Question

Troubled Asset Relief Programs (TARP):

a. Why is the legislation required?

b. Summarize the main requirements of the legislation.

c. Why or how is the company impacted by the legislation?

d. What punishment did the company/person receive?

e. What is the status of the legislation today?

Answer 1

Troubled Asset Relief Programs (TRAP) is a programof the US govt to purchase toxic assets and equity from financial institutions to give strenght to its financial sector so the financial sector of the country can fight and stand in crisis situation.

a). In 2008 President of US, Bush Signed the legislation of TRAP To make it in effect. The requirement of TRAP Was to stem a worlwide economic collapse so that the country dont get impacted of the crisis in the rest of world.

b). TARP initially gave the Treasury purchasing power of $700 billion to buy illiquidmortgage-backed securities (MBS) and other assets from key institutions in an attempt to restore liquidity to the money markets.

c). The economic and company impacts of TARP have been evaluated in terms of its effect on factors such as employment, growth and stability. Former FDIC chairman Bill Isaac, for example, opined in his 2010 book Senseless Panic: How Washington Failed America that "any objective analysis would conclude that the TARP legislation did nothing to stabilize the financial system that could not have been done without it. Moreover, the negative aspects of the TARP legislation far outweighed any possible benefit.

d). today Civil charges were filed against 58 individuals and 47 companies with 55 cases resulting in $282 million in civil penalties who did not follow the policies of legislation

e). Today TARP’s housing initiatives are actively funded. Cash collections under TARP’s bank investment programs represent more than 100 percent of the original Treasury investment. This level of repayment exceeds original expectations for the five components of TARP’s bank investment programs. Overall, relative to original expectations and perhaps to public perception, TARP’s bank investment programs appear to have been successful in stabilizing banking conditions and at a cost far less than originally projected.