Government rushing to finish huge financial rescue plan

WASHINGTON — The Bush administration sketched out a multi-faceted effort on Friday to confront the worst U.S. financial crisis in decades, outlining a program that could cost taxpayers hundreds of billions of dollars to buy up bad mortgages and other toxic debt that has unhinged Wall Street.

President Bush, flanked by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, acknowledged that the program will put a "significant amount of taxpayers' money on the line."

The administration is asking Congress to give it sweeping new powers to execute the plan. Paulson said it "needs to be big enough to make a real difference and get to the heart of the problem."

Paulson gave few details but said he would work through the weekend with leaders of Congress from both parties to flesh out the program, the biggest proposed government intervention in financial markets since the Great Depression. Members of the Senate Banking Committee said they had received no details of the proposal.

The government steps were clearly welcomed by financial markets. As Paulson spoke, the Dow Jones industrials were up over 300 points and at one point had soared by 450 points.

Before the markets opened, the government announced plans to temporarily insure money-market deposits and to block short-selling in financial securities. Short selling is a trading method that bets the stocks will go down.

Speaking to reporters at the Treasury Department, Paulson said that the new troubled-asset relief program that he wants Congress to enact 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 in a prepared statement.

"The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing," Paulson said.

Paulson said mortgage giants Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market.

He also said Friday that the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crisis.