Paulson and Bernanke Push Bailout as Lehman Assets SoldBy Reuters - | Posted 2008-09-23 Email Print
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Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson stressed to the U.S. Congress the dire consequences of failing to move quickly on the plan for the government to buy up hundreds of billions of dollars of tainted mortgage-related securities. Members of the U.S. Congress and Senate express their understanding for fast-action, but want safeguards in place and more details on what the $700 billion bailout will include.
NEW YORK (Reuters) - The architects of a $700 billion bailout for the U.S. financial system tried to head off opposition to the plan in the U.S. Congress, while Japan's largest brokerage agreed to buy Lehman Brothers' European arm as the next step in the industry's dramatic transformation.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson stressed the dire consequences of failing to move quickly on the plan for the government to buy up hundreds of billions of dollars of tainted mortgage-related securities.
U.S. stocks opened slightly higher, with the Dow Jones industrial average .DJI up 0.22 percent, following losses in European and Asian markets on uncertainty over what price the government will pay for the securities, when the buying would begin, and how confidence in the U.S. financial system can be restored.
"Action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy," Bernanke said in remarks prepared for delivery on Tuesday to the Senate Banking Committee.
He said global financial markets "remain under extraordinary stress.
Paulson said market turmoil was already spilling into the broader U.S. economy. "We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil," he said.
Democrats are pushing back. Senate Banking Committee Chairman Christopher Dodd said lawmakers must limit executive pay for companies participating in the bailout or risk the wrath of voters. The bailout plan, he said, was "stunning and unprecedented in its scope and lack of detail".
U.S. lawmakers and the Bush administration are trying to resolve differences over the legislation that would authorize the Treasury to buy $700 billion in bad assets and hold them until they could be sold at a later date.
On the Democrats' wish list: assistance to homeowners struggling to pay their mortgages, curbs on executive pay at companies that use the program to unload toxic assets, and the government taking equity stakes in banks that use the program. Markets suspect the debate could drag into next week.
"I just don't think the American public is sold," said David Dietze, chief investment officer of Point View Financial Services in New Jersey. "I think they are skeptical of the need and they are fearful of the cost."