Rescue plan seeks 700 bn to buy bad mortgages

The Bush administration is asking Congress to let the government buy 700 billion in toxic mortgages ...

The Bush administration is asking Congress to let the government buy 700 billion in toxic mortgages in the largest financial bailout since the Great Depression, according to a draft of the plan.

The plan would give the government broad power to buy the bad debt of any US financial institution for the next two years. It would raise the statutory limit on the national debt from 10.6 trillion to 11.3 trillion to make room for the massive rescue. The proposal does not specify what the government would get in return from financial companies for the federal assistance.

8220;We8217;re going to work with Congress to get a bill done quickly,8221; president Bush said at the White House. Without discussing details of the plan, he said, 8220;This is a big package because it was a big problem.8221; The White House and congressional leaders hoped the developing legislation could pass as early as next week. Administration officials and members of Congress were to negotiate throughout the weekend. The plan is designed to let faltering financial institutions unload their bad debt on the government, and in turn the taxpayer, in a bid to avoid dire economic consequences.

Bush said he worried the financial troubles 8220;could ripple throughout8221; the economy and affect average citizens. 8220;The risk of doing nothing far outweighs the risk of the package, and over time we8217;re going to get a lot of the money back.8221; He added, 8220;People are beginning to doubt our system, people were losing confidence and I understand it8217;s important to have confidence in our financial system.8221;

8220;In my judgment, based upon the advice of a lot of people who know how markets work, this problem wasn8217;t going to be contained to just the financial community,8221; the president said. He said he was concerned about 8220;Main Street8221; and that what happens on 8220;Wall Street8221; affects 8220;Main Street8221;.

Democrats are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures. They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.

Asked about the chances of adding such items, Bush sidestepped the question, saying only that now was not the time for political posturing. 8220;The cleaner the better,8221; he said about legislation he hopes Congress sends back to him at the White House.

Story continues below this ad

If passed by Congress, the plan would give the Treasury secretary broad power to buy and sell the mortgage-related investments without any additional involvement by lawmakers. The proposal, however, would require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government8217;s first use of the rescue power, and every six months after that.