The Incredible Bendable Bailout
In a development that will surely come as a shock to everyone, the $700 billion bailout package isn't being spent like we were told it'd be spent.
Treasury is unlikely to conduct any auctions to purchase bad loans and other troubled assets -- the original intention of the $700 billion rescue plan. Instead, Treasury is expected to continue focusing its firepower on injecting capital directly into the financial sector, these people said.
There is good news:
Before launching its $250 billion capital-purchase program last month, Treasury toyed with requiring banks to raise matching funds alongside any government investment, but it thought that might discourage some firms from participating. It also worried that firms would not be able to raise private money in the current market environment.
Instead, Treasury structured its investment in a way that it believed would encourage firms to eventually raise private funds. But Treasury officials now think market conditions may have improved enough that companies could raise private capital.
