The Treasury's equity-purchase program was widely favored by economists, who contended that it would be preferable to the approach of buying bad mortgage securities from banks, the centerpiece of the financial bailout bill.
"Buying mortgage assets is plagued with problems," said R. Glenn Hubbard, dean of the Columbia Business School and former chairman of President Bush's Council of Economic Advisors.
Hubbard made his comment shortly before the Paulson announcement but after it became clear that the Treasury secretary was leaning toward the new approach.
"It's very helpful that Treasury is pivoting in this direction," Hubbard said. "This is a crisis that policy can fix -- it's not beyond our ability."
Paulson offered few details about the equity program, declining to say how much of the $700 billion would go to such purchases. He said U.S. officials were "working around the clock" to develop the program.
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