Again and again, the Bush team urgently pressed Congress in public and private Tuesday to disburse quickly on a $700 billion rescue plan of the financial industry as Republican and Democratic lawmakers expressed their anger over a crisis that pushed the nation's economy to the collapse.
Stocks rose in the opening hour as Treasury Secretary Henry Paulson went before the Senate Banking Committee to inform that quick passage of the administration's plan is the single most effective thing the government can do to help homeowners, the American people and stimulate the nation’s economy. However, even before Paulson could speak, lawmakers have already expressed their unhappiness.
There truly fact is the government has no credible assurances that this plan will work. The Congress could very well send $700 billion, or a trillion, and not resolve the crisis. Most experts view it as an unwarranted government intrusion into the financial markets. Rep. Joe Barton, R-Texas said, "Just because God created the world in seven days doesn't mean we have to pass this bill in seven days."
The administration's plan is designed to allow the government acquires bad mortgage-related assets and other toxic assets held by endangered financial institutions and banks. Getting those debts off their books should bolster their balance sheets, making them more inclined to lend and easing one of the largest choke points in the credit crisis. If the arrangement works, it should help raise a major weight off the sputtering economy.
President Bush was in New York, his speech before the United National General assembly crafted to offer assurances to world leaders that the U.S. government has its financial problem under control. However, he is confident that Congress will pass the necessary legislation to deal with the problem. Moreover, he has assured other leaders that the financial package is "a robust plan to deal with serious problems."
The U.S. has taken unexpected measures in recent weeks to stop a financial damage that would have destruction implications for the broader economy. It has, among other things, taken control of mortgage giant companies Fannie Mae and Freddie Mac, provided an $85 billion sudden serious loan to insurance extremely important American International Group Inc. and temporarily banned short selling of hundreds of financial stocks.
In promoting the massive bailout, the piecemeal approach the government has taken so far was necessary but inadequate. The root cause goes back to the rotten debts held by financial institutions that are choking off the flow of lending, an important ingredient to the economy's health.
Wall Street has been dramatically reshaped amid all the fallout. The Fed agreed to allow Morgan Stanley and Goldman Sachs, the country's last two investment banks, become bank holding companies so that they can take deposits, like a commercial bank, in an effort to survive. Lehman Brothers sought bankruptcy protection, Merrill Lynch accepted to be bought by Bank of America, and Bear Stearns was taken over by JPMorgan Chase.
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