On Saturday, the Bush rescue plan team asked Congress for the funds to purchase $700 billion in bad mortgage-related assets clogging the financial system and harming the economy as negotiations began on the largest bailout since the Great Depression.
The rescue plan would give Washington broad authority to buy up to toxic assets from U.S. financial institutions for the next two years. However, it does not mention which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.
Bush worried that this financial damages “could ripple throughout” the economy and affect average citizens. He believes that the risk of doing nothing far outweighs the risk of the package. He optimists that in further time, U.S. will get a lot of the money back. He admitted that people have doubted the U.S. financial system, more and more people were losing trust.
Recently, Democrats are pressing to require that the rescue plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.
Congressional aides and administration officials are working through the weekend to fill in the details of the three-pages-long proposal that gives sweeping powers to the government to dispense extremely large sums of taxpayer dollars in a program that would be sheltered from court review. The White House hoped to get a bill done as soon as possible with Congress by the time markets opened Monday.
According to Senate Majority Leader Harry Reid, D-Nev., citizens cannot allow themselves to be in denial about the threat now facing the world economy. From all indications, that threat is real, and the consequences of inaction could be catastrophic. He added that every single American has a stake in preventing a global financial collapse.
According to House Speaker Nancy Pelosi, D-Calif., said in San Francisco, the government must rescue the financial system or it will have immeasurable effect on American consumers, taxpayers, homeowners and the rest.
The rescue plan would lift up the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.
Sen. Chris Dodd, D-Conn., the Banking Committee chairperson said, "We understand the importance of the anticipation in the markets, but we also know that what we're doing is going to have consequences for decades to come. There's not a second act to this, we've got to get this right."
On the other hand, lawmakers digesting the astonishing cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers' money.
Meanwhile, the House's top Republican, Ohio Rep. John A. Boehner, said in a statement that he and all American people are furious to trapped in such damage situation, the government needs to give all efforts possible to protect the taxpayers from the consequences of a broken Washington. Moreover, he added that the efforts to exploit this crisis for political advantage or partisan quid pro quo would only delay the economic stability that families, seniors, and small businesses deserve.
Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress. On the other hand, Democratic rival Barack Obama used the party's weekly radio address to call for aid for Main Street as well as Wall Street.
Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.
Besides mortgage aid and executive compensation limits, Democrats are considering attaching middle-class assistance to the legislation despite a request from Bush to avoid adding items that could delay action. An expansion of jobless benefits was one possibility. Bush believes that most leaders can understand that the government needs to fix these damages as soon as possible.
The proposal does not require that the government accept anything from banks in return for unloading their bad mortgage-related assets. Nevertheless, it would permit the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail. In addition, the government could contract with private firms to manage the assets it purchased under the rescue plan.
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