The Emergency Economic Stabilization Act of 2008 (Division A of Pub.L. 110-343, 122 Stat. 3765, enacted October 3, 2008, commonly referred to as a bailout of the U.S. financial system, is a law enacted in response to the subprime mortgage crisis authorizing the United States Secretary of the Treasury to spend up to US$700 billion to purchase distressed assets, especially mortgage-backed securities, and give cash directly to banks (however, the plan to purchase distressed assets has been abandoned). Both foreign and domestic banks are included in the program. The Federal Reserve also extended help to American Express, whose bank-holding application it recently approved. The Act was proposed by Treasury Secretary Henry Paulson during the global financial crisis of 2008.
The original proposal was submitted to the United States House of Representatives, with the purpose of purchasing bad assets, reducing uncertainty regarding the worth of the remaining assets, and restoring confidence in the credit markets. The bill was then expanded and put forth as an amendment to H.R. 3997. The amendment was rejected via a vote of the House of Representatives on September 29, 2008, voting 205–228.
On October 1, 2008, the Senate debated and voted on an amendment to H.R. 1424, which substituted a newly revised version of the Emergency Economic Stabilization Act of 2008 for the language of H.R. 1424. The Senate accepted the amendment and passed the entire amended bill, voting 74–25. Additional unrelated provisions added an estimated $150 billion to the cost of the package and increased the length of the bill to 451 pages. (See Public Law 110-343 for details on the added provisions.) The amended version of H.R. 1424 was sent to the House for consideration, and on October 3, the House voted 263-171 to enact the bill into law. President George W. Bush signed the bill into law within hours of its congressional enactment, creating the $700 billion Troubled Asset Relief Program (TARP) to purchase failing bank assets.
Supporters of the plan argued that the market intervention called for by the plan was vital to prevent further erosion of confidence in the U.S. credit markets and that failure to act could lead to an economic depression. Opponents objected to the plan's cost and rapidity, pointing to polls that showed little support among the public for "bailing out" Wall Street investment banks, claimed that better alternatives were not considered, and that the Senate forced passage of the unpopular version through the opposing house by "sweetening" the bailout package.
Businessman and commentator Peter Schiff argued that since the problems of the American economy were created by excess credit and debt, a massive infusion of credit and debt into the economy only exacerbates the problems.This argument has been opposed by both supporters and critics of the program.