| WASHINGTON (MarketWatch) -- The White House has shelved plans to purchase troubled mortgage assets from banks and other financial institutions, Treasury Secretary Henry Paulson said Wednesday. That program was once the cornerstone of the $700 billion rescue plan for financial markets passed by Congress. But almost as soon as Treasury received the money, it decided that giving capital to banks in return for preferred stock is a better use of the funds. Some of the money saved from not buying mortgage assets will now be used to shore-up the market for credit card receivables, auto loans and student loans, Paulson said. This market has ground to a halt, he added. Treasury would also consider giving some capital to non-bank financial institutions. Proposals to modify mortgages remain on the table, Paulson said. The cost of these programs will be substantial. Paulson's remarks came in a lengthy update of the government rescue plan. He defended the steps taken to date, and there are signs of improvements in markets. But in the next breath, he said the financial system remains fragile and the focus must be recovery and repair. |
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