The WSJ has an article this morning reporting that Treasury is now looking into buying stakes in
a broad range of financial companies, … including bond insurers and specialty finance firms such as General Electric Co.’s GE Capital unit, CIT Group Inc. and others …
That’s interesting. But here’s what’s really interesting:
Treasury Secretary Henry Paulson originally unveiled a complex plan to buy up financial institutions’ hard-to-sell assets such as mortgage-backed securities. That proposal has yet to get up and running, stymied by operational delays and beset by criticism. People familiar with the matter say Treasury may scrap part of that early plan — purchasing assets through an auction process — and instead purchase some of these distressed assets directly.
I don’t know that I’ve ever seen a case where criticisms from outside government (and probably a lot of nudging from the Federal Reserve) have caused such a quick U-turn in a major government policy.
Now I’m not sure that the current buy-stakes-in-every-last-financial-institution-that-asks is really the right approach either. But at least Paulson has set an encouraging precedent: When the facts change, he changes his mind.