Politics
Out of context: Reply #2140
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- ukit0
Looks like the rescue plan has been rescued...
http://www.nytimes.com/2008/10/1…
WASHINGTON — As international leaders gathered here on Saturday to grapple with the global financial crisis, the Bush administration embarked on an overhaul of its own strategy for rescuing the foundering financial system.
Two weeks after persuading Congress to let it spend $700 billion to buy distressed mortgage-backed securities, the Bush administration has put that idea on the back burner in favor of a new approach, which would have the government inject capital directly into the nation’s banks — in effect, partially nationalizing the industry.
While the Treasury department says it still plans to buy up distressed assets, the scope of that plan is unclear. And the federal government meanwhile has directed Fannie Mae and Freddie Mac, the government-controlled mortgage giants, to ramp up their purchases of troubled mortgage bonds, in what could be a speedier and less formal process than the reverse auctions proposed by the Treasury.
The Federal Housing Finance Agency, which last month seized Fannie Mae and Freddie Mac and placed them into a conservatorship, has ordered the companies to buy substantially larger amounts of mortgage securities — mostly subprime or other classes of mortgages in default.
The new plan to buy stock in banks, which has become the administration’s primary focus, comes closer to a partial nationalization of the banking system than at any time since the Depression. In exchange for providing capital, the government would demand some kind of nonvoting minority stake.
The surprising turnaround by Treasury Secretary Henry M. Paulson Jr., announced Friday as part of a coordinated plan to rescue the financial industry, has raised questions about whether he squandered valuable time by trying to sell Congress a plan that he and other administration officials had failed to think through in advance.