Thomson Financial News
US GOVTS: Paulson Defends TARP Implementation in Final Talk with Press
01.16.09, 11:00 AM ESTWashington, Jan 16 2009 (IFR) - In what was likely his final talk with Treasury reporters, Treasury Secretary Henry Paulson defended the implementation of the Troubled Assets Relief Program (TARP), and said he is content with the decisions made under the program in the three fast-paced months since it came into existence.
'I believe that the program has been well managed during this tumultuous, fast-paced period,' he said. 'I think history will look and say, maybe around the edges we might have done things differently, but the big decisions we've made have been the right ones and I think they'll stand the test of time.'
Included in that list of decisions is the move to buy bank stocks directly rather than buying just the banks' troubled assets, and working with the Fed on things like the Term-Asset Backed Loan facility (TALF), under which Treasury and the Fed chipped in $220 billion to buy asset-backed securities.
Paulson acknowledged the frustration that many Americans have that the TARP has not quickly resolved the 'severe economic downturn,' but said the TARP has done its job of settling the system.
'I'll assure you that the TARP has been essential to financial stability,' he said, adding that it has helped the US make 'real progress' toward stability.
He also reiterated that he wants banks to lend the money they receive under TARP, not hoard it, although he said increased lending will necessarily slow in any recession.
'When you go through a period like this, lending naturally decreases,' he said. 'So really the key question, the big question, is how much greater is the lending as a result of the program than it would've been without the program.'
Paulson also sounded a warning on the growing US debt, and said it is his preference that any money the government makes in selling bank stocks years from now should be used to reduce this debt.
'The TARP program is an investment,' he said. 'It's hard to imagine not getting that investment back. But I believe that when it comes back, this money should go toward reducing debt as opposed to more spending.'
pete.kasperowicz@thomsonreuters.com
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