Question

Please provide information on the following topics

What were the "big" issues with the TARP legislation?

Why did the legislation initially fail to pass Congress?

What were the consequences?

Answer 1

TARP is troubled asset relief program started in the US in 2008 to circumvent the subprime crisis. It required the US treasuries to purchase toxic assets to finance and strengthen its financial sector.

The TARP was coined as a consequence of Emergency Economic Stabilization Act of 2008; scheme which provided $700billion in federal funds in order to support failing firms after the asset pricing bubble incident.

This later led to the lowring of the pay of top executives of institutions that still owned federal government money.

The program continued to be debatable especially among conservative voters. During Obama's presidency the tea party movement was a reaction to the temporary relief of financial firms. Many critics of TARP argued that it was for the benefit of the powerful wall street firms while smaller firms remained vulnerable

In 2010, tea party challenged the other party which had supported TARP led to high profile seat loss who were republican legislators In 2012 only one Republican candidate served congress in the TARP vote, thus all were against the TARP implementation of 2008 and 2009. Though it was less popular among liberal voters, Obama and other Democrats were of the view that without improved financial foresight, risky assets will continue even if TARP exists, and financial sector being vulnerable can again lead to recession.