Paulson reconsiders mortgage assets plan
Updated on 12 November 2008
The US Treasury Secretary says he is reconsidering the use of the $700 billion (£463bn) bail-out to buy troubled mortgage assets.
Henry Paulson told reporters he and his team are instead mulling a second round of capital injections into financial institutions that would match with private funds.
Mr Paulson and his colleagues had been looking at buying illiquid mortgage assets from banks and other institutions to cushion potential losses - under the so-called Troubled Asset Relief Programme (TARP) - in a bid to have Congress back the bail-out plan.
However, it didn't take long to discover that setting up such purchases would take time, and the Treasury opted for the faster method of injecting capital directly into banks by buying preferred stock.
So far, the US Treasury has allocated $250 billion (£167bn) of the fund to such purchases.
In an update on the Treasury's financial rescue efforts, Mr Paulson said: "Our assessment at this time is that this is not the most effective way to use TARP funds."
He added: "But we will continue to examine whether targeted forms of asset purchase can play a useful role, relative to other potential uses of TARP resources.
"In developing a potential matching programme, we will also consider capital needs of non-bank financial institutions not eligible for the current capital programme."
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