Bailout

Financial Rescue Redux

The government is planning a second phase of its rescue of the financial system, and it's looking a lot like the original plan that Henry Paulson scrapped. According to The Wall Street Journal, "Officials at the Treasury, Federal Reserve and Federal Deposit Insurance Corp., in consultation with the incoming Obama administration, are discussing a plan to create a government bank that would buy up the bad investments and loans that are behind the huge losses that U.S. banks continue to report, say government officials. Also under consideration is an additional and giant government guarantee of banks' assets against further losses." The goal is to get private capital back into the banking system. Paulson originally planned to use TARP funds to buy up bad assets, but ditched that plan because it seemed too slow and costly at the time.