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Home » News » Business

Friday, September 19, 2008

Paulson: Bailout to cost hundreds of billions of dollars

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  • Treasury Secretary Henry Paulson briefs reporters about efforts to heal the crisis in the U.S. financial markets, Friday, Sept. 19, 2008, at Treasury Department in Washington. (AP Photo/J. Scott Applewhite)
  • Senate Majority Leader Harry Reid speaks to reporters with Speaker Nancy Pelosi by his side after members of Congress met with SEC Chairman Chris Cox, Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke. Associated Press
  • Getty Images
From left: Federal Reserve Chairman Ben S. Bernanke, Treasury Secretary Henry M. Paulson Jr., Securities and Exchange Commission Christopher Cox and Senate banking committee Chairman Christopher J. Dodd meet with legislators on Capitol Hill on Thursday to discuss the Bush administration's response to the financial crisis.

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By Patrice Hill

UPDATED:

The still-being-formulated plan for the federal purchase of bad debts will cost hundreds of billions of dollars, Treasury Secretary Henry M. Paulson Jr. said in a news conference Friday.

Mr. Paulson said that despite all of the steps taken already, including taking over an insurance company and mortgage finance giants, "more is needed." He said the root cause of the problem, the proliferation of mortgages that homeowners are unable to repay, has spread to the rest of the financial system. Five million mortgages are in foreclosure or are delinquent, he said.

"These illiquid assets are clogging the system," Mr. Paulson said. He said the bailout will be less costly to the consumers than allowing that problem to spread. He said he plans to spend the weekend working with members of Congress devising a comprehensive plan for the government to purchase some of these bad debts, and expects the Congress to pass authority to do so in a week.

• Bush: 'Pivotal moment' in U.S. economy

• Stocks soar after rescue plan announced

• TWT EDITORIAL: It's the oversight, stupid

---

Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke met with congressional leaders Thursday night in an unprecedented, historic effort to craft a bipartisan solution authorizing Treasury to resolve mounting bad loans that have dragged down a beleaguered Wall Street.

"We are here to work together for solutions ... in a way that insulates taxpayers, consumers, Main Street from the crisis on Wall Street," said House Speaker Nancy Pelosi, California Democrat, surrounded by lawmakers from both parties who assembled for the extraordinary meeting on Capitol Hill.

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