Which legislation passed in 2008 authorized the Treasury Department to purchase stock in and assets of failing financial institutions?

The legislation that authorized the Treasury Department to purchase stock in and assets of failing financial institutions in 2008 is the Troubled Assets Relief Program (TARP). TARP was enacted as part of the Emergency Economic Stabilization Act and was designed in response to the financial crisis that marked the collapse of major financial institutions due to exposure to mortgage-backed securities and the housing market collapse.

Through TARP, the government aimed to stabilize the financial system by purchasing and holding troubled assets, thus providing liquidity to financial institutions and restoring confidence in the banking sector. This program allowed the Treasury to acquire both equity in banks and other financial entities as a means to facilitate their recovery and help the economy regain stability.

In contrast to the other legislative options, while the Economic Stabilization Act laid the groundwork for TARP, the specific mechanism of asset purchase is characterized by TARP itself. The Housing and Economic Recovery Act focused on reforms within the housing sector, and the Dodd-Frank Wall Street Reform Act was established later, in 2010, to address and regulate parts of the financial industry to prevent such crises in the future.