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US launches all-out attack on credit crisis

(Agencies)
Updated: 2008-09-20 20:42

WASHINGTON - 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.

US President George W. Bush, second from left, accompanied by, from left, Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Securities and Exchange Commission (SEC) Chairman Christopher Cox, delivers a statement about the economy and government efforts to remedy the crisis, Friday, Sept. 19, 2008, in the Rose Garden of the White House in Washington. [Agencies]

Capping a week that has reshaped Wall Street, US Treasury Secretary Henry Paulson urged Congress to quickly agree on a programme for huge purchases of bad debts held by banks and other financial institutions.

Lawmakers promised fast action on the plan, which two banking industry sources put in the US$500 billion to US$800 billion range.

Losses on mortgage-related debts have choked the financial system, forced lenders into bankruptcy and led the economy to what US President George W. Bush called a "pivotal" moment.

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"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, US authorities turned their attention to the underlying problem -- the rising tide of bad mortgage debt.

Paulson offered few details on Treasury's proposal but said he would work through the weekend and next week with Congress to get a programme put in place. The proposal being sent to lawmakers would run only a few pages, a source said. A congressional aide said staff on Capitol Hill would be briefed on the plan on Saturday morning.

Rep. Steny Hoyer, the Democratic leader in the House of Representatives, said the chamber would likely take up a bill to implement the programme early next week. House Speaker Nancy Pelosi said lawmakers would stay in town past their hoped-for adjournment next Friday if needed to pass it.

"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."

US 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 closed up 368 points, or about 3.4 percent.

The news also caused waves in the US 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.

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