Paulson resists calls for added help in bailout

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By Martin Crutsinger ASSOCIATED PRESS

UPDATED:

Treasury Secretary Henry Paulson said Sunday that the nation's credit markets remain frozen and Congress must move quickly to pass a $700 billion bailout package for financial firms. But key Democrats said the legislation needs changes to provide better protections for taxpayers and homeowners in danger of losing their homes.

"The credit markets are still very fragile right now and frozen," Mr. Paulson said in an interview on NBC's "Meet the Press." "We need to deal with this and deal with it quickly."

Mr. Paulson made the rounds of the television talk shows to stress the need for speed in getting the bailout package approved. The administration spent the weekend negotiating the details of the proposal with members of Congress with the expectation that it can be passed in the next week.

"It pains me tremendously to have the American taxpayer put in this position, but it is better than the alternative," Mr. Paulson said.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said that what Congress was being asked to approve was the "mother of all bailouts," which Shelby said would end up costing more like $1 trillion rather than $700 billion when the costs of the government taking over mortgage giants Fannie Mae and Freddie Mac and insurance giant American International Group Inc. were added.

Related stories:Democrats vow to refine rescue plan and Bailout plan costliest rescue in U.S. history

Democrats said they understood the need for urgency but insisted that the measure needed to provide help for homeowners threatened with losing their homes, perhaps by changes in bankruptcy laws to allow for mortgages to be modified, and by capping pay and benefit packages for executives at the huge Wall Street firms that will be selling their bad debt to the government.

"I don't want the American taxpayer to get this bad debt and then the guy (whose company once held the bad loans) gets millions of dollars on his way out the door," said Rep. Barney Frank, Massachusetts Democrat and House Financial Services chairman.

Mr. Paulson and President Bush have argued that the alternative would be credit markets that remain frozen, meaning that businesses will fail because they can't get the loans they need to operate and the economy will grind to a halt because consumers, who account for two-thirds of economic activity, won't be able to get the credit they need to keep spending.