As contemplated by the enabling legislation, TARP funds have also been used on a targeted basis to prevent potentially disorderly failures of systemically critical financial institutions – failures that would have had highly adverse consequences for the system as a whole. These actions, together with similar measures in other countries, have brought greater stability to our financial system.
Moreover, injections of new capital are moderating the powerful pressures on the financial institutions that received the injections to deleverage by selling assets and pulling back from new lending. Stabilization and slowing the pace of deleveraging are critical first steps toward more-normal credit conditions.