Not Buying Troubled Assets After All
Remember that emergency bailout, wherein the world would come to a complete halt if the government didn’t buy up all the bad loans? Hank Paulson says “Never mind.”
Treasury Secretary Henry Paulson says that the $700 billion government rescue program will not be used to purchase troubled assets as originally planned. Paulson says the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.
He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.
Now, I don’t know whether this is a better idea than the original plan — although it does come closer to passing a common sense test. But it’s hardly confidence inspiring that they were saying “Trust us” on the absolute urgency of doing precisely the opposite weeks ago.
Further, while I presume the bailout legislation gave Paulson substantial leeway, it’s more than a little frightening that he’s going to spend a quarter trillion dollars in a way totally contrary to the way they were designated by Congress. Something’s not quite right about that.