Banking Practice Exam 2025 - Free Banking Practice Questions and Study Guide

The Troubled Asset Relief Program (TARP) was specifically established in response to the financial crisis of 2008. Its primary goal was to stabilize the banking system and restore confidence in the financial markets by allowing the U.S. Treasury to purchase distressed assets from financial institutions. This program aimed to enable banks to strengthen their balance sheets by removing troubled assets, which in turn would facilitate lending and stimulate economic activity.

TARP initially focused on acquiring toxic assets, such as mortgage-backed securities, which had significantly depreciated in value due to the housing market collapse. By purchasing these assets, the U.S. Treasury could help financial institutions regain stability and ultimately support the broader economy. The success of TARP was instrumental in mitigating the financial crisis and laid the groundwork for subsequent recovery efforts.

The other options mention different aspects of financial regulation or assistance. The Capital Purchase Program also relates to financial stability but specifically involves capital injections into banks rather than the purchase of distressed assets. The Foreclosure Prevention Act pertains to protecting homeowners from foreclosure, and the Check 21 Act addresses the electronic processing of checks, having no direct relation to the purchase of distressed assets.