Troubled Asset Relief Program

Moneybestpal Team

The Troubled Asset Relief Program (TARP) is a government initiative that was established in 2008 to aid in the stabilization of the American financial system during the global financial crisis. The program gave the U.S. Treasury permission to buy or insure distressed assets, including mortgages and securities, from banks and other financial institutions for up to $700 billion.

The major objectives of TARP were to help economic recovery, stop more bank failures and foreclosures, and restore liquidity and confidence in the financial markets. The program's use of taxpayer funds to save private businesses that were judged "too large to fail" caused controversy. While advocates stated that TARP helped to restore growth and prevented a larger economic collapse, detractors alleged that it rewarded poor behavior and created moral hazard.

After spending around $426 billion and earning back around $441 billion through repayments, dividends, interest, and asset sales, TARP came to an end in 2014. The Congressional Budget Office estimates that the net cost of TARP to taxpayers was around $32 billion, with losses from aid to automakers and insurance company AIG accounting for the majority of that sum. Although the program's effects on the economy are still being contested, several analyses indicate that TARP may have contributed to improvements in credit conditions, GDP growth, and unemployment rates.