New US bailout planned

by Dave Keating | September 19, 2008 at 03:51 am

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US lawmakers have been complaining that the federal government doesn't seem to have an overall master plan for dealing with the meltdown on Wall Street, seemingly selectively bailing out companies at random and letting others implode. Last night treasury secretary Henry Paulson brief leaders from the house and senate and explained the federal government's plans, maintaining that there is a masterplan in place. Lawmakers don't seem convinced.

The federal government, in what will be its most far-reaching attempt yet to contain the financial crisis, is poised to establish a program to let banks get rid of mortgage-related assets that have been hard to value and harder to trade.

Leaders from the House and the Senate were briefed on Thursday evening by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

"The root cause of distress in capital markets is the real estate correction and what's going on in terms of the price declines in real estate," Paulson said at a press briefing after the meeting. "So we're coming together to work for an expeditious solution aimed right at the heart of this problem, which is illiquid assets on financial institutions' balance sheets."

Many details of the plan remained unclear, but it is likely the government would take on tens of billions of dollars in mortgage assets - if not more.