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Tarp
Troubled Asset Relief Program

Troubled Asset Relief Program

1. Stated Purpose, objectives or goals
The Troubled Asset Relief Program (TARP) was originally proposed by Treasury Secretary Henry Paulson in September of 2008 in an effort to allow the federal government to buy “troubled assets” like failed mortgages from private banks. The program would buy “bad” mortgages from banks in hopes that banks bottom line and solvency would improve. This goal was ultimately modified and essentially created a blank check for the Treasury Secretary to bail out industries as he saw fit. Paulson’s plan was a no-strings-attached request to shovel funds as the Secretary saw fit.

2. Enabling legislation
TARP was created during a time when people started to fail making payments on their mortgages. The blame for these failing mortgages was plentiful and there was plenty to spread around. Banks were highly culpable in that they started lending to people who traditionally could not qualify for a mortgage. Advertisements for “no money down”, “borrow up to 110% of your home’s value” were common place. Brokers received their bonuses based on closure of the loan so the temptation for lending to borrowers they knew could not afford the mortgage was great.
As a result of this practice, mortgages started to become delinquent. In the face of failing mortgages and the uncertainty of their value, banks reduced the amount of loans they were making. As a response, Secretary Paulson decided that the best way to address this “crisis” was to have the federal government (with taxpayer dollars) buy up these bad loans so the banks would be free, in theory, to once again start making good loans. Unfortunately, Secretary Paulson’s plan was not very specific and was summarily shot down by the House of Representatives. After some re-work and a new name the bill was passed on October 3, 2008. What originally started as the Troubled Asset Relief Program turned into the Emergency Economic

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