WASHINGTON — Treasury Secretary Henry Paulson officially abandoned his original plan to buy troubled assets from financial institutions. While the government will continue to invest in those firms, he said, it would also now focus on the nation’s struggling consumers.
In detailing the next phase of Treasury’s $700 billion Troubled Asset Relief Program, Mr. Paulson indicated the government would continue flooding financial institutions with cash, but would also try to increase the availability of student loans, auto loans and credit cards. He said he’s also examining ways to help prevent foreclosures.
The market supporting consumer finance “is currently in distress, costs of funding have skyrocketed and new issue activity has come to a halt,” Mr. Paulson said in remarks at the Treasury Department Wednesday.
The Dow Jones Industrial Average fell 411.30 Wednesday, or 4.7%, to close at 8282.66 — a sign that some investors, too, are worried about the perilous state of the economy. But investors attributed some of the decline to Treasury’s switch, as the bailout’s widening focus underscores the depth of the economy’s problems as well as new strains on the government’s rescue net. more