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The Troubled Asset Relief Program, TARP, came to an end the 3rd of October 2010. From that date no new investments can be made under this program. Existing programs will continue until their termination date. So what was TARP really all about? What did it achieve? And how much did it cost? This series of articles will look at these and other questions to provide a clear (albeit in hindsight) view of this mother of all bailouts and mortgage aid programs.
Tarp has been one of the most talked about, criticised, publicised and depending who you ask the most maligned and misrepresented government aid program in American history. The total cost of TARP, according to Treasury, is less than $50 billion. That is a small percentage of the $700 billion authorized by congress. The government underspending on a public spending program is certainly newsworthy! Most of the $50 billion were used as loans for banks and financial institutions that were at risk of going bankrupt during the 2008 financial crisis. Of the loans provided, $234 billion have already been repaid to the government. The $50 billion represents the running costs of the program and its many sub-programs.
TARP may well end up being the last government bailout if the Dodd-Frank Act Wall Street Reform holds true in the next financial crisis. This Act terminates the use of government money for bailouts.
So first of all, what did TARP do to help the American people. One idea that has gained popularity is that TARP was a gift to Wall Street but did not help Main Street, or the average American taxpayer. Although it is understandable that taxpayers are frustrated when the very organizations that caused the financial crisis recieved support from the government, it would be incredibly naive to believe the bankruptcy of the huge financial institutions would have no effect on the average Joe.
Timothy F. Geithner, Treasury Secretary illustrates it as a fire. Although your heart goes to the victims of a house fire, you must first put the fire out before helping the victims. In this case the financial institutions that created the crisis were a fire that needed to be put out by injecting the resources and providing the guarantees to avoid the whole market from falling.
According to a report by Mark Zandi (a former advisor for Senator John McCain) and Alan S. Blinder (a former adviser for President Clinton) TARP and other government measures prevented the United States from falling into what would have been called The Great Depression 2.0.
Whether you believe TARP was part of the solution or the problem, you will be interested in knowing what exactly were the measures TARP brought about to Wall Street. What effects did it have on how financial institutions are now run? Our next article will deal with these questions.
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