Number: RS22956
Title: The Cost of Government Financial Interventions, Past and Present
Authors: Baird Webel, Analyst in Financial Economics; Marc Labonte, Specialist in Macroeconomic Policy; N. Eric Weiss, Specialist in Financial Economics 
Abstract: Between March and September 2008, the federal government intervened financially with private corporations on three occasions, resulting in the government receiving significant debt and equity considerations. The firms affected were Bear Stearns, Fannie Mae and Freddie Mac, and AIG. Dissatisfaction with the case-by-case approach to addressing the ongoing financial turmoil led Treasury to propose a more comprehensive approach on September 19, 2008. On October 3, 2008, the Emergency Economic Stabilization Act (EESA, P.L. 110-343) was signed into law, authorizing the Troubled Assets Relief Program (TARP). TARP gave Treasury the option of purchasing or insuring up to $700 billion of assets from financial firms. On October 14, 2008, Treasury announced it was shifting its focus towards direct capital injections into banks through the purchase of preferred shares. Treasury's announced "capital purchase plan" was for purchasing up to $250 billion in financial firms' preferred stock under the TARP authority, with approximately $187.5 billion actually purchased as of December 31, 2008.
Pages: 8
Date: January 8, 2009