WASHINGTON — An enormous, taxpayer-financed program to buy up bad mortgages and other distressed debt is necessary to protect the savings and aspirations of millions of Americans, Treasury Secretary Henry M. Paulson Jr. said on Friday.
“We’re talking hundreds of billions” of dollars, Mr. Paulson said at a briefing in which he underscored the depth of the problem, pledged to work with Congress to address it quickly and voiced optimism that, in the end, the country would emerge from the financial chaos.
Seeking to dispel any impression that the bailout would amount to a rescue of greedy Wall Street executives by Main Street Americans, Mr. Paulson said the program would “cost Americans far less than the alternative.”
Resolving the financial problems is of paramount importance, not just for major corporations and investment banks but for people who have never set foot in the corridors of corporate and political power, Mr. Paulson said. “Their retirement savings, their home values, their ability to borrow for college” and their chance to find and keep good jobs depend on it, he said.
Mr. Paulson said Fannie Mae and Freddie Mac, which were recently taken under the federal government’s wing, would expand their purchases of mortgage-backed securities to help ease the problems.
He declined to lay out specifics of the unfolding recovery program, which he said he would work on through the weekend with lawmakers so that it could be acted upon next week. But he said that the program must be well designed and “sufficiently large” to protect taxpayers “to the maximum extent possible.”
Senator Richard C. Shelby of Alabama, the top Republican on the Senate Banking Committee, said panel members had begun addressing details of the rescue program. Until now, Mr. Shelby said in an interview on Bloomberg television, Mr. Paulson and the Federal Reserve chairman, Ben S. Bernanke, “have been jumping from crisis to crisis like putting out a brush fire.”
Mr. Paulson did not specify what he told Congressional leaders on Thursday evening, when they met in what he called a “lengthy and productive working session” on how to deal with the crisis. He said the problems were spawned by shaky and sometimes opaque real estate investments, and now streams of credit had been clogged, not just for big investors but also for families wanting to buy houses and cars and pay for tuition.
But if what Mr. Paulson told the lawmakers was similar to what he told the American public on Friday, he surely conveyed to them a sense of urgency, telling the legislators that the situation was too important for them to adjourn and go home to campaign, which many of them hoped to be doing by now.
President Bush and Mr. Paulson appealed for a bipartisan approach. The president described this as “a pivotal moment for America’s economy” and appealed to the collective resilience of the American people, which he said had sustained them over the last seven years through terrorist attacks, economic downturns and natural disasters.
“We will weather this challenge too, and we must do so together,” Mr. Bush said. “This is no time for partisanship.”
House Speaker Nancy Pelosi, Democrat of California, pledged Thursday night to keep Congress in session beyond its scheduled adjournment next Friday, if necessary, “to consider legislative proposals and conduct necessary investigations” linked to the crisis.
President Bush promised to work with members of both parties “to steer our economy through these difficult times and get back to the path of long-term growth.”
What Mr. Paulson called the “tactical steps” taken by the government caused the markets to shoot up on Friday morning. But deeper, long-range moves are necessary to address the causes of the crisis, he said.
Mr. Paulson said that when the country had put the crisis behind it — “which we will” — there must be a comprehensive drive to shore up a federal regulatory structure that he called “suboptimal, duplicative and outdated.”
“This is a critical debate for another day,” Mr. Paulson said.
President Bush said, “There will be ample opportunity to debate the origins of this problem. Now is the time to solve it.”
“Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary,” the president said. “Given the precarious state of today’s financial markets — and their vital importance to the daily lives of the American people — government intervention is not only warranted, it is essential.”
Source : nytimes
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