US Treasury Secretary Hank Paulson has committed a dramatic volte face from the Bush administration’s Wall St bailout plan to purchase toxic subprime mortgages from financial firms.

Mr Paulson announced he is refocusing on shoring up financial institutions with direct investments, shoring up markets for securitized consumer debt such as car loans, student loans and credit cards, as well as prodding banks to speed up the thaw in the country’s credit system.

CDO investment vehicle Credit Sails continues to struggle: it missed its most recent interest payment to shareholders, and the value of its underlying assets slumped by a quarter in the first half of the year.

Investors are meant to receive 8.5% interest on the NZDX-listed Credit Sails bonds, paid quarterly.

But the market turmoil and dearth of interest in CDO-based products saw Credit Sail’s “credit strategy pool” fall below the threshold required to make the interest payment.