December 5, 2007 (LPAC) –-U.S Treasury Secretary Henry Paulson unveiled his grand scheme to deal with the financial crisis at the Second Annual Housing Summit on Dec. 3, with further details leaked to the Dec. 4 Washington Post by Treasury officials.

The glaring failure of the plan, as indicated by the name of the conference, is that he is treating a global, systemic financial blowout as if it were merely a housing crisis which could be dealt with by reducing mortgage defaults. Paulson knows full well that the hole blown in the financial system--emphatically including the U.S. banking system--by the collapse of the multi-layered, over-leveraged asset-backed securitization markets, goes far beyond the question of mortgages, but believes he can orchestrate a bailout under the guise of helping homeowners.

Paulson's scheme would essentially throw money at the problem by increasing funding for mortgage counselling, have cities and states sell tax-exempt bonds to finance mortgages, freeze interest rates on some mortgages, and other tricks. It appears that what Paulson is really doing is using this gimmick to block the only real reform plan on the table, LaRouche's Homeowners and Bank Protection Act, which would freeze foreclosures and deal with the problems Paulson is pretending do not exist. Paulson's plan is not a financial solution, but a political maneuver to try to protect a bankrupt system.