Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke are considering a new plan to address the credit crisis, said Senator Charles Schumer, who proposed an agency to pump capital into troubled banks.
“The Federal Reserve and the Treasury are realizing that we need a more comprehensive solution,” Schumer, a Democrat who chairs the congressional Joint Economic Committee, told reporters in Washington today. “I’ve been talking to them about it.”
Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages and make them more affordable. His remarks indicate momentum is building for some wider plan after the Fed and Treasury’s takeovers of Fannie Mae, Freddie Mac and American International Group Inc. this month.
Schumer advocated a Great Depression-era Reconstruction Finance Corp. model, different from the Resolution Trust Corp.- type plan others have floated. Another RTC, which was a 1990s agency that sold devalued assets in the Savings and Loan Crisis, would “simply transfer excessive risk to the U.S. government without addressing the plight of homeowners,” he said.
Read it all. I can’t imagine how stressful it is to be Henry Paulson or Ben Bernanke right now. As for any plan, something comprehensive and clear is desperately needed, but the devil will be in the details–KSH.
Update: CNBC has much more on this here.