Paulson Warns Financial Rescue Plan Will Cost ‘Hundreds of Billions’

Posted in Uncategorized at 10:09 am by Steve

As the economy continues to sink, the United States is facing very real peril. Many people, who were already living paycheck to paycheck are going to loose everything if quick action is not taken.
What can be done though? Is it right to inflate an already outrageous national debt to help financial companies who got themselves into this position by bad management and greed? Is it responsible to hit the tax payers with additional burdens?
I think it is safe to say that we all need to pray to God and hang on for the ride…it’s going to be a rough one.

WASHINGTON — Treasury Secretary Henry Paulson said Friday that it will take a “significant investment of taxpayer dollars” to lift up the flailing economy, warning that everything from retirement savings to home values are at risk if Congress does not act immediately.

“We’re talking hundreds of billions (of dollars),” Paulson said when asked how high the price tag could run. “This needs to be big enough to make a real difference and get to the heart of the problem.”

He said he is continuing to work with members of Congress and will ask lawmakers to take action on a rescue package next week before they recess.

“The financial security of all Americans, their retirement savings, their home values, their ability to borrow for college and the opportunities for more and higher paying jobs depends on our ability to restore our financial institutions to sound footing,” he said. “This is what we need to do.”

But Paulson said he’s confident the infusion of more taxpayer dollars is the best option.

“I am convinced this bold approach will cost American families far less than the alternative,” he said.

He spoke after the federal government announced several short-term measures to stem the worst financial crisis in decades.

The government on Friday said it would safeguard assets in money market mutual funds and temporarily banned short-selling of financial company stocks. The Treasury Department has asked Congress to give it sweeping power to buy up toxic debt that has unhinged Wall Street.

President Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money market mutual funds. And the Federal Reserve announced it will expand its emergency lending program to help support the $2 trillion in assets of the funds.

Both moves are designed to bolster the huge money market mutual fund industry, which has come under stress in recent days.

The Fed said it expanding its emergency lending efforts to allow commercial banks to finance purchases of asset-backed paper from money market funds. The central bank should help the funds to meet demands for redemptions.

The Securities and Exchange Commission early Friday imposed a temporary emergency ban on short-selling of financial company stocks, a trading method that bets the stocks will go down.As the financial crisis widened, entreaties had come from all quarters to stem a swarm of short-selling contributing to the collapse of stock values in investment and commercial banks.

Bush planned to discuss the swirl of emergency actions in a Rose Garden statement later Friday.

Paulson and Federal Reserve Chairman Ben Bernanke are crafting a massive rescue plan to buy up dodgy assets held by troubled banks and other financial institutions at the heart of the nation’s financial crisis.

Congressional leaders said they expected to get the plan Friday and act on it before Congress recesses for the election.

Wall Street headed for a huge rally Friday. The government’s moves could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has grinded to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc.

Global stock markets roared higher, too.

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