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Wednesday, November 12, 2008

Paulson bait and switch

Remember last month, when we absolutely, positively had to buy $700 billion bad bank assets? Despite skepticism, particularly among House Republicans, the plan passed.  Academics generally the plan was somewhere in between unworkable and stupid.

 

So what happened with all that?

 

Paulson’s still using the money, but not planning to buy ANY of the assets we so desperately needed to buy just last month.

 

http://news.yahoo.com/s/ap/20081112/ap_on_bi_ge/financial_meltdown

 

The government has abandoned the original centerpiece of its $700 billion rescue effort for the financial system and will not use the money to purchase troubled bank assets. Treasury Secretary Henry Paulson said Wednesday that the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.”

Because I thought the original plan was crazy, I’m not sorry to see Paulson change his mind.

But this clearly shows how poorly our leaders understand what is going on, when a $700 billion plan ($7,000 per US household!) can be abandoned within weeks.