The Financial Crisis Of The Troubled Asset Relief Program

The 2008 financial crisis brought panic and fear to the nation as the stock market plunged, reducing the wealth of millions of Americans. The housing market crash put nearly all the major financial institutions in grave danger of insolvency. The government reacted quickly to not only stop the bleeding and devastation but also to restore confidence in the financial system and reassure the public the economy wasn’t in a free fall. This was not a time to sit back and let the market self-adjust. Under the Troubled Asset Relief Program (TARP), the U.S. Treasury played a key role in stabilizing the financial system, the auto industry, and the housing markets during the 2008 financial crisis. Essentially, the U.S. Treasury guaranteed money market funds, provided capital to over 700 banks, and provided a bailout to AIG to avoid a widespread collapse in the financial industry. Investors and consumers had lost faith in the financial system and were pulling their funds out in record numbers; panic was spreading as Americans were speculating this could be the next big depression. It was essential for the U.S. Treasury to act to restore public confidence immediately. The FDIC deposit insurance was increased to $250,000 as another attempt to lure investors and depositors back to the banks (Reyes, 2013). The U.S. Treasury not only had to provide enough capital reserves to banks to enable them to put money back into the hands of consumers but also encourage consumers to spend and inves t.Show MoreRelatedThe Financial Crisis : Rescue Efforts855 Words   |  4 PagesThe Financial Crisis: Rescue Efforts Throughout the early 2000’s, relaxed lending regulations and lowered interest rates sparked the growth of the securitization of subprime mortgages. 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