"Government owns a share of the firm's risk and the taxpayer shares in the upside as the financial system recovers… These are not steps we wished to take, but rather ones made necessary by the breakdown of our credit markets." — Treasury Secretary Henry Paulson, statement on TARP, October 14, 2008
Paulson's defense framed TARP primarily as
- Acheck_circle
an emergency intervention required by frozen credit markets, not a permanent expansion of government
- B
a free-market alternative to FDIC deposit insurance
- C
a long-planned nationalization of the banking system
- D
a return to the Glass-Steagall regulatory regime
Explanation
Paulson and Bernanke argued the capital injections were a temporary necessity to prevent systemic collapse, with taxpayer participation through preferred equity intended to be reversed once banks stabilized.