Troubled
Asset Relief Program (TARP) Research
Troubled Asset Relief Program or BAILOUT: The inspiration for our board game
When TARP was initially approved by the government in September of 2008, it was quickly renamed
"bailout" by the media. We were inspired by the name
"bailout" which led to the creation and name of our board game and card games.
Troubled Asset Relief Program: Purpose
The Troubled Asset Relief Program is more commonly known as TARP or
the Bailout. This
program was passed by the Congress and signed into action by President
George W Bush where the United States government provided funding to purchase assets and equity
from the big banks and financial institutions to strengthen its financial
market. At the time of the TARP's approval by the federal government,
the largest component in 2008 was to address
the subprime mortgage crisis.
Purpose
The bailout allowed the United States Department of the Treasury to purchase
or insure up to $700 billion of "troubled assets", defined as: "(A)
residential or commercial mortgages and any securities, obligations,
or other instruments that are based on or related to such mortgages,
that in each case was originated or issued on or before March 14,
2008, the purchase of which the Secretary determines promotes
financial market stability; and (B) any other financial instrument
that the Secretary, after consultation with the Chairman of the Board
of Governors of the Federal Reserve System, determines the purchase of
which is necessary to promote financial market stability, but only
upon transmittal of such determination, in writing, to the appropriate
committees of Congress."
In short, the Troubled Asset Relief Program allows the Treasury to
purchase illiquid, difficult-to-value assets from banks and other
financial institutions.
The Act requires the banks that are "too big to fail" to sell assets to TARP in order to
issue equity warrants to the Treasury. Through the sale of the
warrants, the Treasury will
only receive warrants for non-voting shares, or will agree not to vote
the stock.
The most important goal of Troubled Asset Relief Program was to encourage banks to resume lending
again at levels seen before the crisis, both to each other and to
consumers and/or businesses.
Bailout The Game...