# Troubled Asset Relief Program The **Troubled Asset Relief Program (TARP)** was the $700 billion federal bailout fund created by the **Emergency Economic Stabilization Act**, signed October 3, 2008, to halt the [[2008 Financial Crisis]]. Proposed by Treasury Secretary Henry Paulson as a plan to buy up banks' "troubled" mortgage assets, it pivoted almost immediately into **direct equity injections** into the banking system — the government buying preferred stock in hundreds of banks to recapitalize them and stop the panic. Its passage was itself a crisis event. The House **rejected the initial bill 205-228 on September 29, 2008**, and the Dow fell 777 points that day — its largest single-day point drop to that time. A revised version, padded with tax provisions and a higher deposit-insurance cap, passed days later. TARP funds flowed not only to banks but to [[AIG]], to the auto industry (GM and Chrysler), and to housing programs. Despite the headline $700 billion (reduced to $475 billion by the [[Dodd-Frank Act]]), most of the money was repaid with interest and dividends; the GAO puts TARP's ultimate lifetime cost at roughly **$31 billion**, with the bank-investment programs actually turning a small profit and the housing-assistance programs accounting for the net loss. For the KB, TARP is **the** politically radioactive event of the era — the moment "Wall Street got bailed out, Main Street got left behind" became the defining grievance of American politics. The crisis was caused by deregulation and speculation, but the bailout's design — saving the institutions that caused it while ordinary borrowers were foreclosed on — made [[Too Big to Fail]] and [[Moral Hazard (Term)]] concrete and undeniable. The crucial political aftermath was the **redirection** of that fury: the Koch network channeled right-wing anger away from Wall Street and toward government spending, producing the [[Tea Party Movement]]. TARP is thus the hinge between the financial system's third great crash and the populist realignment that followed. ## See Also - [[2008 Financial Crisis]] - [[Too Big to Fail]] - [[AIG]] - [[Lehman Brothers]] - [[Dodd-Frank Act]] - [[Financial System Timeline]] - [[Financial System Hub]]