Economy: Lawmakers want alternative to $700B plan

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By The Associated Press
Published: September 24, 2008

WASHINGTON — Federal Reserve Chairman Ben Bernanke bluntly warned lawmakers Tuesday they risk a recession with more unemployment and home foreclosures unless they pass the Bush administration's $700 billion plan to save the financial industry.

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Influential lawmakers in both parties demanded changes in the White House-backed proposal, and conservative Republicans recoiled at federal intervention into private capital markets.

Six weeks before the elections, both major party presidential contenders also insisted on alterations in the administration's prescription for the worst financial crisis in decades.

Bernanke's remarks about the risk of recession came in response to a question from Sen. Chris Dodd, D-Conn.

"The financial markets are in quite fragile condition, and I think absent a plan they will get worse,” Bernanke said. "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way.”

Gross domestic product is a measure of growth, and a decline correlates with a recession.

Dodd later spoke disparagingly of the administration's proposal. "What they have sent us is not acceptable,” he said.

The legislation that the administration is seeking would allow the government to buy bad mortgages and other troubled assets held by endangered banks and financial institutions.

Getting those debts off their books should bolster the institutions' 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 could help lift a major weight off the sputtering national economy.

Negotiating terms
The White House and key lawmakers have been in negotiations since the weekend on terms of the legislation. It was not clear what impact the new congressional complaints would have on the discussions.

"Nobody is happy” about the bailout request, said House Majority Leader Steny Hoyer, D-Md., although he spoke of possible passage of legislation by the weekend.

Still, prospects for legislation seemed strong, with lawmakers eager to adjourn this week or next for the elections.

Many Democrats and some Republicans want to strip executives at failing financial firms of lucrative "golden parachutes” on their way out.

The administration balked at a Democratic demand: allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.

Paulson, seated next to Bernanke at the committee hearing, objected strongly when Sen. Chuck Schumer, D-N.Y., asked if $150 billion might be enough to get the program started, with a promise of more to come.

Paulson said that would fail to give the markets the confidence to rebound.

So far this year, a dozen federally insured banks and thrifts have failed.


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Related Topics: Public Finance, Politics, U.S. Politics, Business, National Economy, Recessions and Depressions, U.S. National Economy


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Just food for thought. It is strange to me that they say we need 700 billion dollars to bail these bums out and that's the same amount it takes to supply the US with oil for a year. HMMM Makes me wonder what's up here. It is also strange that Shell Oil now has a secret office in Iraq. OIL/WAR Now they say that McCains campaign manager has been hiding money that Freddie Mac payed his company and McCain and Mr Davis claim they have no ties to Freddie Mac. HMMM Makes me wonder. What in the hell is this secret Republican society doing now. Bush and cronies trying to steal 700 billion dollars and then walking away. If no one can see this going down then the American public is blind. We need to jail these bastards for conspiracy before they walk away with our 700 billion. Arn't these Republicans a great bunch of good old boys that would steal 700 billion dollars from fellow Americans. I think we should vote these CRIMINALS into office again so they can go ahead and finish off the kill. It is cruelty for these guys to walk away from the wounded and bleeding without finishing us off.
v - Sep 24, 2008 8:38 AM
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