Capital Purchase Program

The Capital Purchase Program or CPP is a preferred stock and equity warrant purchase program conducted by the US Treasury's Office of Financial Stability as part of Troubled Assets Relief Program (aka, TARP). According to the first congressionally mandated oversight report published by GAO, "[TARP's] primary focus was expected to be the purchase of mortgage-backed securities (MBS) and whole loans... [but] within 2 weeks of enactment... the Treasury announced that it would make $250 billion of the $700 billion available to U.S. financial institutions through purchases of preferred stock." Because preferred stock is similar to debt in that it gets paid before common stock, some economists have questioned whether the buying of preferred stock by the CPP will be effective in getting banks to lend. Other economist have argued that the capital purchases represent a taxpayer subsidy of unsecured creditors. A review of investor presentations and conference calls by executives of some two dozen US-based banks by the New York Times found that "few [banks] cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future." In a letter to Congress the Director-designate of the National Economic Council Larry Summers said that the Obama administration would place tighter controls on how CPP funds could be used. In particular, the second $350 billion dollars would include restrictions on the payment of common stock dividends and executive compensation. Professor Summers also promised greater disclosure and more attempts to tie the funds to foreclosure mitigation efforts.

On January 16, 2009 the Congressional Budget Office estimated that of the first $247 billion of securities purchased represented 26 percent ($64 billion) subsidy to the banks receiving funds. In his speech on February 10, 2009, the new Secretary of the Treasury Timothy Geithner announced the Capital Assistance Program effectively ending the capital purchase program.

First Eight financial institutions

Eight finanicial institutions received funds on October 28, 2008. These are:

• Bank of America Corporation
• Bank of New York Mellon Corporation
• Citigroup Incorporated
• Goldman Sachs Group Incorporated
• JPMorgan Chase & Company
• Morgan Stanley
• State Street Corporation
• Wells Fargo and Company

44 other participants in the CPP through purchases made on 11/14/2008 and 11/21/2008

• Bank of Commerce Holdings
• 1st FS Corporation
• UCBH Holdings, Incorporated
• Northern Trust Corporation
• SunTrust Banks, Incorporated
• Broadway Financial Corporation
• Washington Federal, Incorporated
• BB&T Corporation
• Provident Bancshares Corporation
• Umpqua Holdings Corporation
• Comerica Incorporated
• Regions Financial Corporation
• Capital One Financial Corporation
• First Horizon National Corporation
• Huntington Bancshares
• KeyCorp
• Valley National Bancorp
• Zions Bancorporation
• Marshall & Ilsley Corporation
• U.S. Bancorp
• TCF Financial Corporation
• Ameris Bancorp
• Associated Banc-Corp
• Banner Corporation / Banner Bank
• Boston Private Financial
• Cascade Financial Corporation
• Centerstate Banks of Florida Incorporated
• City National Corporation
• Columbia Banking System Incorporated
• First Community Bancshares Incorporated
• First Community Corporation
• First Niagara Financial Group
• First Pactrust Bancorp Incorporated
• Heritage Commerce CorporationHeritage Financial Corporation
• Hf Financial Corporation
• Nara Bancorp Incorporated
• Pacific Capital Bancorp
• Porter Bancorp Incorporated
• Severn Bancorp Incorporated
• Taylor Capital Group
• Trustmark Corporation
• Webster Financial Corporation
• Western Alliance Bancorporation