--Gen. George S. Patton, U.S. Army (1885-1945)
You got to hand it to Treasury Secretary Henry Paulson. Realizing that the original plan for how to use the $700 billion ponied up by Congress to bail out the financial market-- which was essentially to buy up bad mortgages in hopes banks would start lending again-- was going nowhere fast, he has smartly shifted gears.
Paulson now hopes to establish a major new lending program, to be run by the Fed, intended to unlock the frozen consumer credit market.
Makes sense to me. Like John McCain, I make no claim to understanding how our economy works (does anyone really?) but you can be as sure as the sun setting today that if you put billions of dollars within reach of American consumers,they will climb all over each other to get hold of it. If it comes in the envisioned form of credit, so much the better. Much neater than handing out fistfuls of dollars on street corners anyhow.
The Treasury hopes to invest about $50 billion from the bailout fund into the new loan facility, according to a report in The New York Times today, with the aim being to help companies that issue credit cards, make student loans and finance car purchases.
"As envisioned," according to the newspaper, "the Treasury would put up about 5% of the money that a company would use for lending and private investors would put up perhaps 20 times that much by buying bonds issued by the new program."
It's rusty but it will work...
No matter how this new consumer deal will work, it had better work.
Thinking positively, I can't see how better the government can prime the pump than by letting the great American consumer-- the true engine of our current economy, like it or not-- jump up and down on the handle.