November 12, 2008
Authored by: Robert Klingler
On November 12, 2008, Secretary Paulson made remarks on the financial rescue package. We have highlighted certain passages below, with emphasis added.
Today banking regulators issued a statement emphasizing that the extraordinary government actions taken by the Fed, Treasury and FDIC to stabilize and strengthen the banking system are not merely one-sided; all banks – not just those participating in the Capital Purchase Program – have benefited, so they all also have responsibilities in the areas of lending, dividend and compensation policies, and foreclosure mitigation. I commend this action and I am particularly focused on the importance of prudent bank lending to restore our economic growth.
Secretary Paulson appears to read the Interagency Statement as we have; TARP Capital was designed to benefit the entire industry, and the entire industry will bear the costs of future regulation.
Secretary Paulson also indicated that the purchase of illiquid mortgage-related assets is not currently on the table.
Over these past weeks we have continued to examine the relative benefits of purchasing illiquid mortgage-related assets. Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether targeted forms of asset purchase can play a useful role, relative to other potential uses of TARP resources, in helping to strengthen our financial system and support lending.
Secretary Paulson commented on the potential expansion of the TARP Capital program to non-financial institutions, potentially through matching investments. Secretary Paulson made clear, however, that “before embarking on a second capital purchase program, the first one must be completed.”