The Bush administration is urging U.S. lawmakers to quickly pass its sweeping $700-billion bailout plan for financial institutions that are holding large amounts of bad mortgage debt. U.S. Treasury Secretary Henry Paulson said in television interviews Sunday that failure to take action to resolve the financial crisis will result in economic catastrophe. From Washington, VOA's Michael Bowman reports.
Tax-payer funded bailouts of private firms are never popular in the United States, particularly when the cost being discussed amounts to more than $2,000 in revenue for every man, woman and child in the country. But Treasury Secretary Henry Paulson appeared repeatedly on U.S. television Sunday with a simple message: failure to act will bring economic catastrophe.
Speaking on Fox News Sunday, Paulson said the plan's ultimate cost will likely be less than the initial outlay of funds.
"This is a program where the government would buy illiquid [non-cash] assets, hold those assets, and sell those assets," Paulson said. "And the funds would come back into the Treasury. The cost will be determined by how quickly the economy recovers, and how quickly housing prices stabilize. I do not like the fact that we have to do this. I hate the fact that we have to do it. But it is better than the alternative."
In recent weeks, Americans have watched with dismay as many of the country's largest, best-known financial firms have failed, been bought out, or been taken over by the U.S. government.
The crisis stems from millions of mortgages given in recent years to home-buyers with poor credit or unstable finances. The result has been a tidal wave of foreclosures that have incurred massive losses on financial institutions and some insurance firms.
Economists fear the current situation will effectively shut down the availability of credit in the country, strangle economic growth, and put at risk the finances of people across the nation. Last week, President Bush proposed a solution that is without precedent in America's financial history: the creation of a massive government fund to purchase bad debt and eventually sell off the assets involved.
The question now is: what will Congress do weeks before a general election?
Democratic Senator Christopher Dodd, who heads the Senate Banking Committee, spoke on ABC's This Week program.
"People [legislators] have a lot of ideas on what they think should be in or not in this package," Dodd said. "We need to give the [Treasury] Secretary the authority to work. These are complex issues. I do not think we ought to micro-manage that part of it. I happen to believe very strongly that the cause of this issue is still the bad lending practices. The foreclosure issue still lurks."
Some Democrats have suggested expanding the package to include benefits for homeowners and others facing economic struggles.
Appearing on Fox News Sunday, Democratic Senator Charles Schumer expressed strong support for broader initiatives, but said they may be addressed in legislation that is separate from the Bush administration's proposed financial bail-out.
"Many of us believe we need a stimulus package. But it does not necessarily have to be part of the bail-out," Schumer said.
But some Republicans in Congress are warning against trying to do too much for too many, rather than focusing on the immediate crisis at hand. Representative John Boehner spoke on "This Week".
"It is about protecting our economy, protecting American jobs. This is not a time for ideological purity," Boehner said. "We face a crisis. And if we do not act quickly, we are going to jeopardize our economy."
After several days of steep losses, the U.S. stock market rallied sharply Thursday and Friday as initial reports of the bail-out package surfaced.