Members of Congress pressed Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to explain why lawmakers should move quickly–as early as Friday, September 26–to pass legislation that would approve a $700 billion financial rescue plan.
During testimony before the Senate Committee on Banking, Housing, and Urban Affairs September 23, chaired by Sen. Christopher Dodd (D-Connecticut), Paulson urged lawmakers to pass legislation enacting his Troubled Asset Relief Program (TARP), which would give Treasury $700 billion to buy up and hopefully resell the nation’s troubled mortgages through what Bernanke called “reverse auctions.” Bernanke stressed that Congress must act soon to pass the bill as the current reality is that the markets–because of the housing crisis–”are not supporting the economy…and credit is not going to be available.”
Members of the committee said the hearing was probably the most important one they’d ever conducted, and voiced their skepticism about jumping the gun to approve a plan that was lacking in details. As Dodd noted in his opening remarks: Treasury’s proposal “is stunning and unprecedented in its scope and lack of detail.”
Paulson, too expressed his exasperation at the current economic crisis, but said, however, that because the mortgage crisis involves such complex securities, it’s hard to discern how the reverse auctions will work–which is why the plan is slight on details. Indeed, he said, Treasury will have to hire a team of asset managers to help conduct and structure such auctions, and pretty much figure strategies out. Paulson said he asked Congress to give Treasury “broad authority” to deal with the situation because “we’re dealing with complex securities and many different securities” and “we’re going to have to use different approaches and different market based techniques.”