In early October, amid a global financial meltdown, than-Treasury Secretary Hank Paulson, with the approval and oversight of Congress and a special finance committee, created the Troubled Asset Relief Program to support systemically important financial institutions.
The original goal of the TARP was to to purchase or insure up to $700 billion of "troubled" assets off of banks' balance sheets, with the ultimate goal of finding the true market value of these complex and often archaic derivatives, much of which were crippling financial institutions.
However, as the global credit markets measured most accurately by the TED spread and three-month LIBOR came to a grinding halt, the Treasury thought it would be best to simply inject capital, in the form of preferred shares, to bolster the capital ratio of the banks going forward.
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