Whatever the policies will be, it is doomed to fail. The problem in the first place is credit bubble and over-leveraging, which is now deflating and de-leveraged (a healthy process, by the way). And the problem is not isolated in US, but throughout the world.
By the TARP, bailout bonanza, etc, essentially the govt. is trying to produce more credit bubble. By logic, the problem cannot be the solution. Letting those zombie banks & companies fail is the best option. A sharp & painful recession is necessary to cure the bubble, getting back economies to normality. If the govt just let things fail, the recession will be sharp & quick and so will the recovery be (sharp & quick). An attempt to reflate will just prolong the problem and possibly bring the economy to depression. Just look at Japan, the govt is trying anything to prevent things from going bankrupt. Now they have "the lost 2 decades". But we already know that govts never run out of idiotic ideas. There's a saying "the most important lesson of history is that man never learns from history". There's nothing truer than that. --- In obrolan-bandar@yahoogroups.com, "jsx_consultant" <jsx- [EMAIL PROTECTED]> wrote: > > U.S. backs away from plan to buy bad assets > Wed Nov 12, 2008 10:36pm EST > > > WASHINGTON (Reuters) - The Bush administration on Wednesday largely > abandoned its plan to buy up toxic mortgage assets and said it will > focus its $700 billion financial bailout fund on making direct > investments in financial institutions and shoring up consumer credit > markets. > > The U.S. Treasury Department initially promoted the financial rescue > package approved by Congress last month as a vehicle to buy illiquid > mortgage assets from banks and other institutions to spur fresh > lending. > > However, that plan never got off the ground and U.S. Treasury > Secretary Henry Paulson told a news conference asset purchases were > not the most effective use of the funds. > > "This is not going to be the focus," he said. Paulson added, > however, that the Treasury would continue to examine the usefulness > of "targeted" purchases. > > Treasury has already tapped the fund to inject capital into banks > and ailing insurer American International Group. Paulson said he was > considering a second round of preferred share purchases in both > banks and non-bank institutions which, in a fresh twist, would match > privately raised funds. > > He also said the Treasury was working with the Federal Reserve on a > plan to help restore credit flows to U.S. households by using > financial rescue funds to lure investors back to markets for > securitized debt, such as car loans, student loans and credit cards. > > The administration's shifting focus disappointed Wall Street and > U.S. stock prices tumbled sharply. The Dow Jones industrial average > closed down 408 points, or 4.7 percent. > > "This hasn't done the Treasury's credibility a world of good," said > Alan Ruskin, chief international strategist at RBS Global Banking > and Markets in New York. "Basically, they found that the market > would applaud direct capital injections more readily than > understanding the complexities of reverse auctions to buy assets, so > it's a pragmatic choice." > > Paulson was unapologetic, saying that by the time the rescue bill > was passed on October 3, it was clear the asset purchase plan would > take too long and would not be sufficient to calm roiling markets. > > "I will never apologize for changing a strategy or an approach if > the facts change," he said. > > COOL TO CALLS FOR HELP > > The $700 billion financial sector bailout is the United States' > marquee effort to combat a credit crisis spawned by rising U.S. > mortgage defaults that is now wreaking economic damage worldwide. > > To help ease the crisis, the U.S. Treasury and bank regulators on > Wednesday issued "guidance" for banks encouraging them to lend and > to rein in any compensation plans that might lead executives to take > excessive risks. > > Earlier on Wednesday, Canada announced a plan to buy up another $41 > billion in insured mortgages and other steps to try to free-up > credit. > > Paulson said the U.S. Treasury was duty-bound to help prevent > mortgage foreclosures, but he warned that further aid would likely > mean a significant government subsidy, signaling a lack of support > for a Federal Deposit Insurance Corp. proposal for more aggressive > aid to borrowers. Continued... >
