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US radical bailout plan has a jawdropping price tag
(Agencies)
Updated: 2008-09-20 09:20 WASHINGTON - Struggling to stave off financial catastrophe, the Bush administration on Friday laid out a radical bailout plan with a jawdropping price tag — a takeover of a half-trillion dollars or more in worthless mortgages and other bad debt held by tottering institutions. Relieved investors sent stocks soaring on Wall Street and around the globe. The Dow-Jones industrials average rose 368 points after surging 410 points the day before on rumors the federal action was afoot.
A grim-faced President Bush acknowledged risks to taxpayers in what would be the most sweeping government intervention to rescue failing financial institutions since the Great Depression. But he declared, "The risk of not acting would be far higher." The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities. Administration officials and congressional leaders are to work out details over the weekend. Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility. In other major steps, the Treasury Department and Federal Reserve moved to give money-market mutual funds the same kind of federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks. Money-market accounts sold through retail banks are already FDIC insured. The spreading global selling panic had started to threaten some money-market funds, usually thought of as rock-solid investments. Administration officials feared a run on these funds, held by millions of Americans. "Every American should know that the federal government continues to enforce laws and regulations protecting your money," Bush said at the White House. The 75-year-old Federal Deposit Insurance Corporation now insures savings and checking accounts and certificates of deposit up to $100,000. Separately, the Securities and Exchange Commission acted to block short-selling in financial securities. That is a trading method that bets the value of stocks will go down. It has been blamed for accelerating the plunge in stock prices of banks and other financial institutions. |
