November 12th, 2008
07:16 PM GMT
NEW YORK - In September U.S. Treasury Secretary Henry Paulson lobbied Congress for $700 billion to buy up troubled mortgage related assets that were dragging down otherwise stable banks. We were told the very future of the U.S. economy was at stake.
Paulson has now admitted what many had already started to guess – they got it wrong. Treasury is no longer planning to use the money to buy toxic debt. That plan, it turns out, was too complicated and was going to take too long to implement. Instead, the government is going to continue to give money directly to financial institutions in exchange for shares.
Not only that, but you no longer have to be a bank, or turn yourself into one, to qualify for help.
Treasury now wants to open the bailout coffers to companies that issue credit cards, student loans and car loans. Paulson says the aim is to lower the costs and increase credit availability to American consumers.
Some say the fact that Paulson is willing to adjust and change the plan so quickly should be applauded; it shows officials are focused on coming up with the best possible remedy to fix the economy and are not worried about losing face.
Others are outraged at what they see as a lack of transparency and information.
Which companies are tapping the funds and what is it about their business or balance sheet that justifies aid?
What about those so-called toxic assets? What happens to them now? Won't they still be problematic?
There is only $60 billion left from the original tranche approved by Congress. How is the rest going to be spent? How much more will be needed? At Wednesday's press conference Paulson said that he felt the original $700 billion was enough to get the job done, but few analysts think that is realistic.
What about the $1.5 trillion dollars the Fed has lent out above and beyond the original funds? The Fed has declined to comment on where that money has gone or what they took for collateral. In fact, Bloomberg News is suing the Fed to release documents under the Freedom of Information Act.
It may be the Treasury and the Fed are taking a "what you don't know won't hurt you" approach. If the general public knew just how bad it was at some banks or key institutions it could spark a run on those firms and perhaps make a bad situation worse.
But the American public is in no mood for behind close doors operations. There is a severe lack of trust when it comes to government officials and business leaders. Taxpayers want to know just where their money is going. They don't like the fact that the rules of the game seem to be changing.
What do you think? Would more transparency help rebuild trust or would that just spark more panic? How can leaders in both government and the private sector rebuild public trust?
About Business 360
CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.