What is TARP?
Troubled Assets Relief Program (TARP): In October 2008, Congress enacted the Emergency Economic Stabilization Act (EESA) to respond to instability in U.S. financial institutions, caused particularly by these institutions’ beings saddled by delinquent mortgages. That legislation created the Troubled Asset Relief Program (TARP). The root of the problem can be traced back to banks that made home loans to consumers who could not afford to pay them back. These mortgages—often referred to as subprime mortgages—were bundled together, sometimes with solid loans and sometimes just with other subprime mortgages, and sold to Wall Street investors. In turn, these investors often resold these “mortgage-backed securities” to other investors. Eventually, as homeowners began defaulting on mortgages, investors discovered they had invested in assets that were losing money. So many investors participated in the purchasing and selling of these assets that the collapse of the mortgage-backed security marke
Troubled Assets Relief Program (TARP): In October 2008, Congress enacted the Emergency Economic Stabilization Act (EESA) to respond to instability in U.S. financial institutions, caused particularly by these institutions’ being saddled by delinquent mortgages. That legislation created the Troubled Asset Relief Program (TARP). The root of the problem can be traced back to banks that made home loans to consumers who could not afford to pay them back. These mortgages—often referred to as subprime mortgages—were bundled together, sometimes with solid loans and sometimes just with other subprime mortgages, and sold to Wall Street investors. In turn, these investors often resold these “mortgage-backed securities” to other investors. Eventually, as homeowners began defaulting on mortgages, investors discovered they had invested in assets that were losing money. So many investors participated in the purchasing and selling of these assets that the collapse of the mortgage-backed security market
