Treasury’s bailout gets a midcourse correction

The $700 billion bailout plan approved by Congress in October is getting a major overhaul. Plans to buy troubled bank assets have been scrapped, the terms of AIG's bailout have been revised, and the roster of firms qualifying for help will be exp

What happened

Amid signs that the federal rescue of the financial system is faltering, the Bush administration this week announced a major overhaul of the $700 billion bailout plan approved by Congress in October. Treasury Secretary Henry Paulson told Congress that the Treasury had scrapped its original plan to buy troubled assets from banks. Instead, it will directly inject capital into financial institutions through stock purchases. The administration also revise the terms of its assistance to tottering insurance giant AIG, purchasing $40 billion in company stock, lowering the interest rate on its $60 billion loan, and extending its term. And in what the Treasury said was a “one-time exception,” the U.S. will also buy $52.5 billion of toxic assets held by AIG.

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