The head of the Treasury and the Federal Reserve began discussions on Thursday with Congressional leaders on what could become the biggest bailout in United States history.
While details remain to be worked out, the plan is likely to authorize the government to buy distressed mortgages at deep discounts from banks and other institutions. The proposal could result in the most direct commitment of taxpayer funds so far in the financial crisis that Fed and Treasury officials say is the worst they have ever seen.
Senior aides and lawmakers said the goal was to complete the legislation by the end of next week, when Congress is scheduled to adjourn. The legislation would grant new authority to the administration and require what several officials said would be a substantial appropriation of federal dollars, though no figures were disclosed in the meeting.
Democrats, having their own desire for a second round of economic aid for struggling Americans, see the administration’s request as a way to win White House approval of new spending to help stimulate the economy in exchange for support for the Treasury request. Democrats also say they will push for relief for homeowners faced with foreclosure in return for supporting any broad bailout of struggling financial institutions.
“What we are working on now is an approach to deal with systemic risks and stresses in our capital markets,” said Henry M. Paulson Jr., the Treasury secretary. “And we talked about a comprehensive approach that would require legislation to deal with the illiquid assets on financial institutions’ balance sheets,” he added.
One model for the proposal could be the Resolution Trust Corporation, which bought up and eventually sold hundreds of billions of dollars’ worth of real estate in the 1990s from failed savings-and-loan companies. In this case, however, the government is expected to take over only distressed assets, not entire institutions. And it is not clear that a new agency would be created to manage and dispose of the assets, or whether the Federal Reserve or Treasury Department would do so.
Does anyone know what this financial crisis has done to the putrid investment funds that TEC uses to fund her efforts against orthodox churches?
How do I protest these bailouts? Our government is grossly in debt – where would the rescue money come from? Who do I write to?
Is it not abundantly clear to all that the ratchet only moves one way? More government, more debt, more inflation, more socialized risk, and on and on, regardless of which party holds power. This movie is going to end badly.
I believe the parties involved, banks who issued sub-rate ARMs, those who couldn’t possibly afford a morgage screaming for them and the government sinking further and further into debt, should share the blame for this mess. We can’t keep all of the casualties alive some must die or be taken over by the ones who can handle it. By the way those loans being issued should be repaid.