Congress hails rescue plan progress

September 28, 2008 12:00 am

, WASHINGTON, September 28  – US Treasury Secretary Henry Paulson and leading lawmakers early Sunday reported "great progress toward" reaching a multi-billion-dollar Wall Street bailout plan before markets reopen after the weekend, saying the accord would likely be finalized later in the day.

"We’ve been working very hard on this," Paulson told an early morning news conference. "And we’ve made great progress toward a deal, which will work and will be effective in the marketplace, and, you know, effective for all Americans."

But lawmakers taking part in the negotiations cautioned the deal still had to be committed "to paper," and congressional staff members were expected to work through the night to finalize the accord.

"We have made great progress," said Nancy Pelosi, the speaker of the House of Representatives, echoing Paulson’s assessment. "We have to get it, commit it to paper, so that we can complete, formally agree."

Senate Democratic Majority Leader Harry Reid said there had been what he called a "breakthrough," which he attributed to efforts by Pelosi, and a formal announcement of the deal should be expected late Sunday.

US lawmakers have struggled to reach agreement on the 700-billion-dollar original plan put forward more than a week ago by Paulson, who was criticized for failing to provide enough oversight.

The Paulson plan calls for the government to use tax dollars to buy up bad loans, including mortgages, and hang onto them, to provide greater liquidity for financial institutions.

But rebel Republicans instead drafted an alternative plan, calling for an expanded insurance system financed by banks to rescue individual home mortgages, so that taxpayers do not have to fund the bailout.

Media reports indicated the 700-billion-dollar request could end up being cut by as much as half, with the rest subject to congressional approval at a later date.

The proposed bailout, first rushed to Capitol Hill by Paulson as a three page proposal, has now ballooned into a document of more than 100 pages, CNN reported.

President George W. Bush sought to calm the wrath of many Americans who view the bailout as a huge handout for private companies while leaving ordinary people in the lurch.

"I know many of you listening this morning are frustrated with the situation," the president said Saturday in his weekly radio address.

"You make sacrifices every day to meet your mortgage payments and keep up with your bills. When the government asks you to pay for mistakes on Wall Street, it does not seem fair."

But the president, whose popularity levels have sunk to record lows, said there was no other way to redress the world’s largest economy, and promised the final price tag would be less than 700 billion dollars.

"The failure of the financial system would mean financial hardship for many of you," Bush said, warning an increasing credit squeeze would make it hard for people to borrow money.

"The result would be less economic growth and more American jobs lost. And that would put our economy on the path toward a deep and painful recession."

However, Democrats and Republicans have expressed disquiet that so much taxpayers’ money will go to private companies, blamed by many for triggering the meltdown.

But Bush vowed in his weekly address that over time the value of the acquired assets would rise again.

"This means that the government will be able to recoup much, if not all, of the original expenditure," he said.

Republican White House hopeful John McCain flew straight back to Washington after Friday’s first presidential debate with rival Democrat Barack Obama to join the search for a deal by working the telephones.

The two presidential nominees clashed sharply on their opposing plans for saving the economy in their debate in Oxford, Mississippi. But both dodged questions on whether they would support the bailout or scale back planned initiatives due to the strain on the US budget.

With the world’s largest economy in a tailspin, other governments are nervously watching the talks, concerned their economies could fall victim to any contagion.

International Monetary Fund chief Dominique Strauss-Kahn said in an interview to be published Sunday that the world body needed to tighten its control over financial markets.

The IMF was "ready to do what is required if we are given the mandate," he said, adding the world faced "financial anarchy" now as it did in 1944 when the IMF was set up in the aftermath of World War II.

"We can have national or regional authorities, such as the European Union for example, but we need a global guarantor, an institution which monitors standards," Strauss-Kahn told France’s Journal du Dimache.


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