Treasury Secretary Henry paulson's new idea of spending bailout fund to stimulate credit card and auto lending is not considerate from long term economic stability point.Aegis to the beleaguered American economy wont come from paulson's idea of funding the bailout fund,which was approved by congress last week.Providing more leverage to the consumers,who have borrowed too much in the past ten years is not a good idea.
Industry watchers say credit card and auto lending has held up despite credit crunch.Last week paulson said he was interested in buying non-mortgage debts.But some economists wonder why is it anyway easy to buy non mortgage debts.Also it wont do anything to boost the economy.Its true that consumer spending is dropping but it has nothing to do with liquidity,its just the matter of confidence and may be because people lost lot of money and might be about to loose job.
Feeding credit card debt could be riskier way to use taxpayer money. That's because credit card debt unlike mortgages is unsecured. If a borrower defaults, there is no house to repossess. What's more, credit card debt, unlike a mortgage, can be wiped away in bankruptcy.
If it was a bad idea for mortgage market ....seems it is bad idea for credit and auto too.