It was signed into law by U.S. President George W. Bush on October 3, 2008 and was a component of the government's measures in 2008 to address the subprime mortgage crisis. Included in the legislation were limits on executive compensation for firms that participated in the program as set forth below:

1. Limits on executive compensation: TARP sets some new limits on the compensation of the five highest-paid executives at companies that elected to participate significantly in TARP. The Act treated companies that participated through the auction process differently from those that participated through direct sale (that is, without a bidding process).

a. Companies who sold more than $300 million in assets through an auction process were prohibited from signing new “golden parachute” contracts (employment contracts that provide for large payments upon

termination) with any future executives. It also placed a $500,000 limit on annual tax deductions for payment of each executive, as well as a deduction limit on severance benefits for any golden parachutes already in place.

b. Companies in which the Treasury acquired equity because of direct purchases had to meet tougher standards that were to be established by the Treasury

These standards would require the companies to eliminate compensation structures that encouraged “unnecessary and excessive” risk-taking by executives, provide for claw-back (forced repayment of bonuses in the event of a post-payment determination that the bonuses were paid on the basis of false data) of bonuses already paid to senior executives based on financial statements later proven to be inaccurate, and prohibit payment of previously established golden parachutes.