Dire Bernanke Speech Shocked Congress

Sept. 21, 2008 — -- Congressional and administration leaders split today over how a bailout package for U.S. financial markets should look, even as all sides called for swift action.

Wrangling over the size and shape of the relief package belied a universal sense of urgency about getting it through Congress after a week of turbulence on Wall Street and concerns about global implications of a possible U.S. economic meltdown.

Treasury Secretary Henry Paulson told ABC News' "This Week with George Stephanopoulos" that the government was preparing to extend bailout protection to foreign companies caught up in the nation's financial crisis, but Paulson rejected proposals that the bailout include new caps on executive compensation or steps to protect American homeowners, who are facing foreclosure in unprecedented numbers.

"We need a lot of reforms. And this is going to be something Congress and the next administration is going to be working on for a long time," Paulson told Stephanopolous. "But these can't be done, and shouldn't be done, in a matter of days. And we need this program in days in order to protect the American people.

"We've been focused on homeowners for a long time, working to avoid foreclosure," he said. "It sure seems to me that, as we buy these mortgage-backed assets, we will have much more leverage in working on the kinds of programs we need to work on."

Senate Banking Committee chairman Sen. Chris Dodd, however, in a separate appearance on "This Week," said the foreclosure crisis needed to be addressed.

"The fact of the matter is the cause ... it isn't just an effect ... the cause of this problem is still the foreclosure crisis," Dodd said. "So it needs to be part of the solution. That's not to clog this up. We need to act quickly and deliberately, and we will."

Dodd went as far as to call the bailout more important than the presidential race.

"We're 40 days away from a national election, but this issue supersedes an election," Dodd told Stephanopolous. "We need to get this right."

Dodd described a sense of shock among congressman when Federal Reserve chairman Ben Bernanke laid out for them the dimensions of the economic crisis.

"When the chairman of the Federal Reserve described the situation to us, there was a pause for about 10 or 15 seconds when nothing was said," Dodd told Stephanopolous. "The air came out of the room. It was that ... startling."

House Minority Leader John Boehner, R-Ohio, who appeared alongside Dodd on "This Week," echoed the senator's alarm.

"This is not a time for ideological purity," said Boehner. "I'm a free-market non-interventionist, but we face a crisis. And if we don't act, if we don't act quickly, we're gonna jeopardize our economy."