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Finance & Stock Groups Forum Index » Mutual Funds » Top News: Paulson: Government won't buy troubled bank assets
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 Posted: Wed Nov 12, 2008 6:15 pm |
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Top News: Paulson: Government won't buy troubled bank assets
US Dollar and Stocks turns lower as Paulson unveils change in bailout.
WASHINGTON – The government has abandoned the original centerpiece of
its $700 billion rescue effort for the financial system and will not
use the money to purchase troubled bank assets.
Treasury Secretary Henry Paulson said Wednesday that 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 also announced that
the administration was looking at a major expansion of the program
into the markets that provide support for credit card debt, auto loans
and student loans.
Paulson said 40 percent of U.S. consumer credit is provided through
selling securities that are backed by pools of auto loans and other
such debt. He said these markets need support.
"This market, which is vital for lending and growth, has for all
practical purposes ground to a halt," Paulson said.
On the issue of using the $700 billion bailout package to provide help
to ailing auto companies, Paulson said the administration preferred an
approach that would accelerate support to that industry from other
legislation Congress passed this fall.
Paulson said the administration is exploring other options, including
expanding the program beyond banks to nonbank financial institutions
which provide essential credit to both businesses and consumers. He
suggested that capital could be provided to institutions on a matching
basis in which the government would supply money to those able to
raise money on their own.
Providing an update on the largest government bailout in U.S. history,
Paulson said that the effort was showing results but that more efforts
were needed given the most severe downturn being faced in housing.
"Our financial system remains fragile in the face of an economic
downturn here and abroad," Paulson said. "Market turmoil will not
abate until the biggest part of the housing correction is behind us.
Our primary focus must be recovery and repair."
The administration decided that using billions of dollars to buy
troubled assets of financial institutions at the current time was "not
the most effective way" to use the $700 billion bailout package, he
said.
The announcement marked a major shift for the administration which had
talked only about purchasing troubled assets as it lobbied Congress to
pass the massive bailout bill.
The bailout money also should be used to support efforts to keep
mortgage borrowers from losing their homes because of soaring default
levels, he said.
A proposal to have part of the bailout funds used to guarantee
mortgages that have been reworked to reduce monthly payments for
borrowers is an approach the administration continues to discuss,
Paulson said, although he indicated it would not be a part of the
rescue program. He said it went beyond the intent of the legislation
Congress passed on Oct. 3.
Asked about what he had in mind to expand the rescue effort to support
credit card and other types of consumer debt that is backed by selling
securities, Paulson said it would probably take weeks to design the
new program and then more time to get it implemented, a possible sign
that any such proposal would have to be implemented by the incoming
administration of President-elect Barack Obama.
http://news.yahoo.com/s/ap/20081112/ap_on_bi_ge/financial_meltdown;_ylt=AjUE5A7CLZf9f5if9YO4bf6yBhIF |
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