Bush plan: $700 Billion for bad mortgages
by Veronica Smith
WASHINGTON (AFP) - US Congressional leaders rushed to tackle Saturday an unprecedented 700-billion-dollar plan to rescue the financial sector from the worst crisis since the Great Depression.
President George W. Bush's administration sent Congress the plan for a 700-billion-dollar bailout of the troubled financial sector over a two-year period, according to a draft of the three-page document posted on The New York Times website.
The plan would give Treasury Secretary Henry Paulson sweeping authority to buy up to 700 billion dollars of tainted mortgage-related assets to stem a grave financial crisis.
"This is a big package because it was a big problem," Bush told reporters Saturday.
Speaking after his administration sent details of the bailout plan to members of Congress late Friday after a week of crisis in financial markets, Bush said decisive action was needed and that the government would eventually make back the money used for the rescue.
"I will tell our citizens and continue to remind them that the risk of doing nothing far outweighs the risk of the package," Bush said.
"And that over time, we're going to get a lot of the money back," he said.
The president underscored the urgency of the unprecedented bailout, which US officials plan to work on through the weekend.
"But right now, the government needed to send a clear signal that we understood the instability can ripple throughout and affect the working people and the average family and we weren't going to let that happen," Bush said.
The White House bailout plan allows for an increase in the public debt limit, to 11.3 trillion dollars, and grants the Treasury secretary powers to buy, sell and hold residential and commercial mortgages as well as securities based on those mortgages.
The extraordinary authority would expire in two years but would permit the government to hold the assets purchased for as long as the Treasury Department believes is necessary.
The rescue calls for the purchase of assets only from US-based firms and grants the Treasury Department legal immunity from any lawsuits as part of the bailout proposal.
It remained unclear how the government would manage the assets it buys. But Paulson would have authority to turn to private financial institutions to carry out the operation or create other bodies to purchase mortgage assets and issue debt.
US authorities were scrambling to muster a full-frontal assault on the escalating 14-month-old credit crunch stemming from a meltdown in US home prices after a frenzied boom fueled by easy credit.
US congressional leaders considered quick legislative action but demanded help for workers and reeling Wall Street firms.
Senate Banking Committee chairman Chris Dodd said lawmakers were shocked into uncharacteristic silence when they were briefed on the catastrophic potential of the meltdown by Paulson and Federal Reserve chief Ben Bernanke on Thursday.
"There was dead silence in the room for five to 10 seconds, the oxygen went out of the room, people were stunned by what they heard," Dodd told CNN.
Senior Democrats admitted there was little option but to go along with the biggest government bid to buy up bad debts and rescue blitzed financial firms in decades.
Democratic House of Representatives speaker Nancy Pelosi said she told Bush she was committed to "quick, bipartisan action."
But she said care must be taken to insulate normal Americans -- "Main Street" -- from the meltdown in the Wall Street financial sector, and to reduce mortgage foreclosures.
Dodd, asked whether Congress could act quickly enough to get the package on the table by the end of next week, told reporters: "We will see, our hope is that we can do that."
"But, this problem is serious, the clock is not going to determine, if it takes us two weeks we will do it, if it takes us three weeks we will do it."
Dodd described the meeting Thursday night as "about as sobering a meeting as any of us have ever attended in our careers here."