TARP Bonuses



A buzzword coined by the financial media during the financial crisis of 2008/09 to describe bonuses paid to employees and executives of banks and other financial firms that received Troubled Asset Relief Program (TARP) funds. TARP bonuses were controversial because employees were receiving additional pay even as their companies required bailout funds.


Companies argue that they have to pay bonuses to retain talent. But critics contend that because the companies led by the executives in question were being rescued with taxpayer money, the bonuses were not well-deserved and the recipients should not be considered "talent".

On March 19, 2009, the House approved a bill to create legislation that would put a 90% tax on bonuses earned during the 2008 year. This tax would apply to banks receiving TARP bailout funds of more than $5 billion. This legislation was created in response to the public anger surrounding $165 million in bonuses that was paid to traders in the AIG Financial Products (A.I.G.F.P.) division, the division responsible for the majority of losses surrounding the fall of A.I.G.

  1. Privatizing Profits And Socializing ...

    A phrase describing how businesses and individuals can successfully ...
  2. Signing Bonus

    A financial award, often issued in one or two lump-sum payments, ...
  3. Tim Geithner

    The 75th United States Secretary of the Treasury. Geithner was ...
  4. Pay Czar Clause

    A buzz word describing a clause found in financial institutions' ...
  5. American Recovery And Reinvestment ...

    An act initiated and signed by U.S. President Barack Obama in ...
  6. Bailout

    A situation in which a business, individual or government offers ...
Related Articles
  1. Insurance

    Top 6 U.S. Government Financial Bailouts

    U.S. bailouts date all the way back to 1792. Learn how the biggest ones affected the economy.
  2. Insurance

    Liquidity And Toxicity: Will TARP Fix The Financial System?

    TARP is the government's attempt to forestall a deep, extended recession. Will it work?
  3. Options & Futures

    A Guide To CEO Compensation

    Make sure you assess whether a CEO has a stake in doing a good job for you, the shareholder.
  4. Retirement

    The Bright Side Of The Credit Crisis

    Find out how this tough economic period can be a learning experience for all.
  5. Options & Futures

    Dialing In On The Credit Crisis

    Would a similar crisis have occurred if iPhone investors were offered the same loan options as homeowners?
  6. Mutual Funds & ETFs

    The 2007-08 Financial Crisis In Review

    If you don't know how the recession began, read on to learn more.
  7. Insurance

    Fannie Mae, Freddie Mac And The Credit Crisis Of 2008

    Is the U.S. Congress' failure to rein in these mortgage giants to blame for the financial fallout?
  8. Investing

    Why Is Financial Literacy and Education so Important?

    Financial literacy is the confluence of financial, credit and debt knowledge that is necessary to make the financial decisions that are integral to our everyday lives.
  9. Professionals

    10 Must Watch Documentaries For Finance Professionals

    Find out about some of the best documentaries that finance professionals can watch to gain a better understanding of their industry.
  10. Economics

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  1. 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 >>
  2. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  3. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>
  4. How stable are municipal bonds?

    Stability is relative in the municipal bond market. Municipal bonds tend to be safer than many other types of investments, ... Read Full Answer >>
  5. What does it signify if the term structure of an interest rate's curve is positive?

    When the term structure of interest rates is positive, it is a signal to economists the short-term yields on similar bonds ... Read Full Answer >>
  6. What do cities do with the funds generated from municipal bonds?

    Funds generated from the sale of municipal bonds may go to provide for unspecified, general government financial needs, or ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!