Wednesday Nov. 12, 12:52 p.m.
U.S. treasury secretary Henry Paulson has announced that the TARP is shifting its focus and will not now buy troubled toxic assets but instead continue injecting capital into troubled financial institutions and markets. In particular, he will be concentrating upon the asset backed paper market that deals with securities from car loans, student loans and other consumer credit assets.He intends to inject capital here and try to attract private sector partners in the process.
According to Paulson, some 40 % of all consumer credit lies with these non bank credit markets and his goal is to unlock them and get credit moving again, something that banks despite major injections of capital appeared to be unwilling to do. Paulson's shift of focus may not be welcomed by the banks who will now have to either keep their toxic assets on their books until they improve in the long term or sell them for less than they had hoped for.
But his move will likely be welcomed by American consumers if it unblocks these credit markets. At the same time Paulson discussed the Government's effort to help homeowners stating that some 200,000 homeowners have been helped with loan readjustments that have aided them in avoiding foreclosure through the HOPE program. Once the new President is installed next January 20th this approach may well be further enhanced.
In Britain the unemployment numbers were gloomy as unemployment rose to 5.8 %, some 1.8 million people with more job losses expected in the months to come. It is a good thing that the Bank of England cut its interest rate by 150 basis points. A much larger stimulus plan on the fiscal side than the 15 billion pounds already announced is now needed in Britain. Inflation is clearly not a problem as pay rises fell month to month, now down to 3.3 % over the three months to the end of this September.
On the oil front NYMEX oil is now trading at the $57 a barrel range and may well drift lower in the coming months.
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