Dire Bernanke Speech Shocked Congress

Members of Congress worked through the weekend to hammer out the plan's specifics, in part because the legislature is set to recess this Friday and won't return until after the presidential election on Nov. 4.

A Plan Takes Shape

Key administration players took to the airwaves Sunday to make the case for a proposed $700 billion financial industry bailout after the collapse last week of investment bank Lehman Brothers, the sale of Merrill Lynch to Bank of America and previous bailout packages for Bear Stearns and insurance giants Freddie Mae and Fannie Mac.

Paulson told Stephanopolous that the White House will push for foreign firms to be included in the plan.

"We have a global financial system. And we are talking very aggressively with other countries around the world," Paulson said.

"If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," he said. "That's a distinction without a difference to the American people. The key here is about protecting the system."

President Bush said Saturday the White House is ready to work with Congress to quickly enact legislation to allow the government to purchase hundreds of billions of dollars worth of bad debt linked to the collapse of the housing market.

The administration proposal would be the biggest government intervention since the Great Depression. It would dole out huge sums of money to financial firms to purchase their holdings of bad mortgage-backed securities so that these firms can resume normal lending operations. The bad mortgage debt has been at the heart of the current credit crisis, which hit more than a year ago but erupted with special ferocity in the past two weeks, forcing extraordinary government actions.

Two weeks ago, the government seized control of the nation's two largest mortgage companies, Fannie Mae and Freddie Mac, and then last week, it took control of the country's largest insurance company, American International Group Inc.

The new proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.

"I don't think anyone knows whether it will work or not. I think in the short run it has the potential to increase confidence," financial analyst David Vise told ABC News' "Good Morning America Weekend Edition" today. "The plan is basically to prop up the United States system."

But finding a solution to the credit crisis that has now dominated the financial markets won't happen without some pain, according to Vise.

"There is no panacea, There is not painless solution here," said Vise, who added the economy's primary problem is a lack of confidence.

"The idea is to inspire confidence," Vise said.

What It All Means

The plan's $700 billion price tag is a large one for taxpayers. It's the amount the government would increase on the budget's limit under the Treasury Secretary's supervision so that it could buy up big bundles of toxic assets, like bad mortgages, which are weighing down Wall Street.

The idea is that with cleared balance sheets, banks could go back to work and again lend money to individuals for new homes, cars, businesses and college tuitions.

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