Massive Rescue Effort for Financial Markets

Daily Real Estate News | September 19, 2008
Massive Rescue Effort for Financial Markets

Congressional leaders and the Bush administration are working with Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke to prepare a massive intervention to revive the U.S. financial system.

The proposed plan reportedly includes using hundreds of billions of dollars in government funding to buy bad loans, leaving banks with more money and fewer problems and allowing them to again lend money.

Paulson and Bernanke urged lawmakers to approve the plan rapidly, presenting what some described as a “chilling” picture of the state of the financial system.

Congressional leaders were told that the consequences would be grave if the legislation doesn’t pass by the end of next week.

Taking over Fannie Mae and Freddie Mac, creating a new source of funding for investment banks, and assuming control of insurance giant American International Group obviously hasn’t been enough to end the crisis. It hasn’t stopped $79 billion in withdrawals from money-market funds, which are a critical source of funding for the U.S. financial system.

"The costs of doing nothing are enormous," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Source: The Washington Post, Binyamin Appelbaum and Lori Montgomery (09/19/08)