US treasury secretary Henry Paulson said today that the US government had reversed course on its $700bn economic rescue package and will not relieve troubled banks and financial institutions of assets. Paulson said the government will spend $250bn to purchase shares in banks in order to supply them with capital to make new loans, thereby righting US credit markets and getting the economy moving again.
At a press conference in Washington, Paulson said the Bush administration remains committed to reducing home foreclosure rates, and said the consumer credit market, including the roughly 40% provided by securities backed by pooled auto loans and credit card debt also needs government support.
The announcement that the treasury department will not buy "illiquid" assets from banks marks a major departure from the way the package was initially sold to the US Congress and the public.
But Paulson emphasised that the current programme of investing directly in financial institutions was meeting with success.
"I believe we have taken the necessary steps to prevent a broad systemic event," he said. "Our system is stronger and more stable than it was just a few weeks ago." Paulson said the investments in major US banks have "significantly enhanced liquidity and helped improve market conditions".
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 bail-out 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 Corporation chairwoman Sheila Bair has pushed for that approach.
Poster Comment:
I knew it was a lie all along. They are facist pigs that are merging the banks through federal fiat money.
