The secretary of the U.S. Department of the Treasury warned Congress today that if his mortgage bailout plain isn’t passed — the credit markets will freeze up and the country will see a stream of bank failures.
| In his second day of testimony on capitol hill, Secretary Henry M. Paulson Jr. acknowledged to the House Committee on Financial Services that his plan to buy up to $700 billion in mortgage-related assets is unprecedented, according to a transcript of his prepared testimony. He said the proposal has been internally under analysis for months at the Treasury.
He said the current financial crisis began years ago, when lenders started making bad loans and borrowers were taking out unaffordable loans. But he called on lawmakers to focus on stabilizing the financial system now and then deal with fixing the outdated regulatory system. Paulson explained that last week, the credit markets froze up — impacting financial institutions and non-financial institutions alike. He noted that the credit squeeze threatens all parts of the economy and employment. While his proposal involves extraordinary risks, it is far less costly “than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund everyday needs and economic expansion.” A broken financial system jeopardizes personal savings and the ability of consumers and businesses to finance spending, investment and job creation. “Over these past days, it has become clear that there is bipartisan consensus for an urgent legislative solution,” Paulson said in testimony before the Senate Banking Committee yesterday. “We need to build upon this spirit to enact this bill quickly and cleanly, and avoid slowing it down with other provisions that are unrelated or don’t have broad support.”
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Treasury photo of Henry M. Paulson Jr.
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Related:
Bailout Legislation Bogged Down
House Democrats have drafted their own mortgage bailout plan that calls for more oversight of the Treasury in its purchase of mortgage assets. As Congress grapples with the legislation, Republican presidential nominee John McCain is suspending his campaign to return to Washington, D.C., to deal with the crisis.
| More Details Emerge on Mortgage Bailout More details have emerged on the Bush administration’s legislative proposal to acquire mortgage assets and prevent a full-scale collapse of the U.S. financial system. The latest move is the biggest yet among a host of historical actions by the government this year.
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