WASHINGTON — Unveiling its plan to rescue the nation's financial system from near-paralysis, the Bush administration is asking Congress for the authority to spend $700 billion and for powers to intervene in the economy so sweeping that they have virtually no precedent in U.S. history.
The proposal, set out in a spare 2 1/2 -page document sent to congressional leaders Saturday, would in effect allow the Treasury secretary to set up a government investment bank to buy up the billions of dollars of the mortgage-backed securities now clogging the arteries of the global financial system.
The dollar figure alone is remarkable, amounting to 5% of the nation's gross domestic product. But the most distinctive -- and potentially most controversial -- element of the plan is the extent to which it would allow Treasury to act unilaterally: Its decisions could not be reviewed by any court or administrative body and, once the emergency legislation was approved, the administration could raise the $700 billion through government borrowing and would not be subject to Congress' traditional power of the purse.
"Nothing quite of this scale has happened since the early years of the country when Alexander Hamilton wrote the Treasury act to give him the power to borrow and intervene in markets," said New York University financial historian Richard Sylla. And in Hamilton's case, Congress quickly clipped his wings, and no successor -- not even under President Franklin D. Roosevelt at the height of the Depression -- exercised quite such unfettered power again.
"It essentially creates an economic czar with no administrative oversight, no legal review, no legislative review. And it gives one man $700 billion to disperse as he needs fit," said Sen. Dianne Feinstein (D-Calif.), referring to Treasury Secretary Henry M. Paulson.
"He will have complete, unbridled authority subject to no law," she said.
The proposal, which contains none of the measures Democrats have sought to help homeowners facing foreclosure, set the stage for a major struggle between the administration and the Democratic Congress.
The confrontation is likely to be all the more intense because it will occur against a background of the approaching elections and fears of how shaky financial markets might react to any delay in the rescue.
Reflecting the urgency of the situation and its sensitivity, members of Congress took a cautious approach to the details Saturday but pledged to act on the crisis-fighting measure in 10 or days or fewer.
