The U.S. is considering using some of its $700 billion bailout package to take stakes in other ailing financial companies. It’s a good thing they gave themselves enough money to work with. Meanwhile, remember Paulson’s original TARP plan? It’s being rejiggered. After all, why buy up troubled assets when you can just give the banks holding those assets more money?
WSJ: The Treasury Department is considering using more of its $700 billion rescue fund to buy stakes in a broad range of financial companies, not just banks and insurers, after tentative signs of the program’s success, according to people familiar with the matter.
In focus are companies that provide financing to the broad economy, including bond insurers and specialty finance firms such as General Electric Co.’s GE Capital unit, CIT Group Inc. and others, these people said.
The possible expansion shows how much Treasury’s rescue plan has morphed since it was first proposed in September. Treasury Secretary Henry Paulson originally unveiled a complex plan to buy up financial institutions’ hard-to-sell assets such as mortgage-backed securities.
That proposal has yet to get up and running, stymied by operational delays and beset by criticism. People familiar with the matter say Treasury may scrap part of that early plan — purchasing assets through an auction process — and instead purchase some of these distressed assets directly.
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