Largest Bailout Since Great Depression
President Bush has asked Congress to find 700 billion dollars to give the government broad power to buy the bad debt of any U.S. 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.
Treasury Secretary Henry Paulson, lawmakers and their aides are expected to work through the weekend in an effort to craft a bill swiftly. Democratic leaders on Capitol Hill said they expect the bill to go before a vote within days.
Paulson, Federal Reserve Chairman Ben Bernanke and other officials have said in recent days that the lack of easy credit between banks and other financial institutions threatens to inflict serious damage on the economy if not addressed immediately.
The proposal would require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government’s first use of the rescue power, and every six months after that.
The plan would allow the Treasury to buy up mortgage-related assets.
The aim is for the government to buy the securities at a discount, hold onto them and then sell them for a profit.