WASHINGTON – Treasury Secretary Henry Paulson, who spurred Congress to approve the purchase of up to $700 billion in distressed mortgage assets last month, said yesterday Treasury has instead shifted its focus to assisting non-bank financial institutions and will not buy mortgage assets after all.
"Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether the targeted forms of asset purchase can play a useful role," Paulson said in an update on program, known as the Troubled Asset Recovery Program.
The purchase of the mortgage assets was the linchpin of the controversial plan, which was initially rejected by Congress, but only passed after billions of dollars in tax breaks were added.
Even while few credit unions planned to participate, there was widespread hope the Treasury’s intervention in the market would raise values for troubled mortgage securities.
Taking questions from reporters afterwards, the Treasury secretary explained that "the facts changed and the situation worsened." Instead of focusing on troubled mortgage assets, Treasury will now shift to addressing a complex area of lending that has been vital for U.S. economic vitality.
