Separately, Treasury announced that it would double to $200 billion the amount of government securities it would sell at special auctions to raise money to bolster the Fed's finances. The department had announced Wednesday the first $100 billion in auctions.
According to those familiar with Bernanke's and Paulson's thinking, both of these efforts would be dwarfed by the new plan -- the price of which could run into the hundreds of billions of dollars or more.
Much about the plan remained uncertain, and working out the details promises to be difficult for lawmakers, who are on edge because of the upcoming election.
A protracted legislative battle over the plan could have a calamitous effect on the battered financial system -- a possibility that congressional leaders seemed to recognize in their pledges for quick, bipartisan action.
For example, would the government take the bad assets on its own books or create a separate entity?
Would the government allow only certain types of institutions like banks to sell their troubled investments to Washington, or would auctions be open to all comers?
Would only certain kinds of assets, such as mortgage-backed securities or so-called collateralized debt obligations, be eligible for sale, or could institutions unload any kind of bad investments?
And behind all these questions lurks an even more difficult one: Is there any way to determine what the bad assets being sold are worth to ensure the government doesn't get cheated in the deal?
In fact, it is the assets that are the hardest to sell and therefore the hardest to value that are at the heart of the current crisis. They are also the ones financial institutions will be most eager to hand over to the government.
Paulson and Bernanke apparently hope to solve this problem by using an auction where the government would buy the troubled assets of those asking the lowest prices.
But the simple fact of such a giant government intervention in private markets and the lack of any effective guide to tell whether Washington is paying a reasonable amount could prove a political obstacle.
"I'm deeply troubled by this plan," Sen. Jim DeMint (R-S.C.) said. "What is missing from it and from the recent string of bailouts is a commitment to return to a free enterprise economy. . . . What we need now is not what could be nearly a trillion dollars in new taxpayer bailouts but pro-growth policies that allow our markets to correct and start growing again."
