Bush offers $700b in 2-yr rescue plan
President George W. Bush's administration has proposed a 700-billion-dollar bailout of the troubled financial sector over a two-year period, according to a draft proposal sent to Congress and released Saturday.
The unprecedented plan would give Treasury Secretary Henry Paulson sweeping authority to buy up to 700 billion dollars of tainted mortgage-related assets to stem a grave financial crisis, said the draft text, posted on The New York Times website.
"The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to 700,000,000,000 dollars outstanding at any one time," the draft proposal states.
The plan also allows for an increase in the public debt limit, to 11.3 trillion dollars, and grants the treasury secretary powers to buy, sell and hold residential and commercial mortgages as well as securities based on those mortgages.
The extraordinary authority would expire in two years but would permit the government to hold the assets purchased for as long as the Treasury Department believes is necessary, it said.
The rescue calls for the purchase of assets only from US-based firms and grants the Treasury Department legal immunity from any lawsuits as part of the bailout proposal.
It remained unclear how the government would manage the assets it buys. But under the plan Paulson would have authority to turn to private financial institutions to carry out the operation or create other bodies to purchase mortgage assets and issue debt.
According to the text, in carrying out his new authority, the Treasury secretary is to take into account ways for "providing stability or preventing disruption to the financial markets or banking system" and for "protecting the taxpayer."
News of the proposed rescue plan fueled a powerful market rebound on Friday.
President George W. Bush defended the plan on Saturday, telling reporters: "This is a big package because it was a big problem."
Speaking after after a week of crisis in financial markets, Bush said outside the White House decisive action was needed and that the government would eventually make back the money used for the rescue.
“I will tell our citizens and continue to remind them that the risk of doing nothing far outweighs the risk of the package.
”And that over time, we're going to get a lot of the money back."
He added that "the government needed to send a clear signal that we understood the instability can ripple throughout and affect the working people and the average family and we weren't going to let that happen."
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