Associated Press Clip: Henry Paulson has turned the bailout package away from that of taking toxic debt into the Treasury and is instead going to buy shares in the banks.
At first Paulson rebuffed calls from some lawmakers to buy into financial companies as a more direct way of getting capital to lenders. He told them at a Sept. 23 Senate Banking Committee hearing “That’s what you do when you have failures, you know?” Instead, it was better to rely on “market mechanisms,” holding auctions for devalued assets”, he said.
Less than a month after his initial plan, he agreed to use the first $250 billion of bailout funds for capital injections. Yesterday he officially abandoned any intention of holding auctions for distressed investments.