TARP Bonuses

AAA

DEFINITION of '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.

BREAKING DOWN 'TARP Bonuses'

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.

RELATED TERMS
  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. Camouflage Compensation

    Compensation that is granted to upper echelon employees, directors, ...
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. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares Agency Bond

    Find out about the iShares Agency Bond exchange-traded fund, and explore detailed analysis of the ETF that tracks U.S. government agency securities.
  10. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Bond

    Find out about the Vanguard Intermediate-Term Bond ETF, and delve into detailed analysis of this fund that invests in investment-grade intermediate-term bonds.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
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!