To: steve harris who wrote (991923 ) 1/5/2017 12:49:01 PM From: PKRBKR Read Replies (1) | Respond to But Congress passed it and everyone was happy, nobody was going to get thrown out of their houses. TARP allowed the United States Department of the Treasury to purchase or insure up to $700 billion of "troubled assets," defined as "(A) residential or commercial obligations will be bought, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress." [3] In short, this allows the Treasury to purchase illiquid, difficult-to-value assets from banks and other financial institutions. The targeted assets can be collateralized debt obligations , which were sold in a booming market until 2007, when they were hit by widespread foreclosures on the underlying loans. TARP is intended to improve the liquidity of these assets by purchasing them using secondary market mechanisms, thus allowing participating institutions to stabilize their balance sheets and avoid further losses.
