MSNBC
reports that the Treasury is planning a solution to the crisis. Big, expensive, and fairly targetted to the problem areas.
Here's more reporting, from the WSJ.
At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, according to people familiar with the matter, a device that echoes similar moves taken in past financial crises. It's size could reach hundreds of billions of dollars, one person said.
Another proposal would create federal insurance for investors in money-market funds, something akin to the deposit insurance currently available for regular bank accounts. The move is designed to stem an outflow of funds as consumers start to worry about even the safest of investments, a worrying sign of how the crisis is spreading to Main Street.
Exactly how such an entity might be structured isn't yet clear. The possible plan isn't expected to mirror the Resolution Trust Corp., which was created two decades ago during the savings and loan crisis to hold and sell off the assets of failed banks. Rather, a new entity might purchase assets at a steep discount from solvent financial institutions and eventually sell them back into the market. [...]
The net effect was to send the stock market soaring in one of its sharpest reversals in recent memory. The Dow Jones Industrial Average ended up 3.9%, the index's biggest percentage gain in nearly six years, on record New York Stock Exchange volume. The blue-chip index finished more than 560 points above its intraday low and reclaimed about 90% of its Wednesday losses.
Sounds like Johnnie Mac is listening to an economist or two:
Until recently, Congress appeared unwilling to act on such an idea quickly. But the near-panic of the past 10 days might have changed their calculation, should Congressional approval be needed. Rep. Paul Kanjorski, (R., Pa.) said lawmakers should extend their session to finalize a plan.
But House Majority Leader Steny Hoyer said that's unlikely. "I don't think it's going to happen in the next 14 days," Hoyer told reporters at a press conference. "Speaker Pelosi and I are both focused on the Sept. 26 adjournment."
Yesterday, Republican nominee Sen. John McCain sought a broad expansion of government regulation over financial institutions, including the formation of a body to both assume distressed mortgages and help failing investment banks.
Saying the government cannot "wait until the system fails," Sen. McCain called for the creation of an entity that would essentially help companies sell off bad loans and other impaired assets. It is unclear how the body, dubbed the Mortgage and Financial Institutions trust, would operate, including whether or not institutions would seek help or whether the government would intervene on its own behalf.
His rival, Democratic Sen. Barack Obama of Illinois was less specific about what steps he would take, offering broader outlines of policy proposals that included a "Homeowner and Financial Support Act." The measure, which would inject capital and liquidity in the financial system, is designed to provide a more coordinated response than "the daily improvisations that have characterized policy-making over the last year."
