The Troubled Asset Relief Program (TARP) was a massive economic aid package enacted in 2008 by the U.S. Treasury Department with the initial intended purpose of stabilizing, and eventually improving, the American economy by mitigating the effects of the financial crisis realized in 2007 and 2008. This crisis was due to a number of factors, including rising mortgage defaults, declining real estate values, and a decrease in consumer spending.

When TARP was first announced, the Treasury was given a large amount of money, $700 billion, to provide targeted assistance to U.S. financial institutions that were deemed too big to fail. This aid was largely focused on purchasing mortgage-backed securities, including collateralized debt obligations, from those institutions that held them. The government also used TARP funds to purchase stocks from banks, insurers and automakers. In some cases, the government was able to provide capital in exchange for a stake in the company in the form of warrants, meaning the government was granted the option to purchase a specified number of shares of the company in the future at a predetermined price.

The money provided by the TARP program was spent to restart consumer lending, buy toxic assets, and to recapitalize banks. It was designed to reduce foreclosures, stabilize housing prices and restart economic growth by reviving consumer spending. It was also meant to have a long-term effect on the economy and provide a lasting framework to protect the American economy from another major financial crisis.

Although TARP was successful in providing much-needed funds to the financial system and helped revive the U.S. economy, the program was not without controversy. Many Americans opposed the idea of taxpayer money going to large banks they felt had caused the crisis in the first place. Critics have argued that the program provided an unfair amount of aid to those banks that were considered “too big to fail,” while small and midsize banks, which had not been involved in the crisis, received little or no aid.

Overall, although TARP has been contentious, it has proven to be one of the most effective government programs in creating conditions for economic recovery. The program invested $426.4 billion of public money and returned a higher figure of $441.7 billion as of November 2020. It was able to support US financial institutions and borrowers, in a way that allowed the US economy to stabilize and return to growth. Though many criticize it, the TARP program was one of the main programs responsible for helping the US economy to recover from the Great Recession.