Skip To Content
Skip To Navigation

Myths vs. Facts: The Truth About TARP

Share This:

The Troubled Asset Relief Program (TARP) was created by President Bush in response to the financial crisis. Under the Bush Administration, the program provided capital injections intended to stabilize the banking system; its estimated cost was $350 billion.

When President Obama took office, the focus of TARP changed. President Obama committed himself to recovering taxpayers’ dollars and reducing the cost of TARP while using the programs’ resources to more directly help American small businesses and middle class families. At President Obama’s direction, TARP was used to help stabilize the American auto industry, get credit flowing to consumers and small businesses, support smaller community banks, and help struggling homeowners by catalyzing change in the mortgage industry.

MYTH: TARP cost the American taxpayers hundreds of billions of dollars.

FACT: The cost of TARP has dropped dramatically. In fact, it could end up costing taxpayers nothing.

  • TARP repayments to taxpayers now total more than $250 billion.
  • The CBO has forecast that TARP could cost taxpayers just $25 billion – a fraction of the $700 billion first authorized; and the New York Times noted that it “could end up costing... nothing.”
  • As a result of TARP investments in American automakers and corresponding demands for industry reform and accountability, the U.S. auto industry as a whole is rebounding strongly, with thousands of jobs created and strong sales gains.
  • AIG could turn a profit for taxpayers based on current market prices. The company’s return to the private debt markets also illustrates an important step towards its future independence.

MYTH: TARP was ineffective in stabilizing the financial sector and was a failure.

FACT: Independent analysts have confirmed that TARP helped to stabilize the finanical sector and was a success.

  • Washington Post editorial: “It is clear that TARP not only has been successful but, in a real sense, also a great deal for taxpayers.”
  • Jonathan Chait, The New Republic: “TARP may end up going down as one of the most successful policy initiatives in American history.”
  • Ezra Klein, Washington Post: “There's an increasingly strong case that TARP may have been the most cost-effective economic policy ever passed.”
  • Richard X. Bove, Rochdale Securities: “[TARP] may have been the most successful United States program ever ... The biggest winner in the TARP program was the American taxpayer. Not only did the program create a positive return to taxpayers but it reversed a decline in the economy which would have resulted in even more bankruptcies, lost jobs and wealth destruction.”

MYTH: TARP has been administered in a less-than-transparent manner.

FACT: The Obama administration has been transparent in administering TARP.

  • In keeping with President Obama’s pledge to improve government transparency, the Treasury Department consistently posts information regarding the administration of TARP on its website, and countless critical documents related to the program have been made public.
  • An October 2009 GAO report noted that, “Over the last year, Treasury has posted information on its Web site; announced decisions in press releases, press conferences, and speeches; and testified at congressional hearings.”