For the rest, the Treasury secretary would be free to do what he "deems necessary."
The plan would boost the public debt limit, now $10.6 trillion, to $11.3 trillion. Treasury could purchase the mortgage-backed assets of only U.S.-headquartered firms, a move that seems likely to anger foreign investors who have been among the major buyers of American financial instruments. With Bernanke's assent, Paulson could widen eligibility.
Paulson and key aides both in and out of government have reportedly been working on the plan to make the government the buyer of last resort for several weeks, having concluded that Washington's effort to fight one financial brush fire after another was failing.
But they were reluctant to share the idea with Congress until the dimensions of the crisis ballooned. In the last two weeks alone, the government has taken over mortgage finance giants Fannie Mae and Freddie Mac and insurer American International Group Inc.
It also tried but failed to orchestrate a private bailout of investment bank Lehman Bros. Holdings Inc., which has declared bankruptcy, and has watched as Merrill Lynch & Co. rushed to sell itself to Bank of America Corp.
In addition, Treasury sought to stanch a run on the nation's $3.4 trillion worth of money market mutual funds by offering to protect their holders against loss in a manner similar to the way Washington protects bank depositors.
Meantime, the Federal Reserve launched a drive to stabilize the financial system by making hundreds of billions of dollars in loans against increasingly risky assets, and buying some types of securities outright.
Even so, all of these efforts appeared to be failing as of the middle of last week as major banks stopped making even the most conservative, short-term loans to one another -- a move that, if allowed to continue, could have plunged the country into deep and abrupt depression.
The language of the new plan suggests that Paulson intends to set up an investment bank inside Treasury and perhaps hire outside firms such as Goldman Sachs Group Inc., which he headed before becoming Treasury secretary.
The plan would give him the power not only to buy troubled instruments, but also engage in the kind of complex financial transactions performed by investment banks "in regard to any mortgage-related asset purchased under this act."
