About TARP

​In September 2008 our nation was on the edge of falling into a second Great Depression. Confidence in the financial system was vanishing and panic was spreading.

Every major financial institution was vulnerable. The credit markets that provide financing for credit cards, student loans, mortgage loans, auto loans, small business loans and other types of financing stopped functioning.

For the first time in generations, Americans were questioning the safety of their money in banks. For the first time in more than 80 years, a generalized run on the nation’s banking system was a real possibility. The nation was losing almost 800,000 jobs a month and household wealth had fallen by 17 percent – more than five times the decline in 1929.

It was out of these extraordinary circumstances that TARP was created to restore the nation’s financial stability and restart economic growth.

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Financial Stability Oversight Board (FINSOB)

What is TARP?

TARP is the Troubled Asset Relief Program, created to implement programs to stabilize the financial system during the financial crisis of 2008. It was authorized by Congress through the Emergency Economic Stabilization Act of 2008 (EESA) and is overseen by the Office of Financial Stability at the U.S. Department of the Treasury.


TARP was a critical part of the government's efforts to combat the worst financial crisis since the Great Depression.

The crisis began in the summer of 2007 and gradually increased in intensity and momentum the following year. A series of major financial institutions, including Countrywide Financial, Bear Stearns, IndyMac, and Fannie Mae and Freddie Mac failed. Then, on September 15, 2008, Lehman Brothers filed for bankruptcy. As Lehman fell, the remaining major investment banking firms in this country teetered on the edge of collapse as their funding sources were squeezed.

Every major financial institution was threatened, and they tried to shore up their balance sheets by shedding risky assets and hoarding cash. The day after Lehman fell, the stock market dropped 500 points and there were signs of a generalized run on America's financial system.

Beginning in 2007, the Treasury Department, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and other federal government agencies undertook a series of emergency actions to prevent a collapse of the country's financial system and the dangers that would pose to consumers, businesses, and the broader economy. However, the severe conditions our nation faced required additional resources and authorities. Therefore, in late September, the Bush Administration proposed EESA, and with bi-partisan support in Congress, it was enacted into law on October 3, 2008.

The purpose of EESA was to promote the stability and liquidity of the financial system through the authorization of TARP and other measures. But TARP was only part of the government's response to the crisis. In 2008 and 2009, Treasury, the Federal Reserve, and the FDIC put in place a comprehensive set of emergency programs to stabilize the financial sector and the economy. These actions included purchases of mortgage-backed securities to help keep interest rates low, broad based guarantees of transaction accounts at banks and money market funds, liquidity facilities provided by the Federal Reserve, and support for Fannie Mae and Freddie Mac. And in 2009, at the urging of President Obama, Congress passed the American Recovery and Reinvestment Act (ARRA) to help create and save jobs, spur economic activity and invest in long-term growth.

By the middle of 2009, the government's coordinated response to the financial crisis had stabilized the financial system and resulted in significantly lower borrowing rates for businesses, individuals, and state and local governments. Companies were able to fund themselves in private markets by issuing equity and long term debt. The value of the savings of Americans had begun to recover. And the U.S. economy began to grow.

While Congress authorized $700 billion for TARP, Treasury utilized far less than that. In fact, TARP's lifetime cost is now estimated to be approximately $32.3 billion, most of which will be attributable to the program's efforts to help struggling homeowners avoid foreclosure.

Key Facts

  • The cost of the financial crisis is properly measured by its human impact: the jobs lost, the wealth destroyed, and the hardship that fell upon millions of American families. From the very beginning, the primary purpose of the government’s response was to arrest the economy’s free fall and limit the recession’s devastation–not to make money.
  • TARP helped prevent a second Great Depression, stabilize a collapsing financial system, and restart the markets that provide mortgage, auto, student, and business loans.
  • TARP's investment programs are winding down. The cumulative collections under TARP, as of October 31, 2016, together with Treasury's additional proceeds from the sale of non-TARP shares of AIG, exceed total disbursements by more than $7.9 billion. (Treasury has recovered $442 billion or 101.8% of the disbursed amount when the $17.6 billion of non-TARP AIG funds collected is included.)
  • TARP is currently projected to cost approximately $34.5 billion - significantly less than the $700 billion originally authorized by Congress.

What Did TARP Do?

TARP was a critical part of the government's efforts to combat the worst financial crisis since the Great Depression. It included a comprehensive set of measures in five key areas: