Paulson urges Congress to pass troubled asset legislation quickly, cleanly

Tue, Sep 23 2008, 13:08 GMT
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WASHINGTON (Thomson Financial) - Treasury Secretary Henry Paulson has urged Congress to enact quickly the Administration's proposed troubled asset program without adding "unrelated" provisions.

"Over these past days, it has become clear that there is bipartisan consensus for an urgent legislative solution," Paulson said in testimony before the Senate Banking Committee. "We need to build upon this spirit to enact this bill quickly and cleanly, and avoid slowing it down with other provisions that are unrelated or don't have broad support."

Some lawmakers are seeking additional provisions to the bill, including a cap on executive pay for CEOs of firms that participate in the bailout and a guarantee that taxpayers would share the profits if those institutions recover financially. The administration has been resistant to these added provisions.

The proposed trouble asset program, announced last week, would remove illiquid mortgage-related assets from banks' balance sheets in an effort to unclog the flow of credit through the economy.

"This troubled asset relief program has to be properly designed for immediate implementation and be sufficiently large to have maximum impact and restore market confidence," Paulson said. He also urged provisions to ensure transparency and oversight to protect the taxpayer.

Paulson has conceded that the program would involve a "significant" taxpayer burden of $700 billion. Yet he insists the alternative -- "a continuing series of financial institution failures and frozen credit markets" -- would be far more costly.

"The ultimate taxpayer protection will be the market stability provided as we remove the troubled assets from our financial system," Paulson said.

Earlier this year, Paulson reminded lawmakers of the need for a swift bipartisan passage of the economic stimulus package. "Today we face a much more challenging situation that requires bipartisan discipline and urgency," he said

He added once the economy overcomes its current obstacles, "our next task must be to address the problems in our financial system through a reform program that fixes our outdated financial regulatory structure, and provides strong measures to address other flaws and excesses".

Paulson said he supports this "critical" debate "but we must get through this period first".

tessa.moran@thomsonreuters.com

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