The troubled asset relief program

This program addresses the root cause of the financial system’s weakness by taking the illiquid mortgage assets (those that have lost value as house prices have decreased) out of the financial system. These toxic assets are currently blocking the system and preventing the credit needed to fuel the economy from being issued.

The problem is that there is a lack of certainty about the value of mortgage assets, and trading in them has virtually ceased. Because these toxic loans are stuck on the balance sheets of banks, and other financial institutions, they are unable to issue new productive loans.