An Assessment of TARP Assistance to Financial Institutions

Charles W. Calomiris and Urooj Khan

Journal of Economic Perspectives, 2015, vol. 29, issue 2, 53-80

Abstract: Six years after the passage of the 2008 Troubled Asset Relief Program, commonly known as TARP, it remains hard to measure the total social costs and benefits of the assistance to banks provided under TARP programs. TARP was not a single approach to assisting weak banks but rather a variety of changing solutions to a set of evolving problems. TARP's passage was associated with significant improvements in financial markets and the health of financial intermediaries, as well as an increase in the supply of lending by recipients. However, a full evaluation must also take into account other factors, including the risks borne by taxpayers in the course of the bailouts; moral-hazard costs that could result in more risk-taking in the future; and social costs related to perceived unfairness. Our evaluation is organized in five parts: 1) What did policymakers do? 2) What are the proper objectives of interventions like TARP assistance to financial institutions? 3) Did TARP succeed in those economic objectives? 4) Were TARP funds allocated purely on an economic basis, or did political favoritism play a role? 5) Would alternative policies, either alongside or instead of TARP, and alternative design features of TARP, have worked better?

JEL-codes: E44 E63 G21 G28 H81 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/jep.29.2.53
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/jep.29.2.53 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:29:y:2015:i:2:p:53-80

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().