Emergency Economic Stabilization Act (EESA) of 2008

Emergency Economic Stabilization Act (EESA) is one of the bailout measures taken by Congress in 2008 to help repair the damage from the subprime mortgage crisis. The act gave the Treasury Secretary the authority to buy up to $700 billion of troubled assets and restore liquidity in financial markets. The Emergency Economic Stabilization Act (EESA) was originally created and proposed by Henry Paulson.

The original form of the EESA was rejected by the House of Representatives in September of 2008 and was therefore revised. A revised version was passed the following month. Proponents of the plan believed that it was vital to minimize the damage done to the economy by the mortgage meltdown, while detractors contended that the cost amounted to a bailout for Wall Street and the banks. A central part of the response to the financial crisis was the implementation of the Troubled Asset Relief Program (TARP).

The law was passed in response to one of the worst financial crises in U.S. history, in which, for the first time in 80 years the U.S. financial
system was at risk of collapse. To help stabilize the financial system, the Secretary of the Treasury was authorized to "purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary."

This broad mandate was backed by $700 billion from the U.S. Treasury. The stated goals of the program were to "protect home values, college funds, retirement accounts, and life savings; preserve homeownership and promote jobs and economic growth; maximize overall returns to the taxpayers of the United States; and provide public accountability for the exercise of such authority."

The act is widely credited for having restored stability and liquidity to the financial sector, unfreezing the markets for credit and capital, and bringing down the cost of borrowing for households and businesses. This in turn helped to restore confidence in the financial system and restart economic growth, although a decade later some markets had still not returned to their pre-crisis highs.

Largely as a result of the takeover of insurance giant AIG, by 2017, the Congressional Budget Office estimated that TARP transactions cost taxpayers a little more than $32 billion. CBO said the federal government disbursed $313 billion, most of which had been repaid by 2017. CBO estimated a net gain to the government of $9 billion from those transactions, and that included a net gain of about $24 billion from assistance to banks and other lending institutions, partially offset by a cost of $15 billion for assistance to AIG.