The U.S. Treasury Department released a note today highlighting that the Troubled Asset Relief Program, or TARP, was almost fully wound down. Created in 2008 in response to the financial crisis, TARP invested hundreds of billions of dollars in several dozen large publicly held companies. In essence, TARP provided operating capital from government funds to support important American industries when the banking system effectively froze up.
TARP wind down
The Treasury has been gradually winding down its TARP investments for a couple of years now. The department began recovering TARP investments as early as 2009, and has nearly completed the process as of the end of 2013. In 2013, the Treasury completely finalized their investment in General Motors Company (NYSE:GM), recouped almost $6 billion of their investment in Ally Financial Inc (NYSE:GOM), and wound down the vast majority of their remaining financial institution assets. Forty banks also repaid loans and the department auctioned or sold our investments in 81 companies in 2013.
Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS
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Success of TARP
TARP has been a success by almost any standard. Even those who opposed the program on political or philosophical grounds when it was rolled out have to admit the program accomplished its goals. The U.S. economy is clearly greatly improved today, and it turns out TARP actually turned a profit.
According to the Treasury Department’s note, the Treasury has been repaid $432.8 billion in total on all TARP investments – including selling its remaining investment in AIG – compared to the $421.9 billion it disbursed in 2008 and 2009.
Other bail out programs also successful
Public-Private Investment Program, or PPIP, was another program created to help deal with the financial crisis. PPIP funds were used to facilitate the provision of credit to American families and businesses. The program involved partnering with private investors to provide financing for funds to facilitate the purchase of problematic legacy mortgage-backed securities.