers. The one bank determined to need more capital, GMAC, is expected to meet its target buffer by accessing TARP’s Automotive Industry Financing Program.

So, no more need for CAP. But with TARP set to expire on December 31, let’s stay tuned to see if TARP’s other programs will be extended…