Paulson's New Plan: Buy Bad Wall Street Debt

Treasury chief pushes creation of agency; news lifts markets
By Harry Kimball,  Newser Staff
Posted Sep 18, 2008 3:45 PM CDT
The Treasury Department in Washington.   (AP Photo)
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(Newser) – The US government is considering the creation of a federal institution that would buy up bad debt from struggling Wall Street concerns, CNBC reports. Treasury Secretary Henry Paulson is reportedly pushing the proposal around Washington. By relieving financial institutions of toxic debt, they could return to lending money as per usual, perhaps stabilizing the country’s economy. News of the proposal gave stocks a huge lift today.

“This will bring real trust back into the market,” one commentator said. “It would free up real, spendable capital in these organizations.” Many insiders see the current shakeup as a “confidence crisis.” If the Feds could help institutions offload suspect debt, customers would feel more comfortable doing business on Wall Street. “Confidence has eroded for entire sectors,” another watcher said, “sometimes not rightfully so.”