This is IN THE NEWS in
VOA Special English.
In recent weeks, the
United States government has dealt with struggling financial companies on a
case-by-case basis. Now government and congressional leaders are discussing a
plan, and they say there is no time to lose.
The idea is to have the
government buy troubled housing loans from banks and other financial companies.
These bad debts resulted from what Treasury Secretary Henry Paulson calls
"irresponsible lending and irresponsible borrowing."
The loans were then sold
as securities. Investors bought them for their high returns. But now their loss
of value may call into question the financial condition of the companies that
As a result, these bad loans have blocked the flow of credit that the
economy depends on.
Removing them from the
financial system will require a lot of money. How much? Secretary Paulson was
asked that question at a news conference on Friday.
REPORTER: "You said
this needs to be a significant size. Are we talking hundreds of billions, a
"We're talking hundreds of billions. This needs to be big enough to make a
real difference and get at the heart of the problem."
Details of the rescue
plan are still being worked out, but the administration wants Congress to act
on legislation next week. Congress is supposed to leave after that to campaign
for the November fourth elections, but lawmakers could delay their plans.
President George Bush
called on Congress not to add provisions that could delay a bill. He says the
proposed action does involve risk to taxpayer money, but he expects the money
will be paid back. He says most of the assets that the government is planning
to buy have good value over time, because most homeowners continue to pay their
And he says the economic
risks of not acting would be far higher.
Earlier this week, the
government gave a rescue loan to the huge insurance company A.I.G. in return
for a controlling interest. That came after the government took control of the
housing finance companies Fannie Mae and Freddie Mac last week. And six months
ago it provided loans for the bailout of the investment bank Bear Stearns. All
these steps, and more, are connected to the bad loans.
President Bush said the
American system of free enterprise rests on the idea "that the federal
government should interfere in the marketplace only when necessary." He
says today's shaky financial markets demand government intervention.
Recent measures have
been historic. But there have been other government interventions in private
business over the years.
For example, Congress
provided billions of dollars to help airlines after the terrorist attacks seven
And in nineteen
eighty-nine, when President Bush's father was president, Congress established
the Resolution Trust Corporation. The agency had to deal with hundreds of
failed savings and loan banks. Dealing with that crisis cost taxpayers about
one hundred twenty-five billion dollars.
And that's IN THE NEWS
in VOA Special English, written by Brianna Blake. I'm Steve Ember.