Treasury Secretary Henry Paulson announced on Wednesday that the original plan to buy up toxic mortgage debt from banks with up to $700 billion of taxpayer money has changed. Just over a month ago Paulson said that the rescue money was absolutely necessary to relieve struggling lenders of their bad mortgages.

Yesterday Paulson said, "Over these past weeks we have continued to examine the relative benefits of purchasing illiquid mortgage-related assets. Our assessment at this time is that this is not the most effective way to use TARP funds."

TARP stands for "Troubled Asset Relief Program," and was the cornerstone of Emergency Economic Stabilization Act of 2008 when it was originally pitched to Congress, rewritten to add some extra help for homeowners, and then finally signed into law by President Bush on October 3rd.

Now Paulson believes that a more effective and more efficient way to boost the economy and help consumers is to buy preferred stock in non-bank lending institutions to provide them with capital to get credit flowing, especially in auto loans, student loans, and credit card lending. He says the difficulty in gaining credit is placing a heavy burden on Americans and causing many to lose their jobs.

Some lawmakers are unhappy with the change, and feel that they were misled by Paulson when he insisted that the way to ease the financial crisis was to buy up troubled mortgages to take them off the books of big banks. Does Paulson have a reasonable explanation for his decision to change how taxpayer funds are to be used? "I will never apologize for changing an approach or strategy when the facts change," Paulson said.



Sources:
U.S. Department of the Treasury
abcnews.com
fox.news