Market Bailout Irks Congress Some Republicans are miffed about all the financial decisions being made without consulting them. Democrat Barney Frank says the Fed shouldn't have $800 billion to spread around without consulting anyone. Republicans say Democrats share blame for the crisis.
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Market Bailout Irks Congress

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Market Bailout Irks Congress

Market Bailout Irks Congress

Market Bailout Irks Congress

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Some Republicans are miffed about all the financial decisions being made without consulting them. Democrat Barney Frank says the Fed shouldn't have $800 billion to spread around without consulting anyone. Republicans say Democrats share blame for the crisis.

MICHELE NORRIS, host:

From NPR News, this is All Things Considered, I'm Michele Norris. Some key members of Congress will be working this weekend. They'll be drafting legislation to implement Treasury Secretary Henry Paulson's proposal to buy up the bad debt he says is clogging our financial system. While lawmakers of the Bush administration seem to be working together now, that was not always the case. Just a few days ago, members of Congress complained they were being left in the dark. NPR's Brian Naylor reports.

BRIAN NAYLOR: It's been a whirlwind week for Wall Street and Congress. On Monday, lawmakers found out about the collapse of Lehman Brothers and the sale of Merrill Lynch. Then came the Federal Reserve board's bailout of insurance giant, AIG. Lawmakers were informed after the fact about those actions and weren't happy about it. Treasury Secretary Henry Paulson compounded their ire when he failed to appear before a Senate committee as expected and skipped the meeting of House Republicans. Now, the administration wants hundreds of billions of dollars to buy banks' bad debt and needs to come to Congress for authority. So Senate Banking Committee chairman Christopher Dodd of Connecticut says it's to keep lawmakers in the loop.

Senator CHRISTOPHER DODD (Democrat, Connecticut; Chairman, Senate Banking Committee): We welcome the administration coming forward with their ideas. We want to be a part of that solution. We want to know the details of it. I'm going to be asking the Treasury Department to inform my colleagues, Democrats and Republicans, over the weekend, so we're not confronted with a fait accompli on Monday or Tuesday.

NAYLOR: The administration seems to have gotten the message. Paulson and Fed Chairman Ben Bernanke briefed congressional leaders last night in Speaker Nancy Pelosi's office, and both men are expected before congressional committees next week. On the hill there's even talk of bipartisanship. All the more surprising because elections are just a month and a half away. Democratic senator Charles Schumer of New York sat in on last night's meeting. He says it was sobering.

Senator CHARLES SCHUMER (Democrat, New York): The picture they painted, if nothing was done, was really troubling - deeply, deeply, troubling. ..TEXT: NAYLOR: While lawmakers appeared genuinely shaken by the magnitude of Wall Street's crisis. The lack of a specific plan at the moment makes it easier for both parties to pledge support. Some Republican conservatives have expressed skepticism, if not hostility, to the administration's interventions in the markets this week. But House Republican Whip Roy Blunt said it's possible something could be worked out that makes almost everyone happy.

Representative WHIP ROY BLUNT (Republican, Missouri): We want to do the best thing for taxpayers, the best thing for pension funds, the best thing for mom and pop businesses, the best thing for people who have a mortgage that they're concerned about. And I think there's a way we can do that.

NAYLOR: Democrat Dodd says any solution must also deal with the underlying cause of the turmoil - all those mortgages that are leading to record numbers of defaults and foreclosures. Democrats also want a guarantee that middle-class Americans will be insulated from crisis on Wall Street. Speaker Pelosi has also indicated Democrats may have a price tag. Things like extended unemployment benefits and more money for roads and bridges before they approve the administration's next round of bailouts. Brian Naylor, NPR News, the Capital.

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Detailing The Government's Financial Rescue Plan

Detailing The Government's Financial Rescue Plan

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Working on the problem: Treasury Secretary Henry Paulson is flanked by Federal Reserve Chairman Ben Bernanke (left) and SEC Chairman Christopher Cox (right). Chris Dodd, chairman of the Senate Banking Committee, is at the far right of the photo. Chip Somodevilla/Getty Images hide caption

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Chip Somodevilla/Getty Images

Working on the problem: Treasury Secretary Henry Paulson is flanked by Federal Reserve Chairman Ben Bernanke (left) and SEC Chairman Christopher Cox (right). Chris Dodd, chairman of the Senate Banking Committee, is at the far right of the photo.

Chip Somodevilla/Getty Images

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.