WASHINGTON, Nov. 12 (UPI) -- The federal government backed off a plan to buy toxic mortgages, U.S. Treasury Secretary Henry Paulson said Wednesday, favoring a program of investment.
In looking for ways to address the U.S. economic crisis, Paulson said in early October that buying bad home loans was a likely answer. However, further review revealed buying the bad loans was "not most effective way to use (bailout) funds," he said Wednesday during a news conference.
The administration of the $700 billion rescue package's focus must be "recovery and repair," Paulson said.
"Foreclosure prevention is something I'll keep working on right up until I leave," Paulson said when asked whether the change in focus of the bailout plan meant homeowners saddled with bad mortgages and facing foreclosures were abandoned.
Paulson outlined three priorities he and other federal agencies will work on to turn around the financial crisis.
First, recovery efforts must continue to "reinforce the stability of the financial system" to free up credit that, in turn, supports economic growth, he said.
Second, markets outside the banking system still need support. Credit card, auto and student loans have "ground to a halt," the secretary said.
Third, Paulson said, officials must "continue to explore ways to reduce the risk of foreclosure."