Treasury Secretary Henry Paulson and the Bush Administration are likely in for more criticism that they lack a cohesive plan to deal with the financial crisis. Why? This morning, the Treasury Department said the $700 billion rescue plan would not be used to purchase banks' troubled assets as originally planned.

Yes, banks are going to get some of that cash directly injected to their balance sheets. But Paulson now says a new goal for the program is to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.

Mr. Paulson says almost half of the nation's consumer credit is provided through selling securities that are backed by pools of auto loans and other such debt. He said these markets had "for all practical purposes ground to a halt" and needed support.

"With the Federal Reserve we are exploring the development of a potential liquidity facility for highly-rated AAA asset-backed securities," he said. "We are looking at ways to possibly use the TARP to encourage private investors to come back to this troubled market, by providing them access to federal financing while protecting the taxpayers' investment. By doing so, we can lower costs and increase credit availability for consumers."

categories: Understanding The Crisis

11:52 - November 12, 2008

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