Lehman Brothers’ collapse in September 2008 prompted the Troubled Asset Relief Program to be enacted.
The Emergency Economic Stabilization Act became law on October 3, 2008, creating TARP during the most dangerous phase of the global financial crisis. The legislation authorized the U.S. Treasury to spend up to $700 billion to stabilize the financial system, initially by purchasing or insuring troubled assets. The program was later used mainly for capital injections and other support measures.
Lehman Brothers had filed for bankruptcy on September 15, 2008, and the resulting turmoil intensified pressure on policymakers. TARP was not a direct bailout of Lehman; the firm had already failed. The program supported banks, insurance companies, and the automobile industry, and the government later recovered much of the money invested. AIG received separate emergency assistance shortly after Lehman’s collapse.