A:

TARP - or the Troubled Asset Relief Program - is a government program created in response to the subprime mortgage crisis that began in 2007. The original goal of the program was to give the U.S. Treasury $700 billion in purchasing authority to buy mortgage backed securities (MBS), the troubled assets that were to blame for the credit crisis, and to create liquidity in the money markets. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act reduced the total TARP purchasing power to a maximum of $475 billion. In October 2010, TARP's authority to incur new obligations ended.

The economic impacts of TARP have been evaluated in terms of its effect on factors such as employment, growth and stability. Ask two different economists or analysts how TARP has affected the economy and you will likely get two different answers. Former FDIC chairman Bill Isaac, for example, opined in his 2010 book Senseless Panic: How Washington Failed America that "any objective analysis would conclude that the TARP legislation did nothing to stabilize the financial system that could not have been done without it. Moreover, the negative aspects of the TARP legislation far outweighed any possible benefit."

U.S. Department of the Treasury Acting Assistant Secretary, Timothy G. Massad, on the other hand, concluded in a March 4, 2011, testimony to the U.S. Congress that TARP was a success. In his testimony, Massad stated, "… we can safely say that this program has been remarkably effective by any objective measure" and, "We have helped bring stability to the financial system and the economy at a fraction of the expected costs." Massad added that TARP was integral to the economic recovery and that, because of TARP, banks are better capitalized and the public is less afraid that major financial institutions will fail.

In short, because TARP spurs much controversy and debate, the answer to "How does TARP affect the economy?" will differ depending on whom you ask and what criteria are used to quantify its effects.

RELATED FAQS
  1. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  2. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  3. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  4. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  5. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  6. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>
Related Articles
  1. Economics

    The 2007-08 Financial Crisis In Review

    Subprime lenders began filing for bankruptcy in 2007 -- more than 25 during February and March, alone.
  2. Fundamental Analysis

    The Evolution of Obamacare Since Its Inception

    Find out whether the Patient Protection and Affordable Care Act, also known as Obamacare, has lived up to its lofty projections from 2010.
  3. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  4. Economics

    Lehman Brothers: The Largest Bankruptcy Filing Ever

    Lehman Brothers survived several crises, but the collapse of the U.S. housing market brought the company to its knees.
  5. Stock Analysis

    China Mobile: Just How Big is It? (CHL, CHU, CHA)

    The story behind China Mobile, the biggest company you might never have heard of.
  6. Markets

    The (Expected) Market Impact of the 2016 Election

    With primary season upon us, investor attention is beginning to turn to the upcoming U.S. presidential election.
  7. Economics

    Trump vs. Bloomberg: How They Compare

    If Bloomberg enters the presidential race how will he compare to billionaire brethren Trump?
  8. Fundamental Analysis

    5 Economic Changes to Expect if a Republican Wins in 2016

    Discover the five most likely economic changes the United States can expect if a Republican wins the presidential election in 2016.
  9. Term

    What Is Section 1231 Property?

    Section 1231 property is depreciable business property that’s held for a year or longer.
  10. Bonds & Fixed Income

    5 Fixed Income Plays After the Fed Rate Increase

    Learn about various ways that you can adjust a fixed income investment portfolio to mitigate the potential negative effect of rising interest rates.
RELATED TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Political Economy

    The study and use of how economic theory and methods influences ...
  3. Federal Budget

    The federal budget is an itemized plan for the annual public ...
  4. High-Deductible Health Plan - HDHP

    A health insurance plan with a high minimum deductible that that ...
  5. Contagion

    The spread of market changes or disturbances from one region ...
  6. Sales Tax

    A consumption tax imposed by the government on the sale of goods ...
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center