Purchase of equity shares of banks by the Department of Treasury, in order to promote lending and market liquidity under the “Capital Purchase Program” of the Troubled Assets Relief Program.
The Capital Purchase Program was the first of the programs implemented under TARP. Through the program, the Treasury will invest up to $250 billion of senior preferred shares in U.S. banks, savings associations, and certain bank and loan holding companies. The maximum amount available for each financial institution is $25 billion or 3 percent of risk-weighted assets, with a mimumum subscription amount of 1 percent of risk-weighted assets. In the program's announcement, the Treasury stated that "companies participating in the program must adopt the Treasury Department's standards for executive compensation and corporate governance," applying to the CEO, CFO, and the next three highly compensated executive officers.
Hundreds of financial instutitions, including the country's largest banks, have participated in the program.