U.S. proposes sweeping bailout
The government would buy up firms' bad assets to boost lending
WASHINGTON — In what could be the biggest bailout since the Great Depression, top government officials and congressional leaders agreed late Thursday to quickly develop a comprehensive plan aimed at defusing the nation's roiling financial crisis.
The plan would relieve financial institutions of the mortgage-backed securities and other bad assets that are threatening the nation's economic health.
Under the proposal, details of which were not announced, Washington would buy the distressed assets, allowing banks to resume their usual borrowing and lending, according to people familiar with the plan. The approach could be similar to the formation of the Resolution Trust Corp. during the 1980s to resolve the savings and loan crisis.
In a meeting between lawmakers and Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke, the top officials suggested that once the financial system was rebooted in this fashion, the government would be able to sell off the assets to recover taxpayers' money and perhaps even turn a profit, according to the people privy to the plan, who spoke on condition of anonymity because they were not authorized to speak publicly.
The plan could be unveiled as early as today and voted on by Congress by next week.
News of the rescue plan sent Asian markets soaring this morning.
Lawmakers emerging from a 90-minute session in the offices of House Speaker Nancy Pelosi (D-San Francisco) said they expected a detailed proposal from Bernanke and Paulson overnight and to work through the weekend in an effort to pass it quickly into law.
The tone at the meeting was deadly serious, as Paulson and Bernanke stressed to lawmakers that the crisis could get far worse.
"I think we had some sobering news tonight," Sen. Richard Shelby (R-Ala.), top Republican on the Senate Banking committee, said as he left the meeting.
Members of both parties pledged in a brief news conference to work cooperatively.
"It's clear that even though we're just six weeks away from an election, our job is to put our partisan differences aside and to work to help solve this crisis," said House Minority Leader John A. Boehner (R-Ohio).
