Financial+Bailout+TARP

2/11/09
 * Financial Bailout TARP**

What Is TARP: Troubled Assets Relief Program or TARP is a program of the United States government to purchase assets and equity from financial institutions in order to strengthen its financial sector. It is the largest component of the government's measures in 2008 to address the subprime mortgage crisis.

Purpose: TARP allows the United States Department of the Treasury to purchase or insure up to $700 billion of "troubled assets”

Troubles Assets?: “(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress." [A CBO Report: The Troubled Asset Relief Program: Report on Transactions Through December 31, 2008.]

In Short: This allows the Treasury to purchase nonliquid, difficult-to-value assets from banks and other financial institutions.

So What’s it going to do?: TARP is intended to improve the liquidity of these assets by purchasing them using secondary market mechanisms, thus allowing participating institutions to stabilize their balance sheets and avoid further losses.

What is it not going to do?: TARP does not allow banks to recoup losses already incurred on troubled assets.

Why TARP?: officials hope that once trading of these assets resumes, their prices will stabilize and ultimately increase in value, resulting in gains to both participating banks and the Treasury itself.

So How Is This Going To Work?: TARP will operate as a “revolving purchase facility.” The Treasury will purchase the assets and then either sell them or hold on to them. The money received from sales will go back into the pool, facilitating the purchase of more assets.

Who Look’s After All This Money?: The authority of the United States Department of the Treasury to establish and manage TARP under a newly created Office of Financial Stability

How will 700 Billion Be Broken Up?: An initial $250 billion can be increased to $350 billion upon the President’s certification to Congress that such an increase is necessary.[3] The remaining $350 billion may be released to the Treasury upon a written report to Congress from the Treasury with details of its plan for the money. Congress then has 15 days to vote to disapprove the increase before the money will be automatically released.[2]. The first $350 billion was released on October 3, 2008, and Congress voted to approve the release of the second $350 billion on January 15, 2009. And the hope that your home will not loose 90% of your it’s value.

Why Not TARP!: $700 billion

Bad Bank: Is a term to describe TARP.

For TARP To Fix the economy we need to stabilize the home market. We need to stop property from loosing value Ageist 700 Billion is A lot of money to loss if assets don’t stabilize. And these are, “troubled assets” as in assets worth less then they should.