TARP

Okay, I’ll be honest: I like money. Although I love God, it seems like the world is run by the monetary transactions; and as a result, the systems of the world have become complicated, spaghetti, and evil.

For the love of money is a root of all evils, because of which some, aspiring after money, have been led away from the faith and pierced themselves through with many pains.

1 Timothy 6:10

But to help myself with understanding what is going on in my country with the financial moves and problems (or disasters), I’ll be looking into some financial terms that I come across and share it with my readers here. Again, this blog is written for myself, with the view in mind that I am the target audience. If you are like me, or like my posts, then I’d love to share my musical findings, artistic ideas, technical reviews, and knowledge discoveries in my life, learning to love God and put God in the center of my life.

Troubled Asset Relief Program

The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008. It was a component of the government’s measures in 2008 to address the subprime mortgage crisis.

Only a third of Americans (34%) correctly say the Troubled Asset Relief Program (TARP) was enacted by the Bush administration. Nearly half (47%) incorrectly believe TARP was passed under President Obama. Another 19% admit they do not know which president signed the bank bailout into law. Notably, there is no partisan divide on the question. Just 36% of Republicans, 35% of independents and 34% of Democrats know that the government bailout of banks and financial institutions was signed into law by former President Bush. And Democrats (46%) are just as likely as Republicans (50%) to say TARP was passed under Obama. (I thought so…)

The TARP program originally authorized expenditures of $700 billion. The Dodd–Frank Wall Street Reform and Consumer Protection Act reduced the amount authorized to $475 billion. By October 11, 2012, the Congressional Budget Office (CBO) stated that total disbursements would be $431 billion and estimated the total cost, including grants for mortgage programs that have not yet been made, would be $24 billion. This is significantly less than the taxpayers’ cost of the savings and loan crisis of the late 1980s but does not include the cost of other “bailout” programs (such as the Federal Reserve‘s Maiden Lane Transactions and the Federal takeover of Fannie Mae and Freddie Mac). The cost of the former crisis amounted to 3.2 percent of GDP during the Reagan/Bush era, while the GDP percentage of the latter crisis’ cost is estimated at less than 1 percent. While it was once feared the government would be holding companies like GM, AIG and Citigroup for several years, it was reported in April 2010 that those companies are preparing to buy back the Treasury’s stake and emerge from TARP within a year. Of the $245 billion handed to U.S. and foreign banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010. AIG is considered “on track” to pay back $51 billion from divestitures of two units and another $32 billion in securities. As of December 31, 2012, the Treasury had received over $405 billion in total cash back on TARP investments, equaling nearly a non-inflation-adjusted 97 percent of the $418 billion disbursed under the program.

Details in diagrams…

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