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The Bush administration sketched out a
multi-faceted effort on Friday to confront the worst U.S. financial
crisis in decades, outlining a program that could cost taxpayers
hundreds of billions of dollars to buy up bad mortgages and other
toxic debt that has unhinged Wall Street.
     

 President Bush, flanked by Treasury Secretary Henry Paulson and
Federal Reserve Chairman Ben Bernanke, acknowledged that the
program will put a "significant amount of taxpayers' money on the
line."


      The administration is asking Congress to give it sweeping new
powers to execute the plan. Paulson said it "needs to be big
enough to make a real difference and get to the heart of the
problem."


      Paulson gave few details but said he would work through the
weekend with leaders of Congress from both parties to flesh out the
program, the biggest proposed government intervention in financial
markets since the Great Depression. Members of the Senate Banking
Committee said they had yet to receive details of the proposal, but
were ready to move quickly when they do.


      The government's steps were welcomed by financial markets. As
Paulson spoke, the Dow Jones industrials were up over 300 points
and at one point had soared by 450 points. Global stock markets
rose, too.


      Before the markets opened, the government announced plans to
temporarily insure money-market deposits and to block short-selling
in financial securities. Short selling is a trading method that
bets the stocks will go down.


      Speaking to reporters at the Treasury Department, Paulson said
that the new troubled-asset relief program that he wants Congress
to enact must be large enough to have the necessary impact while
protecting taxpayers as much as possible.


      "I am convinced that this bold approach will cost American
families far less than the alternative - a continuing series of
financial institution failures and frozen credit markets unable to
fund economic expansion," Paulson said in a prepared statement.


      "The financial security of all Americans ... depends on our
ability to restore our financial institutions to a sound footing,"
he said.


      Paulson said 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.


      He also said the Treasury Department will expand a program,
announced earlier this month, to buy mortgage-backed securities,
which have been badly hurt by the housing and credit crises.


      "As we all know, lax lending practices earlier this decade led
to irresponsible lending and irresponsible borrowing. This simply
put too many families into mortgages they could not afford,"
Paulson said.


      At a news conference in which he only took three questions,
Paulson was asked the approximate dollar size of the government
intervention. "We're talking hundreds of billions," he said.


      Paulson did not address specifics about the plan to buy back bad
debt or whether the government would take a direct stake in
troubled banks in exchange for its help.


      "These illiquid assets are clogging up our financial system,
and undermining the strength of our otherwise sound financial
institutions. As a result, Americans' personal savings are
threatened, and the ability of consumers and businesses to borrow
and finance spending, investment, and job creation has been
disrupted," Paulson said.


      He said that the administration would present Congress with a
proposed legislative package and then work with lawmakers "to
flesh out the details through the weekend. And we're going to be
asking them to take action on legislation next week."


      "This is what we need to do. Because for some time we've been
saying that the root cause of the problems in our economy and our
financial system is housing, and until we get stability in the
housing market we are not going to get stability in our financial
markets," he said.


      Earlier, 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 is expanding its emergency lending efforts to
allow commercial banks to finance purchases of asset-backed paper
from money market funds, which should help the funds meet demands
for redemptions.


      The Securities and Exchange Commission early Friday imposed a
temporary emergency ban on short-selling, which had been
contributing to the collapse of stock values of investment and
commercial banks.
   

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


      The government's actions could help alleviate the uncertainty
that has been sending the markets into tumult over the past week.
Lending has come to a virtual standstill in the wake of the
bankruptcy of Lehman Brothers Holdings Inc.


      European Central Bank, Swiss National Bank and Bank of England
also offered up more cash Friday. The three banks put a combined
$90 billion into money markets in a lockstep move.


      The chairman of the Senate Banking Committee, Chris Dodd,
D-Conn., warned on ABC's "Good Morning America" Friday that the
United States could be "days away from a complete meltdown of our
financial system" and said Congress would work quickly to prevent
that.

      Later Dodd told reporters that the government's rescue plan will
be costly, and demanded more details. "We're anxious to hear the
specifics. None of us have any idea what the details are. We
understand the gravity of the moment," he said. predicted the new
bailout plan would cost at least half a trillion dollars.


      Paulson said he wanted action next week by Congress.


      "Time is of the essence," House Speaker Nancy Pelosi,
D-Calif., said Thursday night after being briefed by Paulson and
Bernanke.


      Rep. Roy Blunt, the No. 2 GOP leader in the House, suggested the
rescue can be handled without a tax increase.


      "It doesn't necessarily have to be something that impacts
taxpayers in a negative way," said Blunt, R-Mo. "It all depends
on how you put that structure together."


      GOP presidential candidate John McCain said any action should
"be designed to keep people in their homes and safeguard the life
savings of all Americans."


      Democratic rival Barack Obama said it is critical that leaders
in both parties work in concert. "Truly we are all in this
together," he said.


      The federal government already has pledged more than $600
billion in the past year to bail out, or help bail out, some of the
biggest names in American finance.

Gallery

Congress promises quick action on bailout package

SEC bans short-selling

Stocks head for rally after word of gov't plan

President Bush said Friday that federal
intervention in financial markets was not only warranted but "it
is essential" to halt the worst financial crisis in decades.

Gov't rushing to finish huge financial rescue plan

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