TARP: The Troubled Asset Relief Program

Executive Summary

• This program was designed to push bad assets off of the balance sheet o the banks and onto the government.

Introduction

TARP stands for Troubled Asset Relief Program. What it did was move toxic assets off of the balance sheets of the private banks and put them onto the government’s balance sheet. It was a bank bailout. The point of this program was to “save the banks” but also to hand out government money in return for nothing to private banking interests, and to hide bank fraud. It is explained in the following quotation.

“The challenge for Ben Bernanke and the Fed governors since the 2008 bailout has been how to deal with the backlog of fraud, not just fraudulent mortgages and fraudulent mortgage securities, but the derivatives piled on top and the politics of who owns them, such as sovereign nations with nuclear arsenals and how they feel about taking massive losses on triple-A paper purchased in good faith. On one hand, they could let them all default. The problem is that the criminal liabilities would drive the global and national leadership into factionalism and controlled violence, not to mention that such defaults would due to liquidity in the financial system, then there is the fact that a great deal of the fraudulent paper has been purchased by pension funds. So the markdown would hit the retirement savings of people who have now also lost their homes or equity in their homes. QE was politically expedient and it prevented the sort of Great Depression seen in the 1930s when the banks completely collapsed.” – TBD

The Fed knew how much fraud had occurred, but becuase the Fed only represents the interests of private banks over the citizens of the country, it was instrumental in hiding this fraud. This is yet another problem with allowing a central bank to be in private hands.