Emergency Economic Stabilization Act (EESA) of 2008

What Is the Emergency Economic Stabilization Act (EESA) of 2008?

The Emergency Economic Stabilization Act (EESA) was a law passed by Congress in 2008 in response to the subprime mortgage crisis. It authorized the Treasury secretary to buy up to $700 billion of troubled assets and reestablish liquidity in financial markets. The EESA was initially proposed by Henry Paulson.

Understanding the Emergency Economic Stabilization Act (EESA) of 2008

The House of Representatives dismissed an initial EESA proposal in September 2008 however passed a modified bill the next month. Defenders accepted that it was imperative to limit the economic damage made by the mortgage meltdown, while detractors denounced it as a bailout for Wall Street.

The EESA surfaced in response to the most horrendously terrible financial crisis since the 1930s, and prepared for the foundation of the [Troubled Assets Relief Program](/troubled-resource relief-program-tarp) (TARP). Entrusted with assisting with balancing out the financial system, the TARP authorized the Treasury secretary to "purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, based on such conditions and conditions still up in the air by the secretary."

The Troubled Assets Relief Program (TARP) was a pillar of the EESA.

The Treasury backed this broad order with $700 billion. The program meant to "safeguard home values, college funds, retirement accounts, and life reserve funds; protect homeownership and advance positions and economic growth; augment overall returns to the citizens of the United States; and give public accountability to the exercise of such authority."

The Effects of the Emergency Economic Stabilization Act (EESA) of 2008

The EESA is widely credited with reestablishing solidness and liquidity to the financial sector, thawing the markets for credit and capital, and bringing down borrowing costs for families and organizations. This, thus, reestablished confidence in the financial system and restart economic growth.

Generally because of the takeover of insurance monster AIG, by 2017 the Congressional Budget Office (CBO) estimated that TARP transactions cost citizens somewhat more than $32 billion. The CBO said the central government dispensed $313 billion, a large portion of which was repaid by 2017. It estimated a net gain to the government of $9 billion from those transactions. That incorporated a net gain of about $24 billion from assistance to banks and other lending institutions, somewhat offset by $15 billion of assistance for AIG.

A large portion of the money paid out under the EESA has since been repaid, and the Treasury has created a gain of more than $110 billion on its loans and investments.

In February 2021, the objective ProPublica reported that a total of $443 billion had been dispensed under TARP as investments, loans, and payouts, of which $390 billion had been repaid to the Treasury. The Treasury had likewise earned $52.5 billion on those investments and loans. That, plus some extra revenue, had brought about a profit, until this point, of $110 billion for the Treasury.

Features

• Defenders accepted the EESA was important to forestall the collapse of the financial system, while detractors called it a bailout for Wall Street and the banks.
• The Emergency Economic Stabilization Act (EESA) was one of the bailout measures taken by Congress in 2008 to assist with repairing the damage brought about by the financial crisis of 2007-2008.
• The EESA authorized the Treasury to buy up to $700 billion in troubled assets, a figure later diminished to $475 billion.