ID :
20500
Mon, 09/22/2008 - 10:07
Auther :
Shortlink :
http://m.oananews.org//node/20500
The shortlink copeid
Paulson urges Congress to rapidly approve $700 bln rescue plan
By Hwang Doo-hyong
WASHINGTON, Sept. 21 (Yonhap) -- U.S. Treasury Secretary Henry Paulson Sunday urged Congress to move quickly to approve a huge bailout package for financial institutions struggling with illiquid assets from falling housing prices.
Paulson told NBC's Meet the Press, "We need to deal with this and deal with it
quickly," fearing the US$700 billion rescue plan might not be cleared in time by
Congress, which adjourns Friday as lawmakers return to the campaign trail for the
Nov. 4 elections.
Democrats have said they will inject several provisions to the package presented
by the Bush administration on Saturday to limit the administration's power to
purchase mortgage-based securities, protect homeowners from foreclosures and
restrict salaries and other benefits for executives of financial firms to be put
under the bailout plan.
The unprecedented package calls for legislation to expand the legal debt limit of
the U.S. government to $11.3 trillion from $10.6 trillion amid fears over the
burgeoning U.S. trade and fiscal deficits undermining the credibility of the
world's biggest economy.
The cost of the package, which surpasses the $600 billion Congress has
appropriated for the war in Iraq since 2003, follows the decision by the federal
government to put up to $200 billion into the failing mortgage giants Fannie Mae
and Freddie Mac, and $85 billion into the world's biggest insurer, American
International Group, at the cost of market principles, taxpayers' money and moral
hazard.
Defending the package, President George W. Bush said Saturday, "This is a big
package because it was a big problem," hoping the government can recoup "a lot of
money" once the financial market is stabilized and the bad assets are resold at a
profit.
Speaking to reporters at the White House along with Colombian President Alvaro
Uribe, Bush also said the bailout package will prevent the current financial
turmoil from spilling over to the overall economy. "This problem wasn't going to
be contained to just the financial community," he said.
The Federal Reserve on Wednesday announced a concerted measure by central banks
of five major economies to pour up to US$180 billion into the global financial
market.
Earlier in the month, Lehman Brothers, the fourth-biggest investment bank in the
U.S., filed for bankruptcy and Merrill Lynch, the world's biggest brokerage firm,
was sold to Bank of America for $50 billion. Bear Stearns collapsed earlier in
the year.
Goldman Sachs and Morgan Stanley, two surviving major investment banks, are said
to be under discussions for possible mergers with other financial institutions.
Critics say the biggest government intervention since the Great Depression will
not solve the problem caused by the "asset bubble" unless falling housing prices
stop the downward trend. However, Bush administration officials insist the
package will help revive the financial system, which is crippled by the mortgage
crisis, as well as eventually boost the housing market.
In a statement released on its Web site late Saturday, the Treasury Department
said, "The program aims to "fundamentally and comprehensively address the root
cause of our financial system's stresses by removing distressed assets from the
financial system ... When the financial system works as it should, money and
capital flow to and from households and businesses to pay for home loans, school
loans and investments that create jobs."
The clogging of the financial markets has "the potential to significantly damage
our financial system and our economy, undermining job creation and income
growth," the statement said.
The program allows the federal government to purchase up to $700 billion worth of
"residential and commercial mortgage-related assets, which may include
mortgage-backed securities and whole loans," with the purchase authority expiring
two years from the date of enactment.
The delinquency rate for commercial mortgages also surged sharply in recent
months, causing some bank failures.
Paulson is also authorized to have the discretion "in consultation with the
Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to
effectively stabilize financial markets."
Assets must have been issued on or before Sept. 17, 2008 to qualify for the
program, and the price of asset purchases will be established through reverse
auctions or any other market mechanisms, according to the statement.
Foreign financial institutions that have significant operations in the U.S. will
also be eligible for the program in consideration of the densely intertwined
global financial system, it said.
hdh@yna.co.kr
(END)
WASHINGTON, Sept. 21 (Yonhap) -- U.S. Treasury Secretary Henry Paulson Sunday urged Congress to move quickly to approve a huge bailout package for financial institutions struggling with illiquid assets from falling housing prices.
Paulson told NBC's Meet the Press, "We need to deal with this and deal with it
quickly," fearing the US$700 billion rescue plan might not be cleared in time by
Congress, which adjourns Friday as lawmakers return to the campaign trail for the
Nov. 4 elections.
Democrats have said they will inject several provisions to the package presented
by the Bush administration on Saturday to limit the administration's power to
purchase mortgage-based securities, protect homeowners from foreclosures and
restrict salaries and other benefits for executives of financial firms to be put
under the bailout plan.
The unprecedented package calls for legislation to expand the legal debt limit of
the U.S. government to $11.3 trillion from $10.6 trillion amid fears over the
burgeoning U.S. trade and fiscal deficits undermining the credibility of the
world's biggest economy.
The cost of the package, which surpasses the $600 billion Congress has
appropriated for the war in Iraq since 2003, follows the decision by the federal
government to put up to $200 billion into the failing mortgage giants Fannie Mae
and Freddie Mac, and $85 billion into the world's biggest insurer, American
International Group, at the cost of market principles, taxpayers' money and moral
hazard.
Defending the package, President George W. Bush said Saturday, "This is a big
package because it was a big problem," hoping the government can recoup "a lot of
money" once the financial market is stabilized and the bad assets are resold at a
profit.
Speaking to reporters at the White House along with Colombian President Alvaro
Uribe, Bush also said the bailout package will prevent the current financial
turmoil from spilling over to the overall economy. "This problem wasn't going to
be contained to just the financial community," he said.
The Federal Reserve on Wednesday announced a concerted measure by central banks
of five major economies to pour up to US$180 billion into the global financial
market.
Earlier in the month, Lehman Brothers, the fourth-biggest investment bank in the
U.S., filed for bankruptcy and Merrill Lynch, the world's biggest brokerage firm,
was sold to Bank of America for $50 billion. Bear Stearns collapsed earlier in
the year.
Goldman Sachs and Morgan Stanley, two surviving major investment banks, are said
to be under discussions for possible mergers with other financial institutions.
Critics say the biggest government intervention since the Great Depression will
not solve the problem caused by the "asset bubble" unless falling housing prices
stop the downward trend. However, Bush administration officials insist the
package will help revive the financial system, which is crippled by the mortgage
crisis, as well as eventually boost the housing market.
In a statement released on its Web site late Saturday, the Treasury Department
said, "The program aims to "fundamentally and comprehensively address the root
cause of our financial system's stresses by removing distressed assets from the
financial system ... When the financial system works as it should, money and
capital flow to and from households and businesses to pay for home loans, school
loans and investments that create jobs."
The clogging of the financial markets has "the potential to significantly damage
our financial system and our economy, undermining job creation and income
growth," the statement said.
The program allows the federal government to purchase up to $700 billion worth of
"residential and commercial mortgage-related assets, which may include
mortgage-backed securities and whole loans," with the purchase authority expiring
two years from the date of enactment.
The delinquency rate for commercial mortgages also surged sharply in recent
months, causing some bank failures.
Paulson is also authorized to have the discretion "in consultation with the
Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to
effectively stabilize financial markets."
Assets must have been issued on or before Sept. 17, 2008 to qualify for the
program, and the price of asset purchases will be established through reverse
auctions or any other market mechanisms, according to the statement.
Foreign financial institutions that have significant operations in the U.S. will
also be eligible for the program in consideration of the densely intertwined
global financial system, it said.
hdh@yna.co.kr
(END)
