The Paulson-Bernanke plan to rescue troubled financial institutions by buying up mortgage assets has been underway for several weeks, according to a person familiar with the plans. Although the plan was announced suddenly—and perhaps earlier than planned—it had been under development for quite some time, with its seeds sown inside the Treasury Department offices at 1500 Pennsylvania Avenue shortly after Bear Stearns collapsed.
In recent weeks, as the plan began to be regarded as a pre-emptive version of the Resolution Trust Corporation, the Treasury began approaching former officials from the RTC to see if they would take a role in the bailout plan. The RTC was created in 1989 to sell off assets of thrifts that had gone bust. One former senior RTC official approached in late August declined to join the Paulson-Bernanke plan, a person close to the former official said.
There’s at least some hint that the Treasury might have sought to use the former RTC officials as window dressing. The Hanky Panke Plan (short for Hank Paulson and Ben Bernanke plan) is being presented as an updated version of the RTC, which obscures crucial differences between the plans. Most importantly, the RTC sold off assets of thrifts that had already failed while the Treasury’s bailout plan wants to buy assets from financial institutions that aren’t convinced they are in danger of failing. Having former RTC officials running the show might have helped distract from the unprecedented aspects of the Hanky Panke Plan.
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