The world according to TARP

23 November 2018 By Peter Thal Larsen Follow @Peter_TL

Market panic helped the U.S. government push its 2008 bank bailout through Congress. Theresa May might hope for a similar outcome if the UK parliament rejects her deal to leave the EU. The flawed analogy misunderstands markets, and forgets that Britain’s crisis is self-inflicted.

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UK Prime Minister Theresa May and her ministers expect a selloff in equities and the pound to pressure members of parliament into supporting her deal to leave the European Union if they initially reject it, ITV political editor Robert Peston wrote on Nov. 21.

The so-called TARP scenario is named after the Troubled Asset Relief Program proposed by the U.S. government in 2008. The scheme, which gave the government permission to purchase toxic assets and equity in banks, was rejected by the House of Representatives in September 2008, but approved several days later after a sharp selloff in global equity markets.

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