What's to say about a week like the one that is drawing to a close? For the first time since 9/11, President Bush has shown the ability to put aside the politics and show true leadership in decisively following the advice of his highest CFOs, Messrs. Paulson and Bernanke, in helping the banking system start to recover. But this is not far enough. This is treating the symptoms and is not curative. What will be curative is if there are sufficient regulations in place that will not allow banks to get themselves into the fix they are in now. A brand new regulatory scheme has to be put into place by President Obama to avert what is now a stopgap measure. Socializing the banks is not the American way. It defies free market principles. A free market in a country and economy so complex has to have rules that everyone plays by so to avert a crisis like this one from ever happening again. I know that Mr. Obama has the people on his team to take the bull by the horns and truly reform the regulatory scheme which has been systematically dismantled not just by Mr. Bush by by every Republican President before him, especially and including Ronald Reagan. President Bush did the only responsible thing here: follow sound advice, even if the medicine is more Lenin than Reagan. God save us all. Shabbat Shalom from San Diego.
Filed at 8:08 p.m. ET
(corrects spelling of Steny Hoyers name in paragraph 7)
By Kevin Drawbaugh and David Lawder
WASHINGTON (Reuters) - The United States surged into action on Friday to launch an all-out attack against the worst financial crisis since the Great Depression, readying a plan to tap hundreds of billions of dollars in taxpayer funds to buy up toxic mortgage-related debt.
Capping a week that has reshaped Wall Street, U.S. Treasury Secretary Henry Paulson urged Congress to quickly agree on a program for huge purchases of bad debts held by banks and other financial institutions. Lawmakers promised fast action.
Losses on these debts have choked the financial system, forced lenders into bankruptcy and led the economy to what U.S. President George W. Bush called a "pivotal" moment.
"America's economy is facing unprecedented challenges, and we are responding with unprecedented action," Bush told reporters in the White House Rose Garden.
After having taken a series of other emergency steps that failed to erect a firewall against the spreading credit turmoil, U.S. authorities turned their attention to the underlying problem -- the rising tide of bad mortgage debt.
Paulson offered few details on Treasury's evolving plan but said he would work through the weekend and next week with Congress to get a program put in place. Congressional aides said they expected to see more details within 24 hours.
Rep. Steny Hoyer, the Democratic leader in the House of Representatives, said the chamber would likely take up a bill to implement the plan early next week. House Speaker
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses," Paulson said at a news conference. "We're talking hundreds of billions. This needs to be big enough to make a real difference and get at the heart of the problem."
U.S. stocks, which chalked up their best day in six years on Thursday as talk of the more aggressive approach spread, soared again on Friday. The blue chip Dow Jones industrial average <.DJI> closed up 368 points, or about 3.4 percent.
The news also caused waves in the U.S. presidential campaign. Republican hopeful Sen. John McCain knocked the Treasury for taking a haphazard approach to the crisis, while rival Democrat, Sen. Barack Obama, supported the latest moves.
At a meeting with congressional leaders on Thursday night, Paulson and Bernanke made the case for aggressive action to get ahead of events that could devastate the already weak U.S. economy.
"When I heard his description of what might happen to our economy if we failed to act, I gulped," Democratic Sen.
At his news conference on Friday, Paulson said the latest plan was the best hope of ultimately protecting the public purse and avoiding a grave recession.
"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," he said.
The White House said it was too soon to say how the plan would impact the nation's debt, and said it was possible many of the funds could be recovered as markets stabilize and currently bad assets are sold off.
"Done right it should begin to ease things," he said.
One congressional aide said Treasury's proposal would likely make suggestions on what kind of debt should be purchased under the program. The aide said the proposal may also call for locating the program initially within the Treasury and then possibly migrating it later into an independent entity, as long as that could be done without slowing the market rescue process.
It was still unclear who might be in charge of the program and how much taxpayer money it will likely cost, aides said.
Sen. Richard Shelby of Alabama, the top Republican on the U.S. Senate Banking Committee, said on ABC's "Good Morning America" the asset-purchase plan could cost anywhere from $500 billion to $1 trillion.
The plan is reminiscent of the Resolution Trust Corp, a government agency set up to help the nation out of the
The major effort marked the latest dramatic government bid to prevent credit markets from freezing up over huge losses on subprime and other mortgage debt.
These have forced U.S. investment bank Lehman Brothers Holdings Inc
"The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy," Paulson said.
The Treasury also said on Friday that it would siphon up to $50 billion from a fund established in the 1930s to conduct foreign exchange market intervention to backstop the rattled U.S. money market mutual fund industry.
This long-safe corner of financial markets, home to some $3.5 trillion of deposits, has increasingly appeared at risk of falling victim to the year-old credit crunch. Money market fund assets dropped by a record $169.03 billion in the week ended September 17 as jittery investors pulled money out.
The Treasury said it would back money market funds whose asset values fall below $1 a share. Separately, the Fed said it would lend money to banks to finance purchases of certain assets from money market funds.
"They are absolutely petrified of ... a run on financial assets," said Boris Schlossberg at GFT Forex in New York.
A panic in money markets set in on Tuesday, when the Reserve Primary Fund, a fund whose assets had tumbled 65 percent in recent weeks, fell below $1 a share in net asset value because of losses on debt issued by Lehman Brothers.
The Treasury also said it would step up a program announced this month to directly buy mortgage-backed securities in the market, and said Fannie Mae and Freddie Mac would also increase their buying -- a further effort to get credit flowing.
(Additional reporting by David Lawder, Emily Kaiser and Donna Smith in Washington, Lucia Mutikani in New York, Jeff Mason in Green Bay, Wisconsin; Writing by Dan Burns, Burton Frierson and Alister Bull; Editing by James Dalgleish)