Prez. Wants Congress to Fast-Track Economic Proposal

Sept. 21, 2008 — -- President Bush is urging Congress to act quickly on his proposal to allow the government to purchase hundreds of dollars of billions of dollars worth of bad debt to bail out a financial system teetering on the brink of collapse.

Congressional members have worked throughout the weekend to hammer out the plan's specifics, in part because they are set to recess this Friday and won't return until after the presidential election. But financial experts have said there's no way to know if this daring step actually will works.

Will It Work?

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."

"What this plan does is buy time," he added, of the rescue that is the largest since The Great Depression.

The 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.

What It All Means

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.

The government doesn't want to own the bad mortgages for long. The plan is to resell them eventually and recoup the money. The Treasury's new powers would last for only two years and the secretary would have to report to Congress semi-annually.

"The government becomes essentially, one of the largest, or the largest home owner in the country," said Stanford Group Company analyst Anne Mathias. "When you joke about your mortgage and you say, 'Well, I don't own my house, the bank owns my house.' Well, now, you don't own your house but the government owns your house."

But the bailout could have an economic downside — inflation.

"[There is] no question at all is that this could increase inflation," Vise said. He said officials believe a rise in inflation is less of a problem than troubles currently causing the economy's hemorrhaging.

But Bush has said the risks of doing nothing far outweigh any challenges the plan may bring.

"My first instinct was to let the market work until I realized, upon being briefed by the experts, how significant this problem became," Bush said. "I decided to act and act boldly."

The Bush proposal is a mere three pages in length and fails to specify just exactly which institution would qualify for the aid. It also doesn't say what taxpayers would get in return.

"It's a rather brief bill with a lot of money," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman. "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."

Democrats have said they will work with the administration to pass a plan, but will demand it include relief for homeowners struggling with mounting debt and not just Wall Street.

It's the Economy Again, Stupid

"It looks like it's a defining moment in the race," said "This Week" host George Stephanopoulos said on "GMA" today. "This crisis over the last week has really brought focus to the economy."

Already, Republican nominee John McCain and rival Barack Obama have come out swinging on the issue.

Obama has hammered McCain for what he believes is a flip-flop – using the Arizona senator's own words against him. He referred to a magazine article McCain once wrote where he suggested the country should cut regulation of health insurance, "as we have done over the last decade in banking."

"He wants to run health care like they've been running Wall Street. Well, senator, I know some folks on Main Street who aren't going to think that's a good idea," Obama told a crowd of more than 15,000 in Jacksonville, Fla.

The McCain campaign has called that assertion a distortion and it believes its six-point plan supporting new regulations shows leadership.

Obama canceled unveiling a plan and his aides said a measured approach is more presidential.

America's financial troubles have taken the focus off of the personality of the campaigns and back toward the issues, Stephanopoulos said. He added, it's had a benefit for Obama, who spent the last several weeks trying to combat the Sarah Palin effect, which boosted McCain's campaign and its support.

But one thing is inescapable. Whoever wins the presidency will inherit an office facing a deep recession and spend the first year digging out of an economic hole rather than furthering his own agenda, Stephanopoulos said.

The Associated Press contributed to this story.