Bailout Watch 169: Sec. Paulson Changes the Game

Robert Farago
by Robert Farago
bailout watch 169 sec paulson changes the game

Treasury Secretary Henry Paulson has announced that the $700b government rescue program will not be used to purchase troubled assets as originally planned. Just like that. I swear. MSNBC reports that turnabout is fair play. “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.” That said, the TS isn’t totally shit-canning the previous plan: “Paulson said 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.” So, that leaves $450b, right? Where’s that going to go now? “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.” Good news for the domestics? Not overmuch. Any recovery in the auto loan biz will still be chasing diminishing demand. To wit: Toyota’s been hawking the Hell out of its zero percent financing and its October sales dropped 25 percent.

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  • Guyincognito Guyincognito on Nov 12, 2008

    WTF?? Purchase stock in banks? Why do we want that? Purchasing illiquid securities made a little sense because, in theory, they would fetch more at auction than we bought them for. So our $700B investment could have generated a profit and we would convert illiquid securities back to liquid assets in the process. It was an emergency measure that would simply get the market trading again. Instead we're irreversibly nationalizing our banks and god knows what else. Luckily, our government officials are carefully screened for selfless and honorable behavior...

  • Menno Menno on Nov 12, 2008

    All I have to say is this. Nations with "nationalized socialist" automotive industries end up building cars like the TRABANT of East Germany. You know, cotton seed plastic body panels. Solid frames under the front & the rear suspension and a mid-section "crush zone" (you know, where the people sit). Two-stroke stinker motor. 26 horsepower. I recall reading that folks behind the iron curtain (didn't matter which country) had to: a) pay up front for the entire cost of the car, which amounted to about 3 to 5 years wages for the average person b) had no choice as to what they got, not even color c) "enjoyed" a waiting period AFTER paying for the car of 3 to 8 years d) could not find parts once they got the car(outside of the black market - i.e. stolen bits) Put another way, just imagine a car company run like the US Post Office and you'll get what I mean. God help us!

  • Creamy Creamy on Nov 12, 2008
    "It’s a $700 billion slush fund for politicians to do with as they like." actually it is $2 trillion dollars that the fed and the treasury secretary can do with as they like: Fed Defies Transparency Aim in Refusal to Disclose. besides giving the fed and the sec treas our money in the first place, politicians have little say over what happens with that money now.
  • Charly Charly on Nov 12, 2008

    Menno, you're right. Renault was nationalized by the French socialist goverment in the 1980's and was chaptered 7 a few years later. Oh wait, it wasn't And nobody remembers Volkswagen. They have been gone tits up ages ago.