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Congress, administration to prop up Wall Street |
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By Ian Swanson
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Posted: 09/19/08 02:30 PM [ET] |
Congress and the Bush administration took steps Friday to reassure Wall Street of efforts to end a financial meltdown, even as they acknowledged the crisis threatens the pocketbooks of ordinary Americans.
House Speaker Nancy Pelosi (D-Calif.) offered support for the rescue plan first proposed Thursday night in her office by Treasury Secretary Henry Paulson, while other key members of Congress said the gravity of the crisis was leading Democrats and Republicans to work together.
Republicans even canceled their long -running energy protest on the House floor because of worries about the country’s financial straits.
Troubled mortgage assets are clogging financial markets, choking off the flow of credit and preventing banks and other financial institutions from financing productive loans, Paulson somberly told reporters Friday at a brief press conference.
“As a result, Americans’ personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment and job creation has been disrupted,” Paulson said from a prepared statement.
Less than an hour later, President Bush described the crisis from the Rose Garden as a “pivotal moment for America’s economy.”
Paulson will work this weekend with congressional leaders from both parties on legislation that will allow the government to purchase troubled assets from banks. He said the program would cost “hundreds of billions,” and Bush said the action was not without risk.
But Paulson said the alternative would be worse.
“I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion,” Paulson said in a prepared statement.
Wall Street appeared to react favorably to the news, which included several moves by the government meant to restore investor confidence. The Dow Jones index jumped immediately Friday morning by 400 points.
Paulson said Treasury would come to congressional leaders with legislation, and then “flesh out the details” of the program.
“We’re going to be asking them to take action on legislation next week,” he said.
Pelosi offered support but also caution to Bush during a Friday morning phone call
“As I told the president this morning, we are committed to quick, bipartisan action,” Pelosi said in a statement, “while ensuring that we uphold key principles — insulating Main Street from Wall Street and keeping people in their homes by reducing mortgage foreclosures, restoring market confidence and protecting American taxpayers from incurring hundreds of billions of dollars of debt.”
Democrats are trying to push through a $50 billion economic stimulus bill that would include an extension of unemployment benefits and food stamps, as well as infrastructure and Medicare funding. But it’s not clear if any of these proposals will be added to the rescue plan that the administration said must be passed by the end of next week, when Congress is set to adjourn for the elections.
Senate Banking Committee Chairman Chris Dodd (D-Conn.), who huddled with members of his panel Friday, said the measure will not be turned into a “Christmas tree.” At the same time, he said the measure will include provisions aimed at the housing crisis, which is the root of the financial turmoil on Wall Street.
“We want to deal with causes and effects here, if we're going to bring to closure the most serious — the most serious economic challenge of our lifetime,” Dodd said.
Congressional leaders had already offered support for the concept Thursday night during a meeting with Paulson and Federal Reserve Chairman Ben Bernanke in Pelosi’s office attended by scores of key members from both parties.
The administration sought last night’s meeting, saying that Paulson and Bernanke needed to meet right away and that “tomorrow would be too late,” a Democratic aide said.
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