WASHINGTON: US Treasury Secretary Henry Paulson urged Congress yesterday to swiftly pass an unprecedented $700-billion financial rescue plan, deflecting Democratic calls for measures to help at-risk homeowners.
President George W. Bush’s administration has asked Congress to move quickly on the plan unveiled late Friday to address the gravest financial crisis since the Great Depression, warning that the economy could collapse without swift action. “We need this to be clean and quick and we need to get it in place,” Paulson said in an ABC television interview.
Leaders of the Democratic-controlled Congress have protested that the plan to buy the toxic mortgage-related assets of financial institutions should also help ordinary Americans hammered by the worst housing slump in decades. “There are many people in this country that need help. But the biggest help we can give the American people is to stabilize our financial system right now,” Paulson said.
The Treasury secretary also said the US was pressing other countries to forge bailouts for their financial institutions similar to the rescue plan. “I’m also going to be pressing our colleagues around the world to design similar programs for their banks and institutions when they are appropriate,” Paulson said in an interview on Fox News Sunday television program. Paulson did not provide further details, but US financial authorities have been working closely with their counterparts in Europe and Japan over the past 10 days to prevent a collapse of the interwoven global financial system.
Paulson also clarified that the US bailout plan would also cover non-US institutions with operations in the United States. Paulson told ABC it was essential to prevent the financial system from clogging up, “because if it does clog up, this is going to have an adverse effect on people’s abilities to get jobs, on their budgets, on their retirement savings, on lending for small businesses and so that’s where the first priority has got to be.”
Paulson acknowledged that some American homeowners need help in the wake of the US subprime mortgage crisis that triggered a global credit crunch 14 months ago. Tight credit has sent foreclosures spiking and home values have fallen as a glut of unsold homes sit on the market. “Once we get the system stabilized, there’s a lot of other things to be done,” he said.
The scale of the unprecedented plan would normally give Congress pause. But negotiations on the proposed bailout could be complicated by a tight presidential election race six weeks ahead of Nov. 4 polls and as Democrats battle to bolster their narrow majority in Congress.
House of Representatives Speaker Nancy Pelosi said that Democrats would work with Republicans to craft a bailout measure, but insisted the interests of ordinary Americans must be kept in mind. In a statement late Saturday, Pelosi said the Bush administration “has requested that Congress authorize, in very short order, sweeping and unprecedented powers for the Treasury secretary to confront a financial crisis of historic proportions.”
Democrats will work with Bush officials to address the crisis, she said, “but we must insulate Main Street from Wall Street and keep people in their homes by reducing mortgage foreclosures.”
Democrat Senate Banking Committee Chairman Chris Dodd agreed that “clean and simple” bill was necessary, but also called for changes to the proposal. “I want accountability,” he told ABC.
The Republican Senate Minority Leader, Mitch McConnell, issued a statement calling for the bailout plan to remain free of “partisan plans or pet projects.” The plan gives Paulson sweeping authority over the next two years to buy up to $700 billion of toxic mortgage-related assets at any one time to stem the grave financial crisis, according to a draft proposal.