Paulson rescue plan is unprecedented
The plan would take on the liquidity crisis by clearing the so-called toxic loans from the balance sheets of troubled financial institutions. Markets worldwide were boosted on the news. Jeremy Hobson has more.
Treasury Secretary Henry Paulson (Brendan Hoffman/Getty Images)
More on The Economy, Investing, Politics, America's Financial Crisis
TEXT OF STORY
Scott Jagow: The government's action on the financial crisis has reached a whole new level. Shortly, the President will speak at the White House about a plan to prop up the entire financial industry. This plan is still being worked out, but the idea is to buy up bad mortgage debt all over the place. The government announced two other major steps this morning. But first, let's start with this plan:
The speculation is that Congress will create something like the Resolution Trust Corporation. That was set up after the Savings and Loan debacle 20 years ago. Or it could be like the Reconstruction Finance Corporation, established during the Depression. Either way, this would be an unprecedented government intervention. Jeremy Hobson takes a look.
Jeremy Hobson: Treasury Secretary Henry Paulson said only that the plan will be a comprehensive approach to deal with illiquid assets on the balance sheets of U.S. financial institutions. Many think that means Washington will buy up bad mortgages that have been dragging down the markets. MIT Economist William Wheaton sees it as an act of genius.
William Wheaton: I think it's exactly what the markets need. It's certainly what the housing market needs. And I'm quite optimistic and bullish.
Wheaton says he wouldn't be surprised if, in the end, the scheme doesn't cost tax payers a dime.
Wheaton: It's gonna buy mortgages at a time when people are desperate to sell them and then in so doing get rid of a lot of the market fear, and then turn around in two or three or four months and sell them.
Of course, if they don't sell, taxpayers would again be on the hook, possibly for hundreds of billions of dollars. Senior lawmakers say they expect legislation sometime next week.
In New York, I'm Jeremy Hobson for Marketplace.
Comments
Comment | Refresh
From huntington beach, CA, 09/19/2008
How does Wheaton think these bonds are going to be worth more in just a few months? Many now are thinking 2010 or later for the housing bottom. People need jobs to buy homes and to pay mortgages. We are only at the beginning of our economic slow down.
From Kent, WA, 09/19/2008
I don't like this plan at all. Once again we're allowing companies to keep the profits when things go well, and push the losses onto taxpayers when things go badly.
From Butler, QC, 09/19/2008
Folks and commentators rant about selfesh wall street tycoons and silly individuals who agreed to payments way beyond their means. All of that is true but what kind of environment made it seem all ok and allowed it to florish, and may have even encouraged it - and who created that environment??
Republicans, Democrats, and Independents - by whatever strip they created a circumstance which was predictable and wretched. This is what is passed-off as governance. As a taxpayer I am disappointed and disgusted. As a voter I'm not going to take it anymore. They have deceived and exploited and have only to look in the mirror to see the cause.
The rationale is that these huge financial corporations must not fail because they would bring the whole of our financial system down and threaten our very ability to manage commerce. If it's that big, then the tail is wagging the dog - who is governing whom?
From Winston-Salem, NC, 09/19/2008
So they want to fire up the Resolution Trust Corp. And someone thinks it may not cost taxpayers a dime. Oh yeah, is that what happened with RTC and the S&Ls? If its too big to fail, then its too big, and taxpayers should not have to pay for it.
09/19/2008
I just have one question: How are the people who are responsible for this mess be punished with this plan, other than walking away with millions of severence packages?
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.