Tag: Secretary Of Treasury

What Happened To The Toxic Loan Plan?

Treasury Secretary Henry M. Paulson’s decision to abandon plans to buy troubled bank assets shows that he has come to two conclusions about what was once the chief focus of the government’s $700-billion bailout:

The first is that it wouldn’t work. The second is that the economists and financial experts who agitated to have capital injected directly into the banking system now appear to have been right all along.

Paulson announced Wednesday that the federal government would formally abandon plans to buy troubled mortgage-backed securities from banks and other big investors to instead focus its efforts on thawing credit markets.

The shift, however, had been in place since last month. A week after the package was passed by Congress on Oct. 3, Paulson began signaling that the thrust had changed and that much of the $700 billion instead would go toward providing capital to banks by investing in their preferred shares.

That action might be compared to replacing a gravely ill patient’s slow intravenous drip with a shot of adrenaline into the heart. The stock market rallied, and over the next few weeks the capital injections intensified and talk of the asset purchases ebbed.

Although Treasury’s change of course has aligned the U.S. more closely with Britain and continental Europe, where direct recapitalization of banks has become the standard response to the financial crisis, it has raised new doubts about the U.S. bailout.

These include concerns about Paulson’s inconsistent direction. The Treasury secretary originally presented the plan to buy toxic mortgage-based investments under the Troubled Asset Relief Program as the only conceivable solution to bank failures, then vehemently resisted congressional attempts at modification.

“This was a major piece of legislation,” observed Campbell R. Harvey, professor of international business at Duke University. “TARP was what people were voting on, and now he announces that TARP is not going to be TARP.”

Another concern is that Paulson and Congress are failing to specifically define the purpose of TARP. Originally the program was aimed at troubled banks, particularly those whose failure might undermine the domestic or global financial systems.

On Wednesday, however, Paulson said the remaining TARP funds would be directed at “both banks and non-banks” with troubled holdings; at non-bank credit markets that have stagnated, such as those for credit card receivables, auto loans and student loans; and at the housing market to stem the risk of foreclosure. These categories represent a dramatic expansion, and arguably a dilution, of the program.

Well, how nice this change seems to be a weekly thing…the money will go where the corporations want it to go.  What of oversight?  There is NO oversight!  Paulson does what Paulson wants and NO ONE is questioning his decisions.  Where were the critics in the run to the bill.  The bill that just had to be passed was to stop the economy from tanking….and the economy tanked….someone ask these people why we should trust them to get it right this time.

Where Is The Love?

Yesterday Paulson spoke for 45 minutes explaining the progress of the bailout and the markets bombed for a third straight session.

An increasingly despondent Wall Street fell for the third straight session Wednesday as investors absorbed another series of dismal corporate reports and news that the government won’t buy banks’ soured mortgage assets after all. The Dow Jones industrials dropped more than 410 points, and all the major indexes lost more than 4 percent.

The stock market has lost about $1 trillion over the past three days, according to the Dow Jones Wilshire 5000 index, which reflects the value of nearly all U.S. stocks.

The market started the day falling on more signs that companies are being hurt by a severe pullback in consumer spending. Macy’s Inc. said it lost $44 million in the third quarter as sales at the department store retailer fell more than 7 percent. And consumer electronics retailer Best Buy Co. slashed its fiscal 2009 guidance on fears that consumer spending will erode even further.

Paulson also announced a new goal for the program to support financial markets that supply consumer credit in such areas as credit card debt, auto loans and student loans. He said, “with a stronger capital base, our banks will be more confident” to support economic activity.

Still nothing Paulson said would lead me to believe that there is anything being done for the people.  But wait!  All involved keep saying that the possiblity of a profit being made is good and that would mean that the taxpayer made money…….thinking…….does that mean we all will get checks?  Or is that just a way to keep the taxpayer at bay and smiling?

Paulson is getting little or no love for his plans…..he rushed the bailout through Congress with the prediction of a failing economy…..they passed the bill…and the economy failed…..is it not about time to regroup and fins a way to make Main Street the most important thing?

Treasury The Most Important Position

At least for the time, president-elected will be judged by who he will put into the leadership role of the Treasury.
Now, as President-elect Obama considers his choice for Treasury secretary, Summers’ name is again front and center. But this time, the decision is not so clear. Obama faces conflicting advice from his close advisors, from Capitol Hill and from important Democratic constituencies.

Others warn that Summers’ sharp elbows and his penchant for controversy could make him a damaging distraction at a time when the nation and the new president can least afford it. And they worry that Summers’ wide-ranging knowledge, expansive personality and combative impulses could clash with the president’s desire to have the White House deeply involved in the biggest problems facing the new administration.

These voices argue that a more reassuring pick might be the venerable former Federal Reserve Chairman Paul A. Volcker, perhaps teamed with New York Federal Reserve Bank President Timothy F. Geithner.

Obama’s choice will have huge symbolic importance, offering voters an early chance to assess his judgment and decision-making process. Regardless of who is chosen, the Treasury secretary will play a central role in the administration’s economic team — influencing the substance of policy and how effectively it is pursued

THe choice that most are going with, at least in this guessing stage is Summers.
From the outset, Summers’ career has been marked by soaring achievement and recurring controversy.

He seemingly was born to be an economist. Both his parents were economists and two uncles — Paul Samuelson and Kenneth Arrow — won the Nobel Prize for their work in the field. Summers was named an assistant professor at MIT even before finishing his doctorate, and was one of the youngest faculty members to be granted tenure at Harvard.

But as chief economist of the World Bank in the early 1990s, he drew fire after approving a subordinate’s research paper that suggested poor African nations might make money by taking in the trash of developed nations.

He survived the African trash send-up to join the Clinton Treasury Department, working his way from one senior position to another until he became Robert E. Rubin’s deputy and successor as secretary. He became Harvard president at age 46.

I think they will not go with a Wall Street insider, it would be more prudent to pick someone from academia.