Paulson Now Wants to Focus on Consumer Lending

Bloomberg News reports that Treasury Secretary Henry Paulson wants to use part of the $700 billion bailout "to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets." Paulson said earlier today, "Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards. This is creating a heavy burden on the American people and reducing the number of jobs in our economy" and acknowledged buying the troubled assets of financial institutions was "not the most effective" use of bailout money. In other news, the Dow, Nasdaq and S&P 500 are down about 3% due to, according to CNBC, "doubt about the effectiveness of government intervention seeped deeper into the market." (AmEx has lost more than 8%.)

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By Jen Chung in News on November 12, 2008 11:51 AM

Comments [rss]

NannyState

With Bush going out of office, it seems this guy is 'pardoning' all of the worst instigators of the global financial crisis. He's like a retard throwing rice at a funeral.

ides_of_march

He looks like Lex Luthor.

Felix Hoenikker

Interesting piece here:

http://www.rollingstone.com/politics/story/24012700/the_new_trough

drewo

A collapsing house of credit cards.

For years, we were told that we were not saving enough as individuals. At the same time we were told to keep spending, to keep the economy in motion. Then people ran out of credit, and cash, and stopped spending -- in some cases actually trying to save money.

Now they want us to keep spending. Mixed messages maybe?

Huntz

Matty,

The original plan was to buy the "bad assets" (mortgage backed securities) from the banks in hopes that with more certain balance sheets, the banks would start lending again. The goverment quickly realized the same problem the banks were having - they have no idea how to value the bad assets.

Instead, the Treasury will be purchasing stock of the banks (so effectively the taxpayer will now be minority owners of the banks). The hope is also to require the receiving bank to raise additional money in the marketplace to further ensure its solvency and show that the market believes that the bank is viable going forward.