Treasury changes TARP focus

Northwestern Financial Review, Dec 1-Dec 14, 2008

The Troubled Asset Relief Program will not be used to purchase troubled assets. Treasury Secretary Henry Paulson announced on Nov. 12 that remaining TARP funds may be used to spur activity in the asset-backed securitization market. "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," he said. Though the original intent of TARP was to buy troubled assets, the country's financial circumstances "worsened considerably" in the time it took to pass the legislation, Paulson said. Hence the shift toward capital infusions through the Capital Purchase Program for banks as well as the new shift toward support of asset-backed securities. "We are looking at ways to possibly use the TARP to encourage private investors to come back to this troubled market," he said.