Bush Administration Seeks $700B for Economic Bailout

We are in so trouble right now.

 

By Lori Montgomery, David Cho and Binyamin Appelbaum

Washington Post Staff Writers
Saturday, September 20, 2008; 11:52 AM

The Bush administration today sent lawmakers a historic $700 billion emergency rescue plan that allows the Treasury to buy the troubled mortgage securities that have been toppling major financial firms and are at the heart of Wall Street's turmoil.

Paulson: Fannie, Freddie to Buy More Mortgages

Treasury Secretary Henry Paulson says mortgage giants Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market.

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The package, the most sweeping government intervention in the markets since the Great Depression, was $200 billion higher than lawmakers had been told yesterday to expect. It also does not include the $200 billion that officials said earlier this month the government will spend on the rescue of Fannie Mae and Freddie Mac.

To accommodate the spending, the package also would also raise the federal debt limit to $11.3 trillion from the current $10.6 trillion. The debt now stands at $9.6 trillion.

President Bush, speaking to reporters today during a White House appearance with Colombia President Alvaro Uribe, said drastic action was needed because of the scope of the financial crisis.

"It is a big package because it's a big problem," Bush said. "The risk of doing nothing far outweighs the risk of the package."

Bush said that in talks with congressional leaders he "found a common understanding of how severe the problem is" and the need for urgent action.

"We need to get this done quickly, and the cleaner the better,'' he said.

Bush, who campaigned for office as the nation's first MBA president and a free-market advocate, also appeared to address complaints from conservatives that the plan is too costly and inserts the government too heavily into the economy. He suggested he was persuaded by Paulson and other senior aides of the need for drastic intervention.

"I'm sure there are some of my friends out there that are saying, 'I thought this guy was a market guy, what happened to him?' '' Bush said. "My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''

Bush acknowledged that the plans would put "hundreds of billions of dollars at risk," but said he was confident would get most of their money back in the end.

Under the proposed plan, the government would purchase only mortgage-backed securities from troubled firms and only those issued before yesterday. The government authority would expire in two years.

The Treasury secretary would be required to report to Congress on the plan within three months.