Treasury Secretary Henry Paulson and
Federal Reserve Chairman Ben Bernanke plan to work through the
weekend with Congress on a comprehensive plan to deal with
toxic bank assets choking the financial system, a Treasury
spokeswoman said on Thursday.
Paulson and Bernanke met with House and Senate Republicans
and Democrats to discuss a "comprehensive approach to address
the illiquid assets on bank balance sheets that are at the
underlying source of the current stresses in our financial
institutions and markets," Treasury spokeswoman Brookly
McLaughlin said in an email statement.
Congressional aides said earlier that the plan may call for
a government agency or vehicle similar to the 1990s-era
Resolution Trust Corp. to take on problem mortgage-related
assets from banks. The RTC assumed insolvent loans and other
assets during the savings and loan crisis of the 1980s and
1990s from failed institutions and rehabilitated them or sold
them to investors.
"They are exploring all options, legislative and
administrative, and expect to work through the weekend with
congressional leaders to finalize a way forward," McLaughlin
said.
She did not disclose details of any Treasury proposals.
Paulson's and Bernanke's meeting with Congress comes on the
heels of massive government rescues of insurer American
International Group (AIG.N), housing finance firms Fannie Mae
(FNM.N) and Freddie Mac (FRE.N) and the bankruptcy of Wall
Street investment bank Lehman Brothers (LEH.N).
Uncertainty over the depth of potential losses from
mortgage bonds and other securitized debt instruments on bank
balance sheets has sent investors around the globe into a panic
this week, threatening to bring the financial system to a halt
and cut off credit to the global economy.
(Reporting by David Lawder)
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