Paulson Switches US Bailout Terms

by Jordan Yerman | November 13, 2008 at 07:05 am

179 views | 18 Recommendations | 7 comments

Treasury Secretary Henry Paulson is switching the terms of the $700 billion bailout to focus on shoring up consumer credit, rather than purchasing floundering assets, which was the entire point of the controversial package to begin with.

Media outlets are seizing on this as proof that the economic situation is getting worse. Having said that, though, the initial targets of the bailout were securities that everyone agreed were worthless anyway, so is the switch really a bad thing?

Treasury Secretary Henry Paulson told us he now has a different plan for how to spend that $700 billion of your money.

When Congress OK'd the bailout package, they all told us it would be spent buying troubled mortgage assets.

That's what Congress voted on. That's what Congress approved.

Now, Paulson says it would be better for the economy if he uses the money to buy bank stocks as a way to help their balance sheets so they are more likely to lend you money for a car or student loan or credit card.

``Paulson's credibility has certainly been substantially diminished,'' said Peter Wallison, who was general counsel at the Treasury under former President Ronald Reagan and is now a fellow at the American Enterprise Institute in Washington. ``There has been a lot of shifting back and forth and he clearly hasn't thought through much of these policies. He has lost a lot of confidence from the market from all of this.''

The story is being reported in stark terms: ABC World News referred to "a dramatic change in course"; NBC Nightly News called it "a $700 billion switcheroo"; a "bombshell announcement," said Fox News Special Report.

No surprise, since Paulson is arbitrarily redirecting $700,000,000,000.

I think they may want to retire Paulson as well as some other specialist.

Big surprise... a member of the Bush administration lied.

...The FED is a private bank, Paulson is not to blame. We are one; for allowing another central bank after president Jackson got rid of the last one, and 2 albeit more directly; because we were not on the phone with Reps saying "Hell No" to a 700 billion dollar unaccountable uncontrolled fleasing

Switching bailout away from banks and related Hedge funds to credit student loans, lifepractical action

Bailouts are tax backed loans... wait loans get paid back - the recipients don't pay it back we do. The only benefit if GIVEN as a "loan" then that student is effectively paying twice. Oh and to the FED of course.

Let me ask you this; With the false claim of " total transparency" who are all the recipients of our bailout money, and what is the term in which they have to pay it back? I am just glad a few legit politicians are outraged by this mess.

Two words: BAIT and SWITCH...

How about we give credit card companies a swift kick in the hindquarters, while we're trying to sort out the financial mess.

Specifically, stop allowing credit card companies to raise interest rates on EXISTING balances. It amounts to a breach of contract.

When I buy a laptop for $99.99 and my rate is 7.99%, I do not expect to suddenly have to deal with a 16.99% interest rate on the balance. I never agreed to 16.99%, nor 13% nor 10%. When I signed my card agreement, the rate was 7.99%.

However, there's a wonderful set of clauses basically saying "we can change your rate at any time for any reason and there's nothing you can do about it," "we can switch fixed rates to variable or variable to fixed."

The credit card industry is pretty much the only one in which a contract is as malleable as silly putty and does not require the consent of both parties in order to modify it.

Existing balances should remain at whatever APR they were originally charged at. If the card company reassesses your risk, they should be able to adjust your rates for future balances. But they should not be able to jack up rates on prior balances simply to line their own pockets after the point of sale. Now, if they want to lower your rate and give you a break, hey fine (that's just a bit of good customer service, making it slightly easier to pay off balances)...

Also, the clause exempting them from class action lawsuits should be struck from the contracts as illegal. If they commit fraud or grievances against an entire class (their customers), those customers should have the right to band together, sue them and tell them to knock it off!

I mean, that's just one place to start with fixing credit and financial issues. Hold banks and other lenders accountable and to some kind of 'fair lending' standard.

Just my 2c.