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Washington Talks About Overhauling Financial System While New Crisis Looms

Top U.S. economic officials told Congress Thursday that new regulatory powers are needed to protect the nation's financial system if a big investment company were to collapse.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke spoke to the House Financial Services Committee which is debating the best way to deal with that scenario and other problems as they overhaul the country's financial system.

The discussions took place at the same time a new crisis developed for the two biggest companies that own or guarantee home mortgages in the United States.

The price of shares in "Freddie Mac" and "Fannie Mae" plunged as investors worried they could lose money because the firms have been badly hurt by the mortgage crisis.

Treasury Secretary Paulson said the companies are working through a "challenging period" but told Congress they are "adequately capitalized" have enough money.

Fannie and Freddie are government-chartered companies set up to help increase home ownership by increasing the amount of money available for mortgage loans.

Some information for this report provided by AP, Reuters and AFP.