Putting the taxpayers on the hook for $700 billion

The Bush administration proposed buying $700 billion of distressed securities from financial firms, urging Congress to act quickly to prevent paralysis in the credit markets and a deep U.S. recession. Congress balked at giving the Administration

What happened

The Bush administration this week proposed buying $700 billion of distressed securities from financial firms, urging Congress to act quickly to prevent paralysis in the credit markets and a deep U.S. recession. But in trying to rush the proposal through in a matter of days, Treasury Secretary Henry Paulson hit stiff resistance from lawmakers of both parties, who demanded that the bailout include protection for home­owners facing default, limits on financial executives’ salaries, and greater oversight of the financial system. Paulson’s proposal—which had not been passed as The Week went to press—would give the treasury secretary virtually unlimited authority to buy up mortgage-backed bonds and other securities to keep financial firms afloat.

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