	Introduction

The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. EESA was passed by Congress and signed by President George W. Bush to address an ongoing financial crisis that reached near-panic proportions in September 2008. Financial turmoil began in August 2007 when asset-backed securities, particularly those backed by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented housing boom turned to a housing bust. Uncertainty about future losses on illiquid and complex assets led to some firms having reduced access to private liquidity, with the loss in liquidity being catastrophic in some cases. September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of AIG, which was averted with an $85 billion loan from the Fed. There was widespread unwillingness to lend in the financial markets because participants were unsure which firms might be holding so-called toxic assets now worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. EESA authorized the Secretary of the Treasury (hereinafter "the Secretary") to either purchase or insure up to $700 billion in troubled assets owned by financial firms. EESA granted this authority for a maximum of two years from the date of enactment, meaning it expired on October 3, 2010. This authority granted in EESA was very broad. In particular, the definitions of both "troubled assets" and "financial institutions" allowed the Secretary wide latitude in deciding what assets might be purchased or guaranteed and what might qualify as a financial institution. TARP Programs

Treasury reacted quickly after the enactment of EESA, announcing the TARP Capital Purchase Program on October 14, 2008, and several other programs followed. Credit Market Programs

Public-Private Investment Program (PPIP). This program provided funds and guarantees for purchases of mortgage-related securities from bank balance sheets. Most of these funds are classified by Treasury as "outstanding." In preparing the budget cost estimates for TARP, the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) are directed by Section 123 of EESA to adjust their estimates by current market borrowing rates, as opposed to the borrowing rate paid by Treasury. The 113th Congress and TARP

In addition to the numerous oversight mechanisms in the original statute, Congress has continued to directly oversee various aspects of TARP through committee hearings, with the House Committee on Oversight and Government Reform creating a subcommittee specifically focused on TARP and financial services during the 112 th Congress. TARP and the Dodd-Frank Act18

Unlike EESA, which was a temporary response to the immediate financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act; P.L. 111-203 ) was a broad bill that permanently changed many parts of the U.S. financial regulatory system. Section 1302 of Dodd-Frank made three primary changes to EESA:
reduced the overall authorization to purchase from nearly $700 billion to $475 billion; removed the implicit authority for the Secretary to reuse TARP funds when TARP assets are sold; and limited the authorities under the act to programs or initiatives initiated prior to June 25, 2010. This exceptional assistance included the purchase of an additional $20 billion of Bank of America preferred shares through the TARP Targeted Investment Program and a joint guarantee on a pool of up to $118 billion of Bank of America's assets (largely acquired through its merger with Merrill Lynch) through the TARP Asset Guarantee Program, the FDIC, and the Federal Reserve. The PPIP Legacy Securities Program was designed to deal with existing mortgage-related securities on bank balance sheets. The initial $0.1 billion in disbursements from TARP have been repaid. Table A-8 summarizes the support for the automakers, including current and peak asset holdings or loan amounts, losses or gains, and conditions of the assistance.
The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. 110-343) in October 2008. EESA was enacted to address an ongoing financial crisis that reached near-panic proportions in September 2008. The act granted the Secretary of the Treasury authority to either purchase or insure up to $700 billion in troubled assets owned by financial institutions. This authority was granted for up to two years from the date of enactment and was very broad. In particular, the definitions of both "troubled asset" and "financial institution" allowed the Secretary wide leeway in deciding what assets might be purchased or guaranteed and what might qualify as a financial firm.
The financial crisis grew out of an unprecedented housing boom that turned into a housing bust. Much of the lending for housing during the boom was based on asset-backed securities that used the repayment of housing loans as the basis of these securities. As housing prices fell and mortgage defaults increased, these securities became illiquid and fell sharply in value, causing capital losses for firms holding them. Uncertainty about future losses reduced many firms' access to private liquidity, with the loss in liquidity being catastrophic in some cases. September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of American International Group (AIG), which was saved only by an $85 billion loan from the Federal Reserve. There was widespread lack of trust in the financial markets as participants were unsure which firms might be holding so-called toxic assets that might now be worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. This uncertainty prevented firms from accessing credit markets to meet their liquidity needs.
As EESA moved through Congress, most attention was focused on the idea of the government purchasing mortgage-related toxic assets, thus alleviating the widespread uncertainty and suspicion by cleaning up bank balance sheets. The initial TARP Capital Purchase Program, however, directly added capital onto banks' balance sheets through preferred share purchases rather than removing assets that had become liabilities through purchasing mortgage-related assets. Several other TARP programs followed, including an asset guarantee program; programs designed to spur consumer and business lending; financial support for companies such as AIG, GM, and Chrysler; and programs to aid homeowners at risk of foreclosure. Eventually, the Public-Private Investment Program resulted in the purchase of some mortgage-related assets, but this remained a relatively small part of TARP. Most TARP programs are now closed.
With the immediate crisis subsiding through 2009, congressional attention to financial services turned largely to consider broad regulatory changes. The resulting Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) amended TARP's authority, including (1) reduction of the overall amount to $475 billion; (2) removal of the ability to reuse TARP funds that had been repaid; and (3) removal of the authority to create new TARP programs or initiatives. The original TARP authority to purchase new assets or enter into new contracts expired on October 3, 2010. Outlays under the existing contracts, however, may continue through the life of these contracts. Overall budget-cost estimates for TARP have decreased significantly since the passage of EESA, with the most recent Congressional Budget Office estimates foreseeing $27 billion in costs and Office of Management and Budget estimates foreseeing $39 billion in costs. Most of these costs are from aid for homeowners, for the insurer AIG, and for U.S. automakers. The assistance to banks is generally showing a gain for the government. In the 113th Congress, oversight of TARP has continued, including a hearing held by a subcommittee of the House Committee on Oversight and Government Reform.