The Wall Street Journal is reporting the Secretary Paulson will be unveiling his plan tomorrow (Tuesday). Here is the broad blueprint for the plan, according to WSJ:
- "The lending facility, which will be operated by the Federal Reserve, is expected to provide loans to investors who want to buy securities backed by credit cards, auto loans and student loans."
- "Treasury will contribute between $25 billion to $100 billion to the facility from its $700 billion Troubled Asset Relief Program."
- " This facility could eventually help remove some of those assets by encouraging private investors to buy them."
By lending money to private investors to acquire these assets, Treasury is making the judgment that it is a capital problem that is preventing investors from purchasing these assets, rather than a concern about the quality of the assets themselves.
Earlier media reports on this plan had indicated that only AAA assets could be purchased with these loans:
- Paulson had described the plan as "the development of a potential liquidity facility for highly rated AAA asset-backed securities. We are looking at ways to possibly use the TARP to encourage private investors to come back to this troubled market by providing them access to federal financing while protecting the taxpayers' investment."
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