By Beth Vessel

Treasury Secretary Henry Paulson announced Wednesday that the TARP program will likely not be used to purchase troubled assets as originally planned.  He said that the purchase of illiquid mortgage-related assets, the original purpose of the TARP legislation, is not the most effective way to use TARP funds.  He said that the administration will continue to use the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.  He listed three critical priorities for remaining TARP funds:

• Reinforcing the stability of the financial system, so that banks and other institutions providing credit will be able to support economic recovery and growth;
• Supporting markets for securitizing credit outside of the banking system, including areas such as credit card debt, auto loans and student loans; and
• Exploring ways to reduce the risk of foreclosure.

The full transcript of Secretary Paulson’s remarks can be found at this link.