Govt Bailout Could Reach $1 Trillion

Sept. 19, 2008 — -- Congress is considering a plan proposed by the US government that would amount to one of the biggest bailouts in U.S. history.

Lawmakers are expected to move by the end of the week on a plan proposed by the US Treasury and Federal Reserve last night to buy up all the bad debt and distressed mortgages from banks and firms on the brink of disaster in an effort to stem the economic crisis sweeping Wall Street.

"To listen to the language last evening that we're literally maybe days away from a complete meltdown of our financial system with all the implications here at home and globally," Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee told ABC's Diane Sawyer on Friday's "Good Morning America."

"This is about a serious a situation as both Richard and I would say we've confronted in our collective years in Congress -- I've been here 28 years," Dodd said of Sen. Richard Shelby, R-Ala., the top Republican on the Senate Banking Committee.

Shelby told Sawyer the bailout could cost a half a trillion dollars.

"I figure it'll be at least a half a trillion," Shelby said when pressed on the size of the bailout, "but when you look at what the Fed[eral Reserve] has already done, and the extension of power to Treasury to deal with Fannie Mae and Freddie Mac, I believe we're talking about a trillion dollars."

"That's going to visit the taxpayer. Sooner or later it's either going to be a debt charged to all of us to our children," Shelby said.

While congressional leaders pledged to work together to stave off a further economic meltdown, Dodd blamed the institutions charged with regulating the financial industry.

"This was avoidable. This did not have to happen. Where were the cops on the beat? Where were the regulators? When these loans were being made they did nothing." Dodd told Sawyer on "GMA."

Shelby stressed the need for more information. "Is this their super-plan?" he asked on "GMA."

"We want to see the details … this is not a done deal yet, but we know there's a crisis, there's stress in the financial markets," he said.

Congressional leaders from both the Democratic and Republican parties met for 90 minutes last night on Capitol Hill with US Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to hash out the plan.

They emerged from the meeting, vowing to work together to pull the nation out its financial crisis, though details remain to be worked out.

"What we are working on now is an approach to deal with the systemic risk and the stresses in our capital markets. We've talked about a comprehensive approach that will require legislation to deal with illiquid assets of financial institutions of the United States, on their balance sheets," Paulson said, outlining the goal of the administration's plan.

House Speaker Nancy Pelosi said the relevant congressional committees will get to work once they see the administration's proposal. "We hope to move very quickly, time is of the essence," she said.

Sen. Harry Reid, the Senate Majority Leader, said he was anxious to get the administration's proposal and that he hoped to see it in hours, not days.

Rep. John Boehner, the House Republican leader, explained why it was important for partisan differences to be put aside. "This crisis isn't about solving the problems with banks or people who hold commercial paper, this is about saving our economy, saving American jobs, making sure that peoples' retirement security is secure as they think it is and protecting peoples' savings."

In a letter to President Bush Thursday, Pelosi offered to postpone Congress' planned adjournment next Friday, Sept. 26, to address the ongoing financial crisis.

In the letter, Pelosi says she wants to ensure a consistent approach to the "ongoing market turmoil" by developing a bipartisan recovery effort.

The speaker's letter signals that Democrats are prepared to accept the president's plan for Wall Street, but also demands a second stimulus package targeted at Main Street.

Pelosi says such a package must include five components: "Investment in infrastructure for economic growth and job creation here at home, home heating assistance at a time of record energy costs, extended Unemployment Insurance for the growing number of Americans looking for work, Food Stamps that will help ensure we feed hungry families in a time of crisis, and assistance to maintain critical health care coverage jeopardized by state budget cuts."

Pelosi says she wants to "balance accountability to the U.S. taxpayer with protecting American families from the crisis's fallout."

ABC News' George Stephanopoulos, Dean Norland, and Nitya Venkataraman contributed to this report.