Today, the U.S. Treasury Department released its "Two-year Retrospective" report on the Troubled Asset Relief Program (TARP), Washington’s initial response to the financial crisis that gripped the country in the fall of 2008. Enacted October 3, 2008, TARP has been credited with playing a critical role in recapitalizing the financial sector and restarting the credit markets, which made it possible for businesses, municipalities, and families to borrow again, so that our economy could recover. However, recent months have found critics questioning the efficacy and, indeed, the very need for TARP at the height of the emergency.

The “Two-year Retrospective” report attempts to assuage the harshest of these analyses. Indeed, Acting Assistant Secretary for Financial Stability Timothy Massad remarked in the report, “…TARP has been unpopular for good reason – no one likes using tax dollars to rescue financial institutions. However, by objective measures, TARP worked. Two years later, our financial system is stable, more than $204 billion of TARP funds have been repaid, only a quarter of the original $700 billion authorization remains outstanding, the total estimated cost of TARP has been cut by more than three-fourths, taxpayers have received $30 billion in income, and the TARP bank programs are on track to make solid returns for taxpayers.”

Notably, an Executive summary of the program contained within the report highlighted a number of its accomplishments, including:

  1. helping to unfreeze the markets for credit and capital;
  2. bringing down the cost of borrowing;
  3. restoring confidence in the financial system; and
  4. restarting economic growth.

Furthermore, the report indicates that the government has already recovered 75 percent of TARP funds invested in banks, generating $27 billion in returns ($18.6 billion of which stems from bank capital programs). As a result, the Treasury now estimates that the total cost of TARP will end up being only about $50 billion.

In its overview of TARP strategy, the report outlines spending under both the Bush and Obama administrations and gives a broad overview of the policies behind the initiative. Most importantly, TARP funds were to be used to jumpstart the credit markets, stabilize the automotive industry and AIG, support small and mid-sized banks, and help “responsible but struggling homeowners.” From a policy perspective, the report claims that TARP succeeded in implementing executive compensation restrictions and increasing accountability and transparency for taxpayers.