Paulson Changes Terms of Bailout

Treasury Secretary Henry Paulson announced yesterday that the financial Bailout, officially known as TARP (Troubled Assets Relief Program) will not, as originally envisioned, be buying any troubled assets.

Instead, the money, approved by Congress, will now be used, per Paulson’s remarks on November 12, to inject capital into the tills of the banks. His hope (as many who propose “trickle-down” theory) is that having more money in their coffers will encourage banks to free up lending and help consumers buy and/or remain in their houses.

Reaction to this has been, for the most part, pretty negative amongst the Senators and Congressmen who voted for this plan (many risking their own re-election hopes by voting). They thought, because they were told, that they were voting for a plan which would flow money to consumers on a fairly direct path. Now they are being told that the decision of whether or not this money ends up in the hands of consumers, is being put in the hands of the executives of the banks who helped get us in this mess in the first place.

To read more about it and see a video of Paulson, you can link to a CNN commentary HERE.