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Look up capital assistance in Wiktionary, the free dictionary.
The Capital Assistance Program is a U.S. Treasury program that provides capital injections in exchange for mandatory convertible preferred stock and warrants to bank holding companies.
As part of the Emergency Economic Stabilization Act of 2008 the U.S. Treasury was given funds to stabilize U.S. financial institutions and encourage lending. The Troubled Asset Relief Program (TARP) was to be implemented in two $350 billion authorizations. The first $350 billion went primarily to the Capital Purchase Program primarily allocated under the direction of U.S. Treasury Secretary Henry Paulson an appointee of George W. Bush. [1] The new Barack Obama appointee, U.S. Treasury Secretary Timothy Geithner, announced the Capital Assistance Program on February 10, 2009. [2]
Money is given in exchange for preferred stock that pays a 9 percent dividend. The preferred stock is automatically converted into common stock at the end of seven years. The banks receiving funds will be restricted in paying dividends, buying back their stock, and buying other firms with cash. [3] Because preferred stock is similar to debt in that it gets paid before common stock, some economists have questioned whether the buying of preferred stock by both the Capital Assistance Program and the Capital Purchase Program will be effective in getting banks to lend efficiently. [4] [5]
In finance, a high-yield bond is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events but offer higher yields than investment-grade bonds in order to compensate for the increased risk.
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New Deal, the corporation's purpose is to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations. Its brother organization is the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac.
A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy.
Henry "Hank" Merritt Paulson Jr. is an American banker and financier who served as the 74th United States Secretary of the Treasury from 2006 to 2009. Prior to his role in the Department of the Treasury, Paulson was the chairman and chief executive officer (CEO) of major investment bank Goldman Sachs.
Debt overhang is the condition of an organization that has existing debt so great that it cannot easily borrow more money, even when that new borrowing is actually a good investment that would more than pay for itself.
The subprime mortgage crisis impact timeline lists dates relevant to the creation of a United States housing bubble and the 2005 housing bubble burst and the subprime mortgage crisis which developed during 2007 and 2008. It includes United States enactment of government laws and regulations, as well as public and private actions which affected the housing industry and related banking and investment activity. It also notes details of important incidents in the United States, such as bankruptcies and takeovers, and information and statistics about relevant trends. For more information on reverberations of this crisis throughout the global financial system see 2007–2008 financial crisis.
In September 2008, the Federal Housing Finance Agency (FHFA) announced that it would take over the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Both government-sponsored enterprises, which finance home mortgages in the United States by issuing bonds, had become illiquid as the market for those bonds collapsed in the subprime mortgage crisis. The FHFA established conservatorships in which each enterprise's management works under the FHFA's direction to reduce losses and to develop a new operating structure that will allow a return to self-management.
A toxic asset is a financial asset that has fallen in value significantly and for which there is no longer a functioning market. Such assets cannot be sold at a price satisfactory to the holder. Because assets are offset against liabilities and frequently leveraged, this decline in price may be quite dangerous to the holder. The term became common during the financial crisis of 2007–2008, in which they played a major role.
The Emergency Economic Stabilization Act of 2008, also known as the "bank bailout of 2008" or the "Wall Street bailout", was a United States federal law enacted during the Great Recession, which created federal programs to "bail out" failing financial institutions and banks. The bill was proposed by Treasury Secretary Henry Paulson, passed by the 110th United States Congress, and was signed into law by President George W. Bush. It became law as part of Public Law 110-343 on October 3, 2008. It created the $700 billion Troubled Asset Relief Program (TARP), which utilized congressionally appropriated taxpayer funds to purchase toxic assets from failing banks. The funds were mostly redirected to inject capital into banks and other financial institutions while the Treasury continued to examine the usefulness of targeted asset purchases.
The government interventions during the subprime mortgage crisis were a response to the 2007–2009 subprime mortgage crisis and resulted in a variety of government bailouts that were implemented to stabilize the financial system during late 2007 and early 2008.
The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President George W. Bush. It was a component of the government's measures in 2009 to address the subprime mortgage crisis.
The Term Asset-Backed Securities Loan Facility (TALF) is a program created by the U.S. Federal Reserve to spur consumer credit lending. The program was announced on November 25, 2008, and was to support the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA). Under TALF, the Federal Reserve Bank of New York authorized up to $200 billion of loans on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. As TALF money did not originate from the U.S. Treasury, the program did not require congressional approval to disburse funds, but an act of Congress forced the Fed to reveal how it lent the money. The TALF began operation in March 2009 and was closed on June 30, 2010. TALF 2 was initiated in 2020 during the COVID-19 pandemic.
The Capital Purchase Program or CPP is an America government preferred stock and equity warrant purchase program conducted by the US Treasury Office of Financial Stability as part of Troubled Asset Relief Program that was launched in 2008. According to the first congressionally mandated oversight report published by GAO, "[TARP's] primary focus was expected to be the purchase of mortgage-backed securities (MBS) and whole loans... [but] within 2 weeks of enactment... the Treasury announced that it would make $250 billion of the $700 billion available to U.S. financial institutions through purchases of preferred stock." This followed a model initiated by the United Kingdom bank rescue package announced on October 8, 2008.
The Subprime mortgage crisis solutions debate discusses various actions and proposals by economists, government officials, journalists, and business leaders to address the subprime mortgage crisis and broader 2007–2008 financial crisis.
On March 23, 2009, the United States Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the United States Treasury Department announced the Public–Private Investment Program for Legacy Assets. The program is designed to provide liquidity for so-called "toxic assets" on the balance sheets of financial institutions. This program is one of the initiatives coming out of the implementation of the Troubled Asset Relief Program (TARP) as implemented by the U.S. Treasury under Secretary Timothy Geithner. The major stock market indexes in the United States rallied on the day of the announcement rising by over six percent with the shares of bank stocks leading the way. As of early June 2009, the program had not been implemented yet and was considered delayed. Yet, the Legacy Securities Program implemented by the Federal Reserve has begun by fall 2009 and the Legacy Loans Program is being tested by the FDIC. The proposed size of the program has been drastically reduced relative to its proposed size when it was rolled out.
The subprime mortgage crisis reached a critical stage during the first week of September 2008, characterized by severely contracted liquidity in the global credit markets and insolvency threats to investment banks and other institutions.
In the United States, the Great Recession was a severe financial crisis combined with a deep recession. While the recession officially lasted from December 2007 to June 2009, it took many years for the economy to recover to pre-crisis levels of employment and output. This slow recovery was due in part to households and financial institutions paying off debts accumulated in the years preceding the crisis along with restrained government spending following initial stimulus efforts. It followed the bursting of the housing bubble, the housing market correction and subprime mortgage crisis.
The 2007–2008 financial crisis, or Global Economic Crisis (GEC), was the most severe worldwide economic crisis since the Great Depression. Predatory lending in the form of subprime mortgages targeting low-income homebuyers, excessive risk-taking by global financial institutions, a continuous buildup of toxic assets within banks, and the bursting of the United States housing bubble culminated in a "perfect storm", which led to the Great Recession.
United States policy responses to the late-2000s recession explores legislation, banking industry and market volatility within retirement plans.
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