Horse racing and the stock exchange attract the same players and the same fraudulent and unscrupulous behaviour

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 Congress, administration craft financial rescue

 By Julie Hirschfeld Davis,

Associated Press Writer



Faltering financial institutions whose toxic assets have brought markets to the brink of catastrophe could unload their bad debt on the government, and in turn the taxpayer, under a half-trillion dollar bailout being crafted by the Bush administration and Congress. Top Republicans and Democrats and their aides planned to work through the weekend with administration officials to hammer out the proposal — the most sweeping government intervention to rescue failing financial institutions since the Great Depression. They hoped the bill could pass the House and Senate as early as next week.


The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities. President Bush on Friday acknowledged risks to taxpayers, but he declared, "The risk of not acting would be far higher." Congressional leaders and presidential candidates in both parties said they would put aside partisan differences and work together on a package that was vital to the economy. Democrats are insisting the package include mortgage help to let struggling homeowners avoid foreclosures. They're also considering attaching additional middle-class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.


Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke briefed lawmakers by conference call Friday, painting a grave picture of an economy on the edge of a major recession and telling them that action was urgent and imperative. In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the call. "You give them good cash; they give you the worst of the worst," said Sherman, a critic of the plan, which he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping.


Lawmakers still had not seen details of the proposal by late Friday, and Republicans and Democrats were raising key questions. For instance, there was no indication of what the government would get in return from financial companies for the federal assistance. Paulson said the new troubled-asset relief program must be large enough to have the necessary impact while protecting taxpayers as much as possible."I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing." Administration officials hoped the rescue plan could be finalized this weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess

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