» Subscribe Today!
More of what you want to know.
The Daily News
X

Forgot your password?
Skip Navigation LinksHome >
VOL. 123 | NO. 223 | Thursday, November 13, 2008

Paulson Says Troubled Assets Will Not Be Purchased

By MARTIN CRUTSINGER | AP Economics Writer

Print | Front Page | Email this story | Comments ()

WASHINGTON (AP) – 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 that 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.

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.

Paulson said the administration is exploring other options, including possibly injecting more capital into banks on a matching basis, in which government funds would be supplied to banks that were able to raise money on their own.

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, but Paulson did not announce that it would be adopted. Federal Deposit Insurance Corp. Chairman Sheila Bair has pushed for that approach.

Speaking of the first-ever summit of leaders of the Group of 20 major industrial and developing countries,

Paulson said this weekend’s meeting needs to focus first on how to repair the financial system as a way to bolster the global economy.

Paulson praised a new set of guidelines issued Wednesday by the Federal

Reserve and other bank regulators, saying they addressed a crucial issue of making sure banks continue to lend at adequate levels.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Sign-Up For Our Free Email Edition
Get the news first with our daily email


 
Blog Get more from The Daily News
Blog News, Training & Events
RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 55 55 13,385
MORTGAGES 73 73 17,422
FORECLOSURE NOTICES 32 32 3,423
BUILDING PERMITS 623 623 31,553
BANKRUPTCIES 66 66 12,761
BUSINESS LICENSES 11 11 4,608
UTILITY CONNECTIONS 153 153 19,610
MARRIAGE LICENSES 44 44 4,104

Weekly Edition

Issues | About

The Memphis News: Business, politics, and the public interest.