Nov. 13 Update: Everyone is Talking Bail OutUS Secretary of the Treasury Henry Paulson on Wednesday changed where money will be directed from the $700 billion economic bailout. The Troubled Asset Repurchase Program, better known as TARP, will no longer buy back from banks their failed mortgages because Paulson cites that faster relief from the economic crisis is needed. Instead, the federal government will pour more money into the financial institutions to bolster their return to normal lending to consumers and businesses.
Although the Treasury shift in direction rattled investors, many Wall Street analysts see that the Treasury is now pointing the economic recovery arrow in the right direction. Paulson's announcement included a new goal for the program to support financial markets that supply consumer credit in such areas as credit card debt, auto loans and student loans
Investors remain discouraged on Wall Street on Wednesday, as the market fell for a third straight day. Relentless selling was spurred by another round of bad news about corporate earnings reports, dropping the Dow Jones Industrials more than 410 points. All indexes dropped more than 4 percent.
Thursday began with the markets dropping on news that retailers are being savaged by an extreme slowdown in consumer spending. Mall cornerstone retailer Macy's Inc. reported a $44 million loss in the third quarter and falling sales of more than 7 percent. Electronics retailer Best Buy cut its 2009 fiscal projections on the same fears that show consumer spending eroding further next year. Morgan Stanley also outlined plans to cut 10 percent of staff in its institutional securities group, the company's largest business segment.
Two leading House Democrats are backing legislation to give $25 billion in emergency loans to the drowning-in-debt automobile industry in exchange for a government ownership stake in the Big Three car companies. Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi are poised to push for a quick vote to pass the bill for an auto industry bailout during the postelection session of Congress that begins next Tuesday. Democratic Rep. Barney Frank, chairman of the Financial Services Committee, is writing the legislation that would draw from the $700 billion financial bailout already approved by Congress.
No to Consumer Credit Relief
The Office of the Comptroller of the Currency rejected a request by banks and consumer advocates for a program to let banks forgive huge portions of credit card debt. The OCC objected to the special program to forgive as much as 40 percent of credit card debt to be forgiven for those who don't qualify for existing repayment plans.
The request was brought by an unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America. They made the request to the Treasury Department agency in late October. The alliance's request shows the problems occurring in this deepening financial crisis, that credit card holders are defaulting at increasing speed and numbers, as institutions are losing tens of billions because of these non-payments.