Emergency Economic Stabilization Act (EESA, TARP)

Emergency Economic Stabilization Act (EESA, 2008)

1) Link to the Text of the Act
Read the statute (12 U.S.C. §§ 5201–5261)

2) Why It Was Done
Passed during the 2008 financial crisis, the Act authorized the U.S. Treasury to purchase or insure up to $700 billion of troubled assets through the Troubled Asset Relief Program (TARP) to stabilize banks and credit markets.

3) Pre-existing Law or Constitutional Rights
No prior law gave the Treasury such sweeping authority to buy private financial assets. Critics argued it pushed the limits of the Commerce Clause and blurred the line between public and private finance, but it did not directly override constitutional rights.

4) Overreach or Proper Role?
Supporters said it prevented a total collapse of the financial system. Critics denounced it as a massive Wall Street bailout with little relief for homeowners, fueling distrust in government and big banks.

5) Who or What It Controls

  • U.S. Treasury (granted unprecedented power to purchase financial assets)
  • Banks & financial institutions (recipients of bailout funds)
  • Taxpayers (indirectly liable for losses but also benefitted from eventual repayment of many funds)
  • Oversight bodies (new offices created for accountability, including the SIGTARP inspector general)

6) Key Sections / Citations

  • 12 U.S.C. § 5211: Authority for Treasury to purchase troubled assets
  • 12 U.S.C. § 5225: TARP funding cap ($700 billion, later reduced)
  • 12 U.S.C. § 5231: Created Office of the Special Inspector General for TARP (SIGTARP)

7) Recent Changes or Live Controversies

  • Most TARP funds were eventually repaid, but critics argue the Act entrenched “too big to fail” institutions.
  • Still central to debates over bailouts, moral hazard, and federal intervention in private markets.
  • Oversight findings continue to influence financial regulatory reform.

8) Official Sources