US abandons plan to buy toxic assets
The US government has abandoned plans to buy up the toxic mortgage assets at the heart of the global financial crisis, a reversal that helped send ailing world markets spiralling even lower.
Investor sentiment took another hit as Germany on Thursday announced its economy, Europe's biggest, had fallen into recession in the third quarter. Britain said the previous say that it was likely to go into a recession.
Dropping the centrepiece of a 700 billion dollar bailout plan, US Treasury Secretary Henry Paulson said Wednesday the money would be better spent on cash injections for struggling banks and help to shore up consumer credit markets.
Paulson, a Wall Street veteran struggling to put the brakes on the worst financial meltdown in decades, said the crisis had deepened since the controversial rescue plan was approved by the US Congress in early October.
"The facts changed and the situation worsened," he said.
The plan to purchase the bad assets that triggered the current crisis was at the heart of the bailout, and many analysts questioned the abrupt about-face, which triggered another massive sell-off on world stock markets.
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