Enterprising Investor Forum

Chances are that we will be hearing more and more about TARP as the Treasury Department continues to try to improve financial stability and we thought that it might be useful to try and summarize what the program is all about.

TARP is short for Troubled Assets Relief Program and the passing of which effectively allowed the Treasury to create the famous 700 billion dollar package. However, the 700 billion are not all readily available. As far as we understand, there are 3 phases:

1. 250 billion available from the start
2. 100 billion second tranche to be signed-off by the President
3. 350 billion that are subject to Congressional sign-off

The program will be run by the Office of Financial Stability and will focus on the following areas:

• Buying Mortgage-backed securities
• The whole loan purchase program
• The insurance program to insure these assets
• Home ownership program to try and find a way to limit the number of foreclosures
• The Equity purchase program, mainly aimed for financial institutions, trying to define rules for these purchases and hopefully sparking a wave of new capital injections in these companies
• Tackling Executive compensation – very hot topic – basically ensuring that the government is not paying high-comp for executives that failed to save their companies
• Oversight, accountability and compliance program

We will no doubt be discussing this further in the near future…