Senate Committee hears bailout proposal

Wednesday, September 24, 2008

Treasury Secretary Henry Paulson and Chairman of the Federal Reserve Ben Bernanke fielded questions from the Senate Banking Committee today. Paulson and Bernanke were joined by Christopher Cox, chairman of the SEC, and James Lockhart, director of the Federal Housing Finance Agency. The four urged the Committee to pass legislation allowing the Treasury to spend up to US$700 billion to bailout investment banks by purchasing their "illiquid debt".

They made the pitch to the committee to bail out Wall Street by passing legislation giving the Treasury unprecedented authority and little oversight. The $700 billion will bail out investment banks with illiquid mortgage assets, securities these firms cannot sell because of the state of the housing sector. The proposal will create a reverse auction, in which the illiquid debt will be bought by the Treasury at a price much higher than the fire sale prices the securities are currently valued out.

The debate centered around whether the government should be involved, is $700 billion too much, will it work, the issue of oversight, and the urgency of the situation.

HAVE YOUR SAY
Should congress pass the bailout proposal?
Add or view comments

Paulson and Bernanke claimed that such a bailout is precondition to a healthy recovery to the economy; credit is contingent on a healthy economy, the purchase of the bad debt will increase the lending to business and consumers to help the recovery of the economy.

Have an opinion on this story? Share it!

Sources

"Bernanke, Paulson: Congress act move now" — Associated Press, September 23, 2008
William Branigin and Neil Irwin. "Policymakers: Congress Must Move Quickly to Avert Damage" — Washington Post, September 23, 2008

Share this:

This page is archived, and is no longer publicly editable.

Articles presented on Wikinews reflect the specific time at which they were written and published, and do not attempt to encompass events or knowledge which occur or become known after their publication.

Got a correction? Add the template {{editprotected}} to the talk page along with your corrections, and it will be brought to the attention of the administrators.

Please note that due to our archival policy, we will not alter or update the content of articles that are archived, but will only accept requests to make grammatical and formatting corrections.

Note that some listed sources or external links may no longer be available online due to age.

The text of this article is licensed under the terms of the Creative Commons Attribution 2.5 License