Essay about The Impact of TARP

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The Impact of TARP: Troubled Asset Relief Program
Eco/210
Kyle McMahan
Midlands Technical College
February 10, 2015

The Impact of TARP: Troubled Asset Relief Program The Troubled Asset Relief Program saved the United States from going into a second Great Depression. TARP was signed into law by George W. Bush on October 3rd of 2008. The Troubled Asset Relief Program is a federal government program that authorized the US treasury to loan up to $700 billion to critical financial institutions and other US firms in extreme financial crisis and high risk of failure. In 2007/2008 the US was facing the worst crisis financially since the Great Depression. In 2009 the Federal Reserve spent $170 billion to keep AIG (American International Group) from going out of business completely. AIG issued billions of dollars of insurance policies to compensate holders of loan-backed securities if loans of these investments went into default and didn’t pay off. TARP has funded many banking firms and other institutions including Citibank, Bank of America, JP Morgan, Goldman Sachs, and even GM and Chrysler have received billions from the program. The TARP program has helped to bailout many important companies. There are many reasons about how TARP ended up being such an effective program, one being that after the bailouts and money lent out, not only was the money repaid to the government but a profit was also made. The Assistant Secretary for the Office of Financial Stability at the U.S. Department of the Treasury, Timothy Bowler, in 2014 published an article on the Treasury.gov webpage that contains the factual information about the outcome of TARP. The article also includes net values of profit per different category, including the Taxpayers who “invested $935 million in Popular and at the time of its repayment, it was the largest remaining bank in the Capital Purchase Program. In total, taxpayers recovered $1.22 billion in principal, interest, and divided payments from Popular, a $285 million net profit” (Bowler, 2014). TARP has also helped with many households and businesses with their credit needs by funding support for asset-backed securities collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the small Business Administration (McConnell, Brue and Flynn pg. 327). Majority of economists think that TARP helped the United States avoid a second Great Depression due to the way the market was declining in GDP in the years 2007-08. These companies that were going out of business were saved due to the bailout they received, and majority of them were able to profit enough money to pay the bailout back.
There are companies that did not contribute to the effectiveness of TARP by paying back their bailouts, and those companies specifically are the automobile manufacturers. The webpage CNN money tracks the bailouts that TARP has made, and an article that was published by one of their writers, Chris Isidore contains some statistics about the
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