TARP: One Year Later

TARP, the Troubled Asset Relief Program, is a year old now. On Sept. 19, 2008, former Treasury Secretary Henry Paulson announced the need for a $700 billion program to purchase toxic assets held by banks to prevent a financial meltdown, and after some modification Congress rapidly approved TARP on Oct. 3. Looking back after a year, was TARP necessary?

Did it work?

The answers are No, and No...

Instead of buying up toxic assets, the TARP money was used to partially nationalize the banking industry. It was also used for a federal takeover of AIG (after it was initially rescued by the Fed) and the bailout of Chrysler and General Motors...

Ultimately, what TARP did was provide funds for the government to take an ownership interest in private firms. Nationalizing our financial and industrial firms is not in the public interest. The federal government now owns 80 percent of AIG and 61 percent of GM. TARP was not necessary. It didn’t work. And what it actually did was undesirable.

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