Hank Paulson just announced the outlines of his rescue plan aimed at purchasing the bad mortgage assets that he said were “clogging up our financial system” so that capital can begin to freely flow.
He said this would require a “significant investment of taxpayer dollars,” in the hundreds of billions of dollars.
In addition, he said that Fannie Mae and Freddie Mac, as well as the U.S. Treasury Department, would increase purchases of mortgage backed securities.
So the bottom line is that there are these really crappy investments out there in the market that no private business would touch with a ten foot pole, so now the federal government will use taxpayer dollars to purchase them. Splendid.