“When you’re dealing with the taxpayers’ money I don’t think ambiguity has a place,” said Mr. Shelby. “We are potentially layering taxpayer resources on top of massive systemic risk.”
“Our plan is aimed at supporting the stability of financial markets, not just these two companies,” Mr. Paulson said. “Let me stress that there are no immediate plans” to infuse cash into the mortgage giants.
With the Treasury plan having done little to calm financial markets, House Republican leaders called for hearings on the proposals despite a personal plea from Mr. Bush for quick action.
Democratic leaders expressed fewer objections and were more sympathetic to the call for swift congressional action, saying they would include the plan in housing legislation that the House may put to a vote as early as this week.
“Inaction is not an option,” despite some doubts, said Sen. Christopher J. Dodd, Connecticut Democrat and committee chairman.
Meanwhile, the Securities and Exchange Commission (SEC) made waves in the markets by announcing it will move to stop illegal trading that has driven down the stocks of Fannie, Freddie and other Wall Street firms and banks.
SEC Chairman Christopher Cox told the banking committee that the commission will limit short selling in the shares of financial companies that are critical to the economy through an emergency order requiring traders to own the shares of financial companies they sell short. The announcement caused a sharp rebound in financial shares in the early afternoon Tuesday, but most resumed their fall by the end of the day.