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Paulson calls for bailout change
Treasury Secretary Henry Paulson takes questions from the press after announcing changes to the bailout plan Nov. 12, 2008.
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TEXT OF STORY
First, though, Henry Paulson. We've told you over the past couple of weeks that there isn't any buying up of troubled assets going on. Today, Hank Paulson made it official.
Our Washington bureau chief John Dimsdale starts us off.
Dimsdale: Secretary Paulson was unapologetic about the change in plans. He said the purchase of bad assets would have been too slow to help banks, while the new strategy of injecting government capital will shore up banks and attract private investments.
Tape of Henry Paulson: As the situation worsened, the facts change. The thing I'm grateful for is we were prescient enough, Congress was, that we got a wide array of authorities and tools under this legislation. And I will never apologize for changing an approach or strategy when the facts change.
Paulson said he might use some of what's left in the bailout to encourage broader lending to consumers,
now that credit card, student and car loans are drying up. The Department is reportedly thinking of requiring that lenders match future government payments with money they raise on their own. And John Dearie at the Financial Services Forum says forcing lenders to come up with their own capital eases the perception that the government is choosing winners and losers with its money.
John Dearie: The extent to which you can minimize government involvement by trying to leverage the government's involvement by bringing in or encouraging private capital, I think that's wise on Secretary Paulson's part.
Paulson is also under pressure to use bailout money to help homeowners facing foreclosure. He praised Fannie and Freddie's plans to set voluntary standards for banks to ease mortgage terms, but stopped short of endorsing an FDIC-backed plan to buy distressed mortgages. He said that crosses the line into a government spending program.
In Washington, I'm John Dimsdale for Marketplace.
"Prescient" is not a word I would use to describe Congress or the administration in this bailout. What you and Congress did, Mr. Paulson, was to promise one thing and deliver another. Where I come from what you did is called "bait and switch" and it is considered fraud. Had you and Congress, as controller of the Federal purse strings, been truly prescient we would not be in this mess in the first place. Lacking prescience maybe fiscal responsibility would have been a good idea.
There's a fundamental issue in all of this that is not being addressed: everyone who wanted something (that they couldn't afford) already bought it. Homes, leather couches, plasma TVs, new cars, all the trappings of the modern luxury lifestyle have already been purchased. That's how we got into this mess to begin with. Encouraging consumer lending is the last thing we should want right now.
Folks who handle their finances responsibly won't be asking for loans in the current economic climate and the folks who would be asking for loans right now aren't the folks who should be borrowing money to begin with.
If Sec. Paulson wanted the banks to do more consumer lending, he would have stipulated that any bank taking Federal bailout money must do so. Instead, a number of them are using the money to make acquisitions or to get bad paper off their balance sheets. Did I mention that bailout money is also going for executive bonus pay? I don't mind staff bonus's, but rewarding the people who ran their companies into the ground is a slap in the face of those providing the bailout money--taxpayers.
