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STEVE INSKEEP, host:

It's Morning Edition from NPR News. Good morning. I'm Steve Inskeep. We're waking up to news of a government bailout of the financial industry. Something like this has happened before, but rarely has the government intervened on such a gigantic scale. The Treasury Department and the Federal Reserve will draft a plan to take some of the assets of companies with billions of dollars in bad debt. Treasury Secretary Henry Paulson told Congress about it last night.

(Soundbite of speech)

Secretary HENRY PAULSON (U.S. Department of the Treasury, George W. Bush Administration): We talked about a comprehensive approach that will require legislation to deal with illiquid assets on financial institutions of the United States on their balance sheet.

INSKEEP: That may require a bit of translation. In fact, much of today's program is about translating what's happening on Wall Street, so we've asked NPR's John Ydstie to help us figure this out. John, good morning.

JOHN YDSTIE: Good morning, Steve.

INSKEEP: Dealing with illiquid assets, what does this mean?

YDSTIE: Well, we don't know the details of this plan. They're going to be worked out over the weekend, but what Secretary Paulson wants is authority from the Congress for the government to acquire the bad assets that are at the heart of this financial crisis, , these mortgage-backed securities owned by financial institutions which they can't sell and which have already brought down AIG, Bear Stearns, and Fannie and Freddie, and made the whole world afraid to lend, because no one knows who will be next to fail.

INSKEEP: And that means that the government takes these over, which means if they're an asset, if there's income, the government gets it, but if there's a liability, the government taxpayers end up paying. Is that right?

YDSTIE: Correct.

INSKEEP: And will this be similar to the effort to bail out savings and loans which took place almost 20 years ago now?

YDSTIE: Well, yes, in a sense, it will be likely to involve a government entity like the RTC, which would acquire bad assets from companies at a deep discount, hold them...

INSKEEP: Resolution Trust Corporation.

YDSTIE: Right - back into the market that - at later time, but there would be some big differences from the original Resolution Trust Corporation. It was disposing of the assets of dead S&Ls that the government had taken over. In this case, the government would be trying to save firms and the financial system by removing these toxic assets. Also, the original RTC was a big organization, and given the urgent nature of the current crisis, officials may not have time to set up a separate organization. So, the government may have to figure out another way to administrate, maybe inside the Treasury Department. It could also resemble the S&L bailout in terms of the potential huge costs to taxpayers.

INSKEEP: NPR's John Ydstie is telling us about federal plans for a bailout of the financial industry. We know about this in part because top federal officials met with Congress last night. John, is Congress going to go along?

YDSTIE: Well, members of Congress who were involved in meeting last night seemed very open to the approach and certainly aware of the urgency of the situation. Here's Democrat Chris Dodd, chairman of the Senate Finance Committee.

(Soundbite of press conference)

Senator CHRIS DODD (Democrat, Connecticut; Chairman, Senate Committee on Banking, Housing and Urban Affairs): It's their proposal. We're waiting to receive something from them. We will then, based on a bicameral, bipartisan basis, react to it. I have no idea what it will look like at this point. I can't tell you numbers, volume. This is a serious moment. I've been in the Senate for 28 years and in Congress 34. There's never been a moment as serious as this one.

YDSTIE: Dodd said that he expected to receive a formal proposal from Secretary Paulson and Chairman Bernanke at a committee next week, Tuesday. And he said he'd make Senate staffers available to work with the administration over the weekend. And Democrat Barney Frank, chairman of the House Financial Services Committee, seemed to be onboard, too.

Representative BARNEY FRANK (Democrat, Massachusetts; Chairman, House Committee on Financial Services): We're going to do this as quickly as we can. We're not talking about a month. I think we're talking about doing it before - we're talking about doing it before we adjourn. You know, maybe (unintelligible) gets pushed back a little bit.

YDSTIE: Frank said he thought his committee could take the administration's plan up by Wednesday and hopefully have it done by the end of the week. House minority leader, Republican John Boehner, who was opposed to this approach as recently as a couple of days ago, also lined up behind the effort last night.

Representative JOHN BOEHNER (Republican, Ohio; House Minority Leader): This is about saving our economy, saving American jobs, making sure the people's retirement security is as secured as they think it is, and protecting people's savings.

INSKEEP: Well, John Ydstie, what do homeowners get out of this?

YDSTIE: Well, that could be an issue for Democrats. Yesterday afternoon, Charles Schumer of New York, a powerful Democratic senator, argued for a comprehensive approach that included letting homeowners go to bankruptcy courts to reduce their mortgage principle. It's something Democrats have tried and failed to do before. Democrats may also want an additional stimulus package to give this power to the administration. We'll see what happens.

INSKEEP: John, thanks very much.

YDSTIE: You're welcome, Steve.

INSKEEP: That's NPR's John Ydstie. And we'll continue following this as we learn more about how this bailout is going to work.

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