Word: crediteers
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...party would not mind if one or two of the auto companies go under, reasoning that it would be easier to force them to restructure along strict environmentally correct lines. But there's concern that bankruptcy could lead to a broader economic fallout. "Because of the condition of the credit market, there's some concern the car companies would have to liquidate," says one senior Democratic aide...
...Treasury Department says nothing has been finalized, but reportedly Paulson and his advisers are looking into using TARP funds along with some money from outside investors to buy up credit card, auto loans and other, non-mortgage consumers debt. The financing mechanism for that type of debt, often called securitization, has stalled like much of the rest of the banking sector. Paulson is hoping that buying up debts directly will be a better way of stimulating lending than just purchasing banks' shares and trying to force the firms to extend loans...
...some economists wonder why buying up credit card and auto loan debt is any better or easier to do than buying up mortgage bonds. In fact, when it comes to credit card debt it could be riskier way to use taxpayer money. That's because credit card debt unlike mortgages is unsecured. If a borrower defaults, there is no house to repossess. What's more, credit card debt, unlike a mortgage, can be wiped away in bankruptcy. (Read "Four Steps to Ending the Foreclosure Crisis...
...This is riskier for taxpayers," says Andrew Jakabovics, an associate director at the Center for American Progress. Worse, it's not clear the program would do anything to boost the economy. Yes, consumer spending is dropping, but some economists think that is a function of confidence, not credit. "Paulson seems to be working under the impression that when it comes to consumer spending liquidity is the issue," says Dean Baker, who co-founded the Center for Economic Policy Research. "People aren't buying because they just lost a lot of money and might be about to lose their job." Lastly...
...what the rationale for this new program is," says Baker. "If it was a bad idea for the mortgage market, then it's a bad idea in the credit card market...