Conception

• The unexpected collapse of major financial institutions, including Lehman Brothers, AIG, Freddie Mac, and Fannie Mae, in September 2008 sparked fear of a chain reaction of bank failures. TARP was originally conceived with the intent of having the Treasury Department purchase banks' mortgage-based securities (MBS) which had plummeted in value. Theoretically, this would stabilize banks by providing them with a cash infusion while removing the toxic assets from their balance sheets. Ultimately, TARP funds were used to provide direct relief to the banks.
  
  

Legislation

• Congress passed H.R. 1424 on Oct. 3, 2008, which enacted the Emergency Economic Stabilization Act of 2008. The act created TARP, which conditionally provided the Treasury Department with $700 billion to aid struggling financial institutions. The treasury received $250 billion immediately, while the release of the next $100 billion was contingent on the President's approval, and Congress and the President were empowered to veto the acquisition of the final $350 billion.
  
  

Oversight

• An oversight committee was established to monitor the dispensation of TARP funds which included the heads of the Securities and Exchange Commission (SEC), the Federal Reserve, and the Federal Housing Finance Agency, along with the Secretaries of the Treasury and Housing and Urban Development. The committee makes recommendations on fund distribution and can report suspected fraud or malfeasance to the U.S. Attorney General. The Treasury Secretary is responsible for reporting to Congress every 60 days detailing TARP's activities and providing detailed financial statements.
  
  

Selecting Recipients

• Regulators used the Camel ratings, a list of confidential criteria, to determine which institutions received TARP funding. Substantial funding was provided to institutions that were deemed "too big to fail" on the assumption that their collapse would cause a domino effect of subsequent bank failures. Major recipients included AIG, which received almost $70 billion, Citigroup, which received $50 billion, and Bank of America, which secured $45 billion.
  
  

Recipients' Fund Use

• Most TARP recipients used their funding to reduce their debt loads and acquire weaker banks despite Congress' intention that the funds be used to provide business and consumer credit. None of the first $350 billion in TARP funding was used to stem the tide of foreclosures, a development that drew sharp criticism from the public and many members of Congress.