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Paulson eyes bank bailout backing Paulson eyes rescue plan backing
(20 minutes later)
US Treasury Secretary Henry Paulson is to urge a key Congressional hearing not to delay a $700bn (£382bn) bail-out of the US banking system.US Treasury Secretary Henry Paulson is to urge a key Congressional hearing not to delay a $700bn (£382bn) bail-out of the US banking system.
Mr Paulson will tell the Senate Banking Committee that the personal savings of US citizens are at risk, according to his prepared remarks.Mr Paulson will tell the Senate Banking Committee that the personal savings of US citizens are at risk, according to his prepared remarks.
The Treasury wants unlimited authority to buy back the bad debt that is clogging the financial markets.The Treasury wants unlimited authority to buy back the bad debt that is clogging the financial markets.
Fed Chairman, Ben Bernanke, will back him by saying urgent action is needed. Fed chairman Ben Bernanke will back him by saying urgent action is needed.
Opening the hearing Democrat chairman of the committee, Chris Dodd, said: "We all recognize the gravity of the situation."Opening the hearing Democrat chairman of the committee, Chris Dodd, said: "We all recognize the gravity of the situation."
He added that the "economic maelstrom" was caused by a combination of "private greed and public regulatory neglect".He added that the "economic maelstrom" was caused by a combination of "private greed and public regulatory neglect".
The continued turmoil in US financial markets... has led US Secretary Treasurer Henry Paulson to seek a comprehensive solution Q&A: US bail-out planThe continued turmoil in US financial markets... has led US Secretary Treasurer Henry Paulson to seek a comprehensive solution Q&A: US bail-out plan
Doubts over how soon the rescue plan can be applied have emerged over the past days from both the Democrats and Republicans.Doubts over how soon the rescue plan can be applied have emerged over the past days from both the Democrats and Republicans.
Under the draft Treasury plans, financial institutions with "significant operations in the US" are eligible to sell or auction their bad debts to the Treasury fund.Under the draft Treasury plans, financial institutions with "significant operations in the US" are eligible to sell or auction their bad debts to the Treasury fund.
The fund would aim to sell off these mortgage-related debts in the future, when it says, their value may well have risen.
'Market turmoil'
That would mean a number of British banks could sell their "toxic assets" to the Treasury-owned bank via an auction.That would mean a number of British banks could sell their "toxic assets" to the Treasury-owned bank via an auction.
The fund will aim to sell off these mortgage-related debts in the future when, it says, their value may have risen.
'Decisive action'
"We saw market turmoil reach a new level last week, and spill over into the rest of the economy," Mr Paulson is expected to say."We saw market turmoil reach a new level last week, and spill over into the rest of the economy," Mr Paulson is expected to say.
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil.""We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil."
He will add: "When the financial system doesn't work as it should, Americans' personal savings, and the ability of consumers and businesses to finance spending, investment and job creation are threatened."He will add: "When the financial system doesn't work as it should, Americans' personal savings, and the ability of consumers and businesses to finance spending, investment and job creation are threatened."
Ben Bernanke's testimony will follow Mr Paulson's.Ben Bernanke's testimony will follow Mr Paulson's.
He is expected to defend the Federal Reserve's action to save insurer AIG from collapse. He is set to defend the Federal Reserve's action to save insurer AIG from collapse.
"A disorderly failure of AIG would have severely threatened global financial stability and, consequently, the performance of the US economy," he is expected to say. "A disorderly failure of AIG would have severely threatened global financial stability and, consequently, the performance of the US economy," he is set to say.
He will then go on to say that despite the efforts of the Federal Reserve, the Treasury, and other agencies, that global financial markets remain under extraordinary stress. He will then say that despite the efforts of the Federal Reserve, the Treasury, and other agencies, that global financial markets remain under extraordinary stress.
'Bold approach''Bold approach'
"Action by the Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy," he will add."Action by the Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy," he will add.
On Saturday, US President George Bush defended the plan, saying the cost to taxpayers of shoring up markets was better than the alternative of job losses and diminished pensions. President Bush has been closely involved with the proposed rescue plan.
"I'm convinced that this bold approach will cost American families far less than the alternative," he said. "This is not a step that we have taken lightly. It's a very big plan. It was something we felt we had no choice but to do at this point," White House spokesman Tony Fratto said in a conference call with reporters.
"Further stress on our financial markets would cause massive job losses, devastate retirement accounts, further erode housing values, and dry up new loans for homes, cars and college tuitions." "But we're going to move forward with it with great confidence that it will have the impact that we expect it to have and to allow growth to continue in this economy," he said.
Some members of Congress are uneasy at the thought of the taxpayer taking on hundreds of billions of dollars of currently worthless debt. Some members of Congress are uneasy at the thought of the taxpayer taking on hundreds of billions of dollars of debt.