WORLD> America
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WORLD> America
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Dodd: 'No second act' to fixing financial mess
(Agencies)
Updated: 2008-09-23 23:25 Despite the bipartisan unhappiness, the prospects for legislation seemed strong. Differences remained, though, including a demand from many Democrats and some Republicans to strip executives at failing financial firms of lucrative "golden parachutes" on their way out the door. The administration is balking at another key Democratic demand: allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure. The administration's plan is designed to let the government buy bad mortgages and other troubled assets held by endangered banks and financial institutions. Getting those debts off their books should bolster their balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan works, it should help lift a major weight off the sputtering economy. Buttressing Paulson's comments, Bernanke said in his prepared remarks that action by lawmakers "is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy." So far this year, a dozen federally insured banks and thrifts have failed, compared with three last year. The country's largest thrift, Washington Mutual Inc., is faltering. President Bush was in New York, his speech before the United National General assembly crafted to offer assurances to world leaders that the US government has its financial problem under control. He said he is confident that Congress will pass the necessary legislation to deal with the problem and said he has assured other leaders that the financial package is "a robust plan to deal with serious problems." He said there are ideas about how to change it, but that there is a desire to get a package done quickly. The US has taken extraordinary measures in recent weeks to prevent a financial calamity, which would have devastating implications for the broader economy. It has, among other things, taken control of mortgage giants Fannie Mae and Freddie Mac, provided an $85 billion emergency loan to insurance colossus American International Group Inc. and temporarily banned short selling of hundreds of financial stocks. Bernanke and Paulson defended their unprecedented steps -- many just in the past few weeks -- to stem the crisis. Even so, Bernanke said that "global financial markets remain under extraordinary stress." In promoting the massive rescue plan, Paulson said the piecemeal approach the government has taken so far was necessary but insufficient. "We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil," the Treasury chief said. The root cause goes back to the rotten debts held by financial institutions, which are choking off the flow of lending, a crucial ingredient to the economy's health. Wall Street has been dramatically reshaped amid all the fallout. The Fed agreed to let Goldman Sachs and Morgan Stanley -- the country's last two investment banks -- become bank holding companies so that they can take deposits, like a commercial bank, in a bid to survive. Merrill Lynch agreed to be bought by Bank of America. Lehman Brothers sought bankruptcy protection, and Bear Stearns was taken over by JPMorgan Chase. |
