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TARP Troubled Assets Relief Program

TARP Troubled Assets Relief Program. Yi Zhuang BA 543. Agenda. Subprime Mortgage Crisis About TARP The Positive Effects of TARP Controversy about TARP. Subprime Mortgage Crisis. Causes of the Crisis: Housing Prices Peak in 2006 Subprime Borrowers Housing Prices Drop Late 2006-2007

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TARP Troubled Assets Relief Program

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  1. TARPTroubled Assets Relief Program Yi Zhuang BA 543

  2. Agenda Subprime Mortgage Crisis About TARP The Positive Effects of TARP Controversy about TARP

  3. Subprime Mortgage Crisis Causes of the Crisis: Housing Prices Peak in 2006 Subprime Borrowers Housing Prices Drop Late 2006-2007 High Mortgage Defaults and Foreclosures

  4. Companies Failed During Crisis • New Century Financial Corporation • American Freedom Mortgage • American Home Mortgage • Bernard L. Madoff Investment Securities LLC • Charter Communications • Lehman Brothers • Linens’n Things • Mervyns • NetBank • Terra Securities • Sentinel Management Goroup • Washington Mutual • Icesave • Kaupthing Singer & Friedlander • Yamato Life • Circuit City • BancoPrivadoPortugues • Allco Finance Group • Waterford Wedgwood • Saab Automobile • BearingPoint • Tweeter • Chrysler • General Motors

  5. Main Events in 2008 • The Federal Housing Finance Agency announced that it had placed Freddie Mac and Fannie Mae into conservatorship • Lehman Brothers announced it was filing for bankruptcy • Merrill Lynch agreed to be sold to Bank of America for approximately $50 billion • AIG sought a $40 billion bridge loan from the Federal Reserve Board to stay in business • The Dow Jones Industrial Average fell 500 points

  6. About TARP 10.3.2008-10.3.2010 • Fundamental Part of the Emergency Economic Stabilization Act of 2008 The purpose of TARP was to restore the liquidity and stability of the U.S. financial system which was near collapse at the end of 2008.

  7. About TARP 10.3.2008-10.3.2010 (con’t) • Initial investment was up to $700 billion • Actual expenditures: $431 billion • Recovered 94% of the funds (3.31.2013)

  8. TARP & Citigroup

  9. TARP's Five Program Areas Dec. 2008: TARP funds spent on any program that deemed necessary to alleviate the financial crisis.

  10. The Positive Effects of TARP • Economic Antifreeze • Withdrawing Money from the Banks • Revving up the Auto Industry • Saved 8.5 M Jobs

  11. Controversy of TARP • TARP Cost Taxpayers Hundreds of Billions of Dollars • TARP Was a Gift for Wall Street that Did Nothing for Main Street • TARP Was a Quick Fix for the Market Meltdown but Left our Financial System Weak • TARP Was the Centerpiece of a Strategy by President Obama to Assert More Government Control Over the Economy

  12. Thank You & Qs?

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