Fed Plan Revised to Allow Purchase of Credit Card Debt from Banks (from Bloomberg)

[JPZenger]

We have been told that the Federal bailout of financial institutions was designed to buy mortgage debt. As the housing market hopefully improved, the Feds could then resell the mortgages and cover most of its costs. However, as described below Paulsen has submitted a revised plan that would allow the Feds to buy credit card debt from the banks.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYXtwpG9mw9g&refer=home

"Sept. 21 (Bloomberg) -- The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities.

The U.S. Treasury submitted revised guidance to Congress on its plan a day after first submitting it, as lawmakers and lobbyists push their own ideas. Officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide.</blockquote>

The change suggests the inclusion of instruments such as car and student loans, credit-card debt and any other troubled asset. That may force an eventual increase in the size of the package as Democrats and Republicans in Congress negotiate the final legislation with the Bush administration, analysts said.

``The costs of the bailout will be significantly higher than originally considered or acknowledged,'' said Josh Rosner, an analyst with independent research firm Graham Fisher & Co. in New York. ``How, given these changes, can the administration and Federal Reserve believe they are being forthright in their unrevised expectation of future losses?''