Troubled Asset Relief Program (TARP)

The $700 billion bailout that is the Troubled Assets Relief Program is the result of unintended consequences of decisions by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke since March.

First they orchestrated the purchase of Bear Stearns by JPMorgan Chase, and that did create a temporary lull in the instability that has plagued markets since the credit crisis begun.

However, each decision after that led to runs on securities firms, banks and insurers, and created turmoil in the markets. It was all done in a desperate attempt to halt the momentum of recession 2008.

And the Troubled Assets Relief Program itself also risks making matters worse. A government pool of distressed real-estate and bad debt could serve to depress the housing market further.

The initial reaction to TARP was declines in financial stocks, total paralysis in the trillion dollar inter-bank loan market, and a run on money market mutual funds. It might just have been the right read on the Troubled Assets Relief Program.

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