Henry Paulson urges for fast rescue plan for bad debt

The US Treasury Secretary has pushed for Congress to put through as quickly as possible a $700 billion (£382 billion) package tackle the aftermath of last week that’s led to the worse financial crisis for decades.

Henry Paulson the US Treasury Secretary intends to set up a fund to buy back bad debt held by banks and financial institutions around the globe. He also asks for other countries to do a similar scheme to help boost confidence.

Over this weekend Treasury and congressional officials have been meeting to get the rescue package signed into law within just a few days. Financial institutions with “significant operations in the US” are entitled to auction or sell their bad debts to Treasury fund. This could include some British Banks.

As people worry about the cost of the scheme to the taxpayer, US president George Bush defended the plan by saying the cost to taxpayers of shoring up markets was better than the alternative of job losses and diminished pensions. “I’m convinced that this bold approach will cost American families far less than the alternative,” the President continued “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.”

The US government has not divulged any more information on the package, although Mr Paulson has asked the government for the loan to be raised to $11.3 trillion to cover the cost of the new scheme.

Last week fears continued regarding the credit crunch infesting the financial system, last week Merrill Lynch was brought out by Bank of America, Investment bank Lehman Brothers collapsed, Giant insurer AIG had to be bailed out by the US government with an $85 billion rescue package.

Source: BBC