Finally lawmakers stepped up to the plate.
And, he brushed aside questions about future plans by saying he had no intentions of doling out the second half of the $700 billion program — let the Obama administration deal with it, he said. It couldn’t move far or fast enough to bring the immediate relief Paulson promised. It’s only been a few weeks since Congress signed off on Treasury Secretary Henry Paulson’s big $700 billion bailout plan—the Troubled Asset Relief Program (TARP). What exactly do we have to show for it? Nobody knows. As you recall, the original plan was to buy $700 billion in toxic securities—spoilage from defaulted home mortgages that kicked off the financial meltdown. Simply put, taxpayers would buy $700 billion worth of assets nobody else would touch, ostensibly to get frozen credit markets back in motion. But the toxic-loan plan never got off the ground. American Express has, with a sprinkle of Treasury pixie dust, been deemed a bank, thus qualified to feed at the trough with the others. Companies like GMAC, the lending arm of General Motors, and other carmakers’ lending units, are standing in line as well. His initial “just trust me” proposal didn’t fly. Credit cars and auto loans next in line In a further drift away from Congressional intent, Paulson announced he wanted to extend the bailout program to non-bank credit markets like those holding credit card receivables, auto loans and student loans. And the situation is all the more hazardous because Paulson keeps waffling. 113, (e )(1) of the TARP legislation, which economists are calling the “Stock Injection Alternative.” Paulson promised that stock injection effectively served to “rescue” the banks, but instead of owning shaky assets, the government—the taxpayers—would become preferred shareholders of the banks themselves. That means the taxpayer would be promised a return (since preferred shares pay interest), and those owning common shares would take the first hits.