November 13, 2008
Henry Paulson announced a $700 billion U-turn on Wednesday when he said that Washington would no longer be using taxpayer money to buy distressed assets from troubled banks.
- A d v e r t i s e m e n t
The Treasury Secretary’s change of heart marks a dramatic shift, given that the primary purpose of the $700 billion bailout fund, approved in Washington only in September, had been to purchase mortgage-backed securities from troubled lenders.
Instead, Mr Paulson said that he planned to use all the funds — $350 billion of which has already been earmarked — to inject capital into banks by acquiring equity stakes in them. At the same time, the US Treasury Secretary, who has less than three months left in office, said that he supported the idea of bailing out America’s collapsing car industry but insisted that his bailout fund should not be used for that purpose.
Mr Paulson, acknowledging the U-turn, said: “I will not issue an apology for changing the strategy when the facts change. We had to move quickly. What we said to Congress then [in September] was that we needed a financial rescue package. And we got a wide array of authorities to use it.”