why did the markets stabilize in 2009

I would like to know too. The movie seems to say that the Treasury/Fed assumed the banks would lend out their money to the public, thus preventing massive job losses and housing foreclosures. But instead, the banks just took the money that was given to them in order to boost their own positions.

How could Paulson give money to the banks without restrictions? It makes no sense.

I'm not an economist, but maybe the question is: Is the market stabilized?

According to the Feds...yes.
According to the rank and file working American...no.

Maybe that is the point of this film.

I am an A minus student, and there isn't anything wrong with that.

[deleted]

This film's epilogue is slightly misleading in that TARP had little or nothing to do with the so called stabilization in 09 and beyond, two separate quantitative easings were implemented to keep the financial system "stabilized" and prop up the markets. Bernanke recently testified that QE3 would be pointless because it's quite simply not fixing the big picture problem, and as a result, we are now flirting with hyper inflation. We're far from out of the woods, don't let anybody tell you different.

For the record, Case-Shiller data released TODAY confirms that real estate has double dipped and is predicted to get worse.

Technically the TARP program was the tip of the iceberg, and to be honest its intent were merely psychological. Behind the scenes, the Federal Reserve purchased a substantial amount of the toxic assets, repackaged them and unloaded it onto other firms or placing them on the Fed's balance sheet; essentially removing the garbage from the banks. Next, the Federal Reserve enacted numerous other more complex emergency credit programs by guaranteeing commercial paper, buying mortgage backed securities and creating swap facilities– the idea for these programs would be to increase the willingness of banks to lend, thus unclogging the credit markets.

Because the market is a crap-shoot. A company can release earnings which beat the street's expectations, beat the previous year's earnings, and yet the stock price might be down 2%. There seems to be no sense in the market.

Please read and pay attention to what I wrote before posting a reply.

While the other posters are correct that TARP worked by increasing confidence, I think it does a disservice to TARP to say that its effects were purely psychological.

If it is public knowledge that a company is encountering very serious difficulty (as all investment banks in 2008 were), people will pull their money out. An investment, or a redemption, IS a reflection of your confidence in the profitability of the investment bank. Eventually, if so many customers will pull their money out, the bank can no longer pay out all of their redemption requests. This is what happened to Lehman. Particularly after the Lehman bankruptcy, the public perception was that any bank could fail at any time due to liquidity concerns.

TARP was a game changer because the customers were assured that the banks would be able to meet their obligations, and would not be forced to declare bankruptcy. So, yes, the crisis calmed down because people received a psychological boost, but the psychological boost was rooted in the fact that liquidity and bankrupcty concerns had passed.

Now, a recovery would certainly have quicker if the TARP funds were spent as they were intended to be spent. Theoretically, a lot of jobs would've been saved and a lot of foreclosures would have been avoided. But eliminating the looming specter of bankruptcy definitely helped the market start to stabilize.

Stock market prices hit bottom in March 2009, which is when the Federal Reserve began its so-called "Quantitative Easing" policy. QE is little more than printing money, and when money is created it has to go somewhere. In '09 it went into stocks because stocks were cheap. Then when the Fed announced QE2 in November 2010, the money went into commodities and that's when gas & food prices started to spike.

Of course what QE's money-printing does is create inflation (see: gas & food prices), which crushes the value (purchasing power) of existing dollars in savings accounts and retirees' pension & social security checks. The increases in the stock market indices are not true increases in value because the dollars they are denominated in are worth less and less as the Fed and the banks increase the money supply.

One of the reasons the Constitution compels Congress to COIN money rather than PRINT it, and why the original Coinage Act of 1792 imposed the death penalty for those who debased the currency, is that a stable currency (i.e. a gold standard) fosters a stable economy and markets that cannot be as manipulated as they have been in the last decade (see: DotCom Bubble, Housing Bubble, CDS/MBS/CDO mess, QE1/QE2, trillion-dollar-deficits). The Colonial government relied on printed money to finance the Revolutionary war; unfortunately that experiment resulted in the term "not worth a Continental" as the paper currency that wasn't backed by value saw its value destroyed even though the Colonists won the war.

Fortunately the public is becoming more aware of the manipulation and devaluations going on - witness for example the ever-increasing polling numbers for Ron Paul. You'd never see these whipsaw 600-point moves in the DOW under an honest monetary system.