Secretary Paulson changes his mind - has $700bn, wonders what to buy?

[Banquo's Ghost]

Hank Paulson, the US Treasury Secretary, having bounced Congress into giving him $700bn to buy up toxic debt and therefore encourage banks to start behaving like intelligent organisations again, has got cold feet (http://www.ft.com/cms/s/0/6cdb3ee0-b0ef-11dd-8915-0000779fd18c.html).

Maybe chucking good money after even worse money like credit bail-outs would be good? Because you know, he's never seen a bottomless pit he didn't want to plug with your cash.

But don't worry, he hasn't made up his mind yet. Maybe he'll just plump for the holiday in Bermuda instead.

Maybe you can make some suggestions for the poor, bewildered man?


“For the Treasury to come out and now say they are not going to do what they originally planned, is a real credibility problem,” said Jim Sarni, portfolio manager at Payden & Rygel.

Measures of risk aversion flared, with the implied yield on four-week Treasury bills falling to 4 basis points. Meanwhile, oil dropped $3.17 a barrel to $56.16 in a sign of growing fears of a deep global economic slowdown.

[seireikhaan]

~:shock:

You've got to be :daisy:'ing kidding me. Not only we gave this numnutz 700 billion, which is in itself bad enough, but now he won't even spend it as he'd promised? ~:pissed:

[Ser Clegane]

I think he is plannning to secrectly divert the money and build a huge robot army to conquer the world and become supreme ruler :crowngrin:

On another note, I think it is actually fine to change the plan - the original bailout plan was very rushed (which was necessary at the time to avoid utter chaos) - now that things seem to have calmed down a little bit, I think it makes a lot of sense to probe the original plan and change the course where appropriate.
I agree that credibility might be an issue here - but I believe the damage to credibility would be worse if it turned out that hundreds of billions of $ had been wasted. The Treasury has a big budget to deal with the crisis now - it is essential to use that budget wisely, IMHO - even if that means that you have to backpaddle.

(NB: of course it is hard to say now which will in the end be the wisest action - the wrong decision might be made after all - but in principle I think it is prudent to be open for different actions than originally planned)

[Vladimir]

Surprise!

That's what happens when government throws money at problems. Instead of trying to help those affected by the crisis, it seeks to cover it up with cash.

[Banquo's Ghost]

On another note, I think it is actually fine to change the plan - the original bailout plan was very rushed (which was necessary at the time to avoid utter chaos) - now that things seem to have calmed down a little bit, I think it makes a lot of sense to probe the original plan and change the course where appropriate.
I agree that credibility might be an issue here - but I believe the damage to credibility would be worse if it turned out that hundreds of billions of $ had been wasted. The Treasury has a big budget to deal with the crisis now - it is essential to use that budget wisely, IMHO - even if that means that you have to backpaddle.

I agree in principle with reviewing the situation (http://uk.youtube.com/watch?v=LVeJwXUg98Q), but this crisis is rooted in a lack of confidence. The administration pushed Congress into making a decision most of them wanted to take time to consider, based on the absolute need to solve an immediate problem. Part of the power they wanted was to make quick decisions.

Now Paulson is admitting that he doesn't really know what the problem is. Thus, Congress ought to take back the money left unspent until he can come back with a credible plan and evidence of its efficacy.

[Ser Clegane]

Thus, Congress ought to take back the money left unspent until he can come back with a credible plan and evidence of its efficacy.

That would certainly be a valid step. After all (I believe) the money was granted for a specific purpose - if it turns out that this purpose might not be the best way to spend it, the alternative spending should pass the same hurdle as the original plan to prevent him from spending the money on a robot army

[drone]

Maybe you can make some suggestions for the poor, bewildered man?

He can always send the currently unused $400 billion to me. :yes:


The whole plan from the start was a joke. Unsupervised distribution of $700 billion by the executive branch, sounds like a winner. Maybe he's just being the good little CEO he once was, and is prepping his golden parachute for Jan 20th.

[Seamus Fermanagh]

Come now, did any of you really think we weren't buying a

PpOiKgE?

[Xiahou]

That would certainly be a valid step. After all (I believe) the money was granted for a specific purpose - if it turns out that this purpose might not be the best way to spend it, the alternative spending should pass the same hurdle as the original plan to prevent him from spending the money on a robot armySomeone check me on this, but I believe that Congress, as is typical, gave over the money with relatively few restrictions. They usually like doing that because it relieves them of responsibility if hindsight shows the money was spent unwisely. It's the standard formula- Congress grants sweeping powers and complains when the executive uses them.

From what I've heard, the new plan will involve the federal government flat out buying stock in the banks in order to provide them with money. Hooray for nationalization. :thumbsdown:

[drone]

I believe that was the original plan proposed by Bush/Paulson, but the bill that actually passed does have some restrictions.

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/12/AR2008111201124.html
The steps unveiled yesterday are Paulson's latest effort at using the bailout to support lending by making capital investments in an ever-widening array of firms in return for ownership stakes. So far, the government has allocated $250 billion of the Treasury package for banks and $40 billion more for insurance giant American International Group.

If the Treasury's new initiative succeeds in increasing the availability of consumer credit, it would probably give a huge boost to the nation's automakers by ensuring that car buyers could find loans. But Paulson added that automakers won't be helped at all in the absence of a plan to make the industry viable.

Congressional leaders immediately expressed their disappointment with his announcement. But citing their goal of getting money to homeowners and automakers, these lawmakers said his decisions could be overturned once President-elect Barack Obama takes office.

"I am concerned that we may have to wait until the next administration before we have the real change in economic policy that our nation needs," Sen. Christopher J. Dodd (D-Conn.) said.

Paulson responded in the interview that such changes, including the use of bailout money to reduce foreclosures, were "not what the American people were expecting, and it's not what many in Congress are expecting."

But Paulson cannot ignore Congress. Once the first $350 billion has been drawn down, Paulson must go back to Congress to obtain access to the rest of the money.

When Paulson first presented the rescue plan to Congress, he pitched it as a program to buy up "toxic securities" -- complicated investments backed by failing mortgages and consumer loans -- that were sapping the confidence of investors.

"We moved away from it because we have a great responsibility to always evaluate the facts in front of us and say how do we take a finite amount of resources and how do we get the most powerful results?" he explained. He added that the program for making capital purchases in financial firms was "quicker, more efficient and more powerful."

So what will probably happen is that he blows through $350 billion, then does nothing until the inauguration unless another major collapse happens. Since he only has unfettered access to the $60 billion left, I can see now why the automakers are going to be swinging in the breeze until January. My guess is that he is saving that for his buddiesfinancial institutions.

[Ronin]

From what I've heard, the new plan will involve the federal government flat out buying stock in the banks in order to provide them with money. Hooray for nationalization. :thumbsdown:

that's not a nationalization...in a nationalization the government simply issues a decree that states that the company is now the government's property....there's none of this "buying stock" siliness

don't be socialist girly man!!! :wiseguy: