According to Washington sources, US Treasury Secretary Henry Paulson has officially scratched out his plan to buy assets from distressed financial institutions owning foreclosure properties. The government will continue to invest in these firms but would first like to focus on struggling consumers and borrowers.
Paulson disclosed that the Treasury will look for ways to aid strapped consumers. In the next phase of the Troubled Asset Relief Program, Paulson said that the government will still flood financial firms with money but will also try to improvise a plan to prevent foreclosures and improve the availability of loans such as:
- student loans
- auto loans
- credit cards
The new rescue move of the Treasury signals an awkward start especially if the new administration will take its place soon. The Treasury would still design new programs even if it would take billions of dollars and weeks to implement. The government has made available a budget of $350 billion. As of the moment, the Treasury has only $ 60 billion available in the TARP fund.
The Congress is not very happy that the Treasury is not forcing banks to create loans with funds they got from the government. Paulson remains steadfast in this issue because he believes that no one should be pushed to get a loan that they do not want. Paulson has even resisted the pressure to provide bailout to troubled automakers in Detroit. He said that the auto industry is important but believes that TARP is not the right vehicle for a bail-out
Paulson, however, have said that the Treasury has not yet figured out how to allow the Congress’ request to use TARP to aid distressed homeowners to prevent foreclosures. It could be recalled that the original plan of the Treasury is to take the lead once it has granted mortgage-backed securities and residential loans. The agency plans to persuade lenders to help homeowners avoid having foreclosed homes.
According to Paulson, using the TARP money to decrease foreclosures was not only thought about but was, in fact, the focal point of the plan. Treasury only hopes to get a clear answer on what the Bush administration can do to help stop the increasing numbers of foreclosure homes.
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