Issue of Interest: Economic Stabilization and TARP

ABA Media Contact: Jeff Sigmund
Phone: (202) 663-5439
Email:  jsigmund@aba.com
Last updated: June 28, 2016

The TARP was a program created by the Emergency Economic Stabilization Act (EESA), which was signed by President Bush on October 3, 2008. It authorized the Treasury Department to spend as much as $700 billion to purchase troubled assets – as the name implies – from financial institutions in order to strengthen the financial sector.

Within days after enactment of EESA, policy shifted to putting capital in U.S. banks and the leaders of nine institutions were called to Washington and "requested" to accept capital injections under a program that became the Capital Purchase Program (CPP). Other TARP programs included the Targeted Investment Program, the Asset Guarantee Program, and those programs designed to rescue the auto industry and insurer AIG.

TARP’s bank programs, often misperceived as causing losses, have already provided a significant return to taxpayers. The government invested $245 billion into TARP bank programs, a small portion (35 percent) of the $700 billion that was authorized.  Banks have repaid $273 billion through principal and interest payments—representing a $28 billion positive return to taxpayers so far. With the expiration of TARP funding authorization, no new investments can be made. It's important to note that all of TARP's losses originate from non-bank programs. 

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