The Troubled Asset Relief Program (TARP) was a U.S. government initiative established in response to the global financial crisis of 2007-2008. Signed into law by President [[George W. Bush]] on October 3, 2008, as part of the Emergency Economic Stabilization Act (EESA), TARP aimed to stabilize the financial system, restore confidence, and prevent further economic collapse. ## Key features of TARP 1. **Purpose**: The primary objective of TARP was to provide liquidity to struggling financial institutions by purchasing toxic assets and equity from banks and other financial entities. These toxic assets primarily consisted of mortgage-backed securities and other complex financial instruments whose values had plummeted due to the subprime mortgage crisis. 2. **Funding**: TARP initially authorized a total of $700 billion for the purchase of troubled assets. However, this amount was later reduced to $475 billion by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. 3. **Implementation**: The U.S. Department of the Treasury was responsible for implementing TARP, using a variety of programs to support various sectors of the financial industry. Some of the major programs under TARP included: - **Capital Purchase Program (CPP)**: This program provided capital to healthy banks by purchasing preferred shares, thereby strengthening their balance sheets and encouraging lending. - **Automotive Industry Financing Program (AIFP)**: This program aimed to prevent the collapse of the U.S. automotive industry, providing financial assistance to General Motors, Chrysler, and their financing arms. - **Making Home Affordable (MHA)**: This initiative was designed to help homeowners avoid foreclosure through loan modifications and refinancing options. 4. **Controversy and criticism**: TARP faced significant criticism from various quarters. Some argued that it rewarded the very institutions responsible for the crisis and created a [[moral hazard]]. Others felt that it didn't go far enough to help individual homeowners facing foreclosure or to punish those who caused the crisis. 5. **Results and repayment**: TARP has been credited with helping to stabilize the financial system and prevent a more severe economic collapse. Over time, most institutions that received assistance repaid the government, often with interest. By 2021, the Treasury had recovered over $442 billion from TARP investments, surpassing the $426.4 billion initially disbursed. In summary, the Troubled Asset Relief Program was a significant government intervention designed to address the financial crisis of 2007-2008. While it faced controversy and criticism, TARP played a role in stabilizing the financial system and preventing a more severe economic downturn.