WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Friday recapitalizing banks is the most effective use of a $700 billion financial bailout war chest but acknowledged the United States' reputation has been tarnished as a result of the financial crisis that has spread worldwide.
"We have in many ways humiliated ourselves as a nation with some of the problems that have taken place here," Paulson said in an interview with CNBC television.
Leaders of major industrial and developing economies are meeting in Washington on Friday and Saturday to discuss how to move forward from a financial crisis that began with the collapse of the U.S. housing market under a load of toxic debt and is now pushing economies around the world into recession.
Paulson won approval from Congress in early October to spend up to $700 billion to calm financial markets and revive lending, but has ruffled feathers by changing the focus to bolstering bank capital from buying mortgages.
The Treasury Secretary defended his decision to switch the focus of the rescue package, the Troubled Asset Relief Program, from buying unsellable mortgage-related assets to injecting capital into banks, saying market conditions had worsened.
"The major purpose of the TARP was to stabilize the financial system, first and foremost, to prevent a collapse ... number two, to get lending going. I think the system has been stabilized," Paulson said.
Emphasis added by me.
There. It's now official. The Treasury of the Secretary has openly confirmed that the entire economic system could have collapsed.
Do you get it now?
It can still collapse.
Chronicles Of Depression 2.0: #335: Plan 9