WASHINGTON | Treasury Secretary Henry Paulson said Wednesday that the government action had succeeded in propping up housing and financial markets but the system remained fragile and more bailouts might be needed to avert a global economic collapse.
“I believe we have taken the necessary steps to prevent a broad and systemic event,” Mr. Paulson said. “We’ve already seen signs of improvement.”
In his update on the government’s $700 billion bailout program for the U.S. financial system, Mr. Paulson said program will not purchase troubled assets from struggling banks and investment firms, as originally planned. He said the rescue would instead follow alternative paths.
The administration will now seek to new ways to assist financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans. But the rescue will continue to use $250 billion of the bailout cash to buy stock in banks in hopes of bolstering balance sheets and freeing the flow of credit.
Critics complain that the administration is not being tough enough on the banks who are receiving the assistance, that the original centerpiece of the program — government purchases of troubled assets — has been left to languish and that homeowners struggling with mortgage foreclosures are not getting the help they need to stay in their homes.
And in addition to all of those complaints, the administration is having to contend with a number of industries, led by auto companies, who contend that they deserve a share of the rescue funds.
President-elect Obama, when he met with President Bush at the White House on Monday, urged Bush to support aid for struggling automakers and Democrats in Congress have begun drafting legislation that would give General Motors, Ford and Chrysler access to $25 billion of the rescue funds.
This article is based in part on wire service reports.