Question

Research the Troubled Asset Relief Program (TARP) public policy response to the 2008 economic crisis.

Write a 800-word paper in which you include the following:

• Describe the purpose of the public policy.
• Identify the key policymakers for the policy.
• Analyze the strengths and weaknesses of the policy.
• Explain if the policy was effective. Provide examples to support your assertion.
• Detail how special interest groups and the media may have influenced your chosen policy.

Include at least three references to support your findings.

Answer 1

The particular policy has the purpose of saving the American economy from the crisis, financial system, restore economic growth, and mitigate foreclosures in the wake of the 2008 financial crisis.

President George W. Bush was the intiater while TARP was initially proposed by Treasury Secretary Henry Paulson.

Strength:

1) Recovery of funds: TARP recovered funds totaling $441.7 billion from $426.4 billion invested.

2) Boosting the business: TARP funds were used to purchase equity of failing business and financial institutions.

3) Stabilization: According to the government TARP saved more than 1 million jobs and helped stabilize banks, the auto industry, and other sectors of business.

Weakness:

1) Done little than expected: According to crticizers the funds were not used in the way they were supposed to be utilized.

2) TARP bonus: The people were extremely against to the bonus that were paid out of the fund to the higher officials.

3) Contributed to the crisis: According to many this policy narrowed banks’ net interest margins, killed the incentive for credit intermediation and cratered asset prices, wiping out some banks’ capital cushions.

4) Unnecessary bailouts: Givernment kept bailing out banks without giving much attention and taking care of the investors.

The policy was not that effective for the following points:

One of the most important was that the U.S. banks were forced to take TARP funds, coerced into paying above-market rates on preferred dividends, and compelled to run their operationsas was suggested and prefered by government.

Even on international terms the effect of the policy promoted instead of sharply cutting public spending to restore market confidence in the sovereign bonds held by banks, sme of the European states prefer instead to bail them out that is basically partially nationalize them. Instead of controlling their own financial excesses, the states seek to extend their controls over the financial system.

It is thought by many that the banks should have left free from the clutches of TARP by the government. Many had felt that TARP’s bearishness had a trailing effect; bad as conditions may have been beforehand, they is no doubt that they got much worse afterwards. It’s simply not true that markets would have been worse off without TARP; in fact, they would have been better off without it.