TARP Bailout FAQ’s

TARP Bailout FAQ’s

Article by Andrew Stratton

All of us that are alive and reading about the TARP bailout today are part of a generation observing great transformations in our nation’s economic picture. Over the last few years, average Americans have watched what they thought was true morph into something quite different. Change on every front of life is inevitable, but the economic changes which have occurred over the last decade have been rapid and momentous. Here are some questions and answers about the whole sometimes puzzling reconfiguration.

– What is the TARP bailout, anyway? These initials stand for the Troubled Asset Relief Program. Let’s face it; any acronym that has “troubled” as a first word must relate to a problem. This program was put into play by the federal government in order to smooth out some tangled up assets and banking endeavors.

– When was it enacted? This program was signed on in October 2008 by then President George W. Bush.

– Why did Bush sign this into law? Back in 2008, the U.S. financial systems were going through extreme problematic circumstances. Due to some “toxic” assets, investors were panicking, banks were on shaky ground and homeowners were having anxiety attacks. This law was designed to provide relief to all of these groups who were on the verge of freak-out mode.

– How was this law supposed to provide relief? A large sum of taxpayers’ money was to be distributed to large companies and banks that were ready to go belly up. It was hoped that bailing out these pillars of the U.S. financial system would stabilize the economy.

– How is this tied to the mortgage meltdown? The real estate bubble in the early and mid-2000’s caused the value of homes to escalate at an unhealthy rate. During this time frame, some unfortunate decisions were made to loan cash to unworthy candidates.

Loans became creative and no-money-down became a common occurrence. While it was wonderful to have every living person capable of purchasing a home, many couldn’t really afford them and foreclosures started to rumble in. This caused housing prices to drop, the bubble to burst and the domino effect to occur. Investors, homeowners and banks were left holding an empty bag.

– Who did the TARP programs bail out? Mortgage giants such as Fannie Mae and Freddie Mac, major banks such as Wells Fargo, Bank of America, JP Morgan Chase, auto dealers such as Chrysler and General Motors and more.

– Has this money been paid back? Yes, much of the money has been paid back with interest. Many recipients have paid the cash back ahead of schedule.

– Has all of the money been paid back and are taxpayers happy in the end? No and no. There is still money to be paid back and there are still many disgruntled Americans who are in dire financial straits and angry with the government.

– Was “Troubled Asset Relief Program” right or wrong? This was an emergency situation that took an imperfect rapid response in order to avoid total collapse. Some portions of it were successful while other portions are debatable.

Americans continue to learn a lot and restructure their own economic lives post housing bubble burst. The TARP Bailout program has been a contributor to a historic unfolding of events.

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