US drops plan to buy toxic assets

Source: FT.com

The US government on Wednesday abandoned its plan to buy toxic assets, saying the money would be better spent on an expanded recapitalisation programme and supporting markets that securitise consumer credit.

The move is a dramatic reversal by Hank Paulson, Treasury secretary, who made the asset purchase plan the centrepiece of his high-stakes pitch for $700bn in rescue funds from Congress under the troubled asset relief programme (Tarp).

“Our assessment at this time is that this is not the most effective way to use Tarp funds,” Mr Paulson said.

Pressed to explain why he had changed his mind so soon after asking Congress to back asset purchases, he said: “The situation worsened, the facts changed.”

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