The Troubled Asset Relief Program (TARP) was established in October of 2008 by the United States government as an emergency response to the financial crisis. This program originally authorized the Department of the Treasury to purchase up to $700 billion of troubled assets from the nation’s financial institutions. This amount was later capped at $475 billion. TARP was intended to promote economic stability by preventing the collapse of institutions that were facing financial crises. Because much of the original investment has been repaid, the Treasury estimates that the program will ultimately have cost less than $50 billion.

The Accomplishments of TARP

By investing in banking institutions and credit markets, TARP helped to stabilize the U.S. financial system. Most notably, the program played a crucial role in preventing the collapse of insurance provider AIG. The failure of AIG would have had devastating effects on the U.S. economy.

TARP also prevented the U.S. auto industry from collapsing during the financial crisis. This saved at least 400,000 jobs in 2008. It also kept auto manufacturers, parts suppliers, and car dealers from going out of business, which would have meant economic catastrophe within surrounding communities. Over 115,000 new jobs have since been created within the industry.

Housing programs were another key component of TARP. Funds provided by these programs reduced the overall number of foreclosures in the country. This helped keep many homeowners from losing their homes during and after the crisis. Unlike funds provided to financial institutions and the auto industry, housing funds will not be repaid.

In the absence of a program like TARP, it is likely that the U.S. would have been facing a second Great Depression. It is estimated that the program ultimately saved approximately 8.5 million jobs in the U.S. Without it, the unemployment rate could have risen as high as 16.5 percent. The economic growth that has occurred since 2009 would have taken far longer, and the U.S. real GDP may have fallen up to three times lower than it did.

The End of TARP

As of October 3, 2010, the Treasury was no longer authorized to make investments under TARP. Some housing programs are still in place to provide assistance to struggling homeowners. The remaining focus of the program is to recover the money that has been spent. All money that was invested in banking institutions has been recovered, and most remaining expenses are from housing programs. Reforms have been enacted to prevent the need for programs like TARP in the future.