WORLD> America
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WORLD> America
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Paulson urges quick OK on $700b rescue
(Agencies)
Updated: 2008-09-22 06:53 WASHINGTON - The Bush administration insisted Sunday that the US Congress must move quickly to approve what one lawmaker called the "mother of all bailouts" -- a $700 billion proposal to buy a mountain of bad mortgage debt in an effort to unfreeze the US credit markets.
Congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days. But they said it must be expanded to include help for people on Main Street as well as the big Wall Street financial firms who have lost billions of dollars through their bad investment decisions.
US Treasury Secretary Henry Paulson stressed that time was critical to get the proposal passed and that changes to the administration's measure, which was sent to lawmakers on Saturday, could delay that approval, further unsettling global financial markets, which have already seen a number of stomach-churning days as the result of the biggest upheaval on Wall Street since the Great Depression. In the past two weeks, the US government has taken over the country's two biggest mortgage companies, Fannie Mae and Freddie Mac, and its biggest insurance company, American International Group Inc., and stood by while the nation's fourth-largest investment bank, Lehman Brothers, was forced to declare bankruptcy and another investment giant, Merrill Lynch, was forced to sell itself to Bank of America. Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to deal with the root cause of all the troubles, billions of dollars of bad mortgage debt sitting on the books of major financial companies. This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up last week despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system. The plan the administration has developed with support from the Fed would have the US government buy up to $700 billion of the bad loans, taking them off the books of financial firms with the hope that this will allow those companies to resume normal lending operations. Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said the US government's efforts would be the "mother of all bailouts" that could well cost $1 trillion when the cost of the government takeovers of Fannie, Freddie and AIG were included. Paulson, appearing on four of the five Sunday morning talk shows to sell the plan, insisted that the administration had no choice. The cost of doing nothing would have been far more severe because the clogged credit markets would make it harder for businesses to get the loans they need to keep operating, he said. Doing nothing also would make it harder for consumers to get the credit they need for car loans and other purchases, the US Treasury secretary said. Consumer spending accounts for two-thirds of total economic activity. |
