ROBERT SIEGEL, host
From NPR News, this is All Things Considered. I'm Robert Siegel.
MELISSA BLOCK, host
And I'm Melissa Block. Remember those toxic assets, the ones the Treasury Department said it would buy with the $700 billion rescue package? Well, to paraphrase Treasury Secretary Henry Paulson: Never mind. Today Paulson issued a progress report on the use of that money, and he said the focus of the bailout has changed. And as for the latest supplicants, the auto companies, Paulson said they should look to Congress, not Treasury, for a bailout. The stock markets did not appreciate Paulson's announcement. The Dow tanked more than 400 points. NPR's John Ydstie has our story.
JOHN YDSTIE: It was called the Troubled Asset Relief Program, or TARP. The idea sold to Congress was that the Treasury would use most of the $700 billion in the program to buy up mortgage-backed securities infected with nasty subprime loans, the very securities at the heart of the financial crisis. But it hasn't happened. Secretary Paulson said today that's because by the time the bill was passed and signed, the crisis had changed. He argued he had not misled Congress and had no reason to be apologetic.
Secretary HENRY PAULSON (Treasury Department): I will never apologize for changing an approach or a strategy when the facts change. I think the apology should come the other way if someone doesn't change when the facts change. So I think we moved quickly, we moved powerfully, to address the situation as it exists.
YDSTIE: Of course, instead of buying toxic assets, Treasury decided to try to unfreeze credit markets by injecting capital into banks, specifically by having the government buy bank stocks. Two hundred and fifty billion dollars of the rescue plan's 700 billion is now designated for that purpose. Paulson said the Treasury had set a speed record by getting $115 billion out the door to eight large banks before the end of October.
Critics say the banks haven't turned the money around and lent quickly enough to consumers and businesses. Paulson again today urged banks to do that, pointing to a statement from bank regulators urging banks to fulfill their responsibility to make loans. As for aid to the struggling U.S. auto companies, Secretary Paulson said the industry is critical to the U.S. economy, but he suggested they look to Congress and not the Treasury. Paulson pointed out that Congress has already passed a bill giving $25 billion to the auto companies, but only to build fuel-efficient cars.
Secretary PAULSON: One option would be to amend that - amend that bill to make it available.
YDSTIE: Democrats in Congress said today they would prepare legislation to aid the auto industry. Paulson also deflected questions about using money from the $700 billion program to aid homeowners facing foreclosure. He said it is a priority and acknowledged it was part of the initial plans for the TARP.
Secretary PAULSON: I just can't tell you how many proposals I've looked at to modify mortgages and keep people in their homes. This is a very complicated area. There are no easy answers.
YDSTIE: And so far no TARP money has been used to limit foreclosures. Paulson pointed to plans announced yesterday to have Fannie Mae and Freddie Mac work with homeowners to modify mortgages. He said it would help hundreds of thousands of people. Critics point out that the number of homeowners facing foreclosure numbers in the millions. Going forward, Paulson said it is time to pause and allow the markets to absorb the programs the government has already put in place. He said the next focus for the TARP would be consumer credit.
Secretary PAULSON: Today, the illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans, and credit cards. This is creating a heavy burden on the American people and reducing the number of jobs in our economy.
YDSTIE: Paulson said the Treasury, along with the Federal Reserve, is looking for ways to use TARP funds to get private investors back into these loans, which are bundled together much like the mortgage-backed securities that were originally the focus of the rescue plan. Paulson said developing a plan to revitalize the market for securitized consumer debt will take weeks. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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