Paulson faces reality

Listening to Hank Paulson’s speech today, one is impressed both by his flexibility and a barely-controlled underlying sense of panic. In a few short weeks, the Treasury Secretary has gone from a bailout plan focused solely on using $700 billion to buy up mortgage-backed securities, to one which may not spend any money at all on mortgage-backed securities. Instead, as he announced today, much of the remaining money will be used to support consumer loan markets which have frozen up—credit card debt, student loans, and auto loans. That’s on top of direct equity injections for banks, and money used to help reduce foreclosures.

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