Great Recession: total U.S. government expenditure on TARP program 2008-2012

On October 3. 2008, the United States Congress passed the Emergency Economic Stabilization Act, which created the Troubled Asset Relief Program (TARP). TARP was essentially a government bailout package designed to purchase non-performing assets and equity shares from financial firms which had come close to bankruptcy during the Global Financial Crisis. In particular, the measures sought to address the issue of the vast number of toxic subprime mortgage assets which were on the balance sheets of U.S. financial institutions.

TARP programs for banks, car manufacturers and insurance

U.S. financial institutions were suffering from a loss spiral, whereby they were forced to sell assets in order to remain liquid (able to meet short-term financing needs with cash), but the act of having to sell these assets decreased their market price, requiring the firms to sell more assets. This spiral was quickly causing panic on financial markets, requiring government intervention to backstop asset prices and prevent further bankruptcies. Of the approximately 418 billion U.S. dollars disbursed by 2012, the majority went to bank bailout programs, while smaller amounts went to bailouts of the automotive industry and the insurance group AIG. A majority of the funds were paid back to the U.S. government through sales of assets or repayments by the receivers of support, while around 23 billion was written off or declared as a loss.