Administration Proposes $700 Billion Financial Services Rescue Plan

The United States government–both the Administration and the Congress–began moving over the weekend of Sep. 20-21 to “address the underlying problem” in the financial system, in the Sep. 19 words of Treasury Secretary Henry Paulson, by giving Treasury the ability to purchase up to $700 billion in troubled mortgage-related assets from financial institutions headquartered in the U.S. over the next two years.

Members of Congress from both parties voiced support for the proposed legislation necessary to conduct the massive bailout, though it appears that Democrats may require more oversight than the simple twice-yearly reports to Congress that the brief draft proposal released Sep. 20 requires, will call for protection for individual mortgage holders, and will want some limitation on the compensation for the executives that will run the massive Treasury operation.

Paulson himself suggested in a series of appearances Sep. 21 on the Sunday morning television talk shows that the purchases might also be made from non-U.S. banks.

Meanwhile, on the night of Sep. 21, the last remaining independent investment banks–Morgan Stanley and Goldman Sachs–applied to the Federal Reserve to become bank holding companies, and the Fed announced that it had agreed to the request