Treasury Secretary Paulson TARP Update

The Treasury is changing its original plan to buy troubled mortgage assets, as it no longer believes that purchasing troubled assets is the most effective way to use the $700 billion in TARP funds. At a press conference on November 12, Secretary of the Treasury Henry Paulson said that although the financial situation is still fragile, the steps taken to date have helped America's financial system. He stated that the Treasury had acted quickly and in coordination with other systems around the world, but that the market turmoil is not likely to end until the housing crisis is over.

Describing the stability of the financial system as the Treasury's highest priority, Secretary Paulson set forth three "critical" priorities for remaining TARP funds following the $250 billion in direct investments of capital in U.S. banks: (i) to strengthen the capital base of the financial system; (ii) to support the asset-backed securitization market that is critical to consumer finance;