What Is the Tarp Law?

The Troubled Assets Relief Program (TARP) was signed into law by President Bush in 2008 as a means of stabilizing the American economy. TARP granted the federal Government $700 billion dollars to bail out troubled institutions. Supporters claim it helped save us from a great depression, while opponents view it as a waste of money that created debt for future generations.

Basics

• On Oct. 3, 2008, the Emergency Economic Stabilization Act was passed by the U.S. House of Representatives. TARP, a component of the act, allows the secretary of the treasury to purchase troubled assets from financial institutions if such a purchase would promote stability within the financial market.

Financial Institutions

• TARP describes "financial institution" as any credit union, bank, insurance company, savings association, or security broker that was regulated and established by the laws of the United States. Before assets can be purchased from these financial institutions, the secretary of the treasury must consult with the chairman of the Board of Governors of the Federal Reserve System to ensure the purchase would aid financial market stability.

Results

• Initially designed to last only until Dec. 31, 2009, TARP was extended until Oct. 3, 2010. TARP has been used to purchase preferred shares of AIG, as well as help out struggling automobile companies such as General Motors. In 2010, the Congressional Oversight Panel stated that TARP had not done enough to improve economic growth within the United States.