President Bush Says They're Making Progress

President Bush said that his Administration and members of Congress have been working hard over the weekend to find a solution to controlling the damage to the nation's financial markets caused by the sub-prime mortgage collapse. He says that they've made good headway on a bill addressing the ensuing financial crisis, but that they have some differences to work out.

"Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants. Indeed, the whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts.

"Failure to act would have broad consequences far beyond Wall Street. It would threaten small business owners and homeowners on Main Street.

"Everyone recognizes that it's not easy to write a bill of this magnitude in a timely manner, and all those who have worked so hard over the weekend and continue this morning deserve the thanks and appreciation of every American. Working together, I am confident we can enact the legislation necessary to prevent lasting damage to our economy and meet the unique challenge facing us today."

Late last week, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke jointly decided that dealing with the source of the problem on a massive scale was the only way to stop the bleeding, by forming a government entity to absorb all the bad mortgages that have poisoned the U.S. financial system. This government entity would be funded by the taxpayers, allowing big Wall Street firms to survive in the economic meltdown that's already been responsible for the fall of major players in the financial sector.

Mr. Paulson has stressed the need to act quickly on this measure. The proposed plan will allow the Treasury to spend up to $700 billion on buying up the bad mortgages. Members of Congress agree with the bulk of the plan, but have some disagreements about the details. Democratic leaders want protection for taxpayers and homeowners included in the bailout. Additionally, they want to put caps on the pay and benefits of executives whose companies are being bailed out by taxpayer money.

The nation's financial crisis stems from huge institutions' bad mortgage investments that betted the risky loans would continue to pay off. Investments in these bad loans have already resulted in the government seizure of Fannie Mae and Freddie Mac, the $85 billion loan to AIG that puts the U.S. government into the insurance business - with 80% ownership in the company, the forced sale of Merrill Lynch to Bank of America, and the Chapter 11 bankruptcy of Lehman Brothers.

The government's decided that it's time for them to fix what they failed to regulate to begin with. They say that doing nothing would make things even worse and that the financial problems would eventually trickle down to every household if they don't act now. But will it fix the problem in the long-term, or just delay the process of a massive market correction and drag out the recovery? Let's see if our government can fix the biggest economic mess since the Great Depression.



Source:
The White House
KNX 170 News
ABC News