WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke plan to work through the weekend with Congress on a comprehensive plan to deal with toxic bank assets choking the financial system, a Treasury spokeswoman said on Thursday.
Paulson and Bernanke met with House and Senate Republicansand Democrats to discuss a "comprehensive approach to addressthe illiquid assets on bank balance sheets that are at theunderlying source of the current stresses in our financialinstitutions and markets," Treasury spokeswoman BrooklyMcLaughlin said in an email statement.
Congressional aides said earlier that the plan may call fora government agency or vehicle similar to the 1990s-eraResolution Trust Corp. to take on problem mortgage-relatedassets from banks. The RTC assumed insolvent loans and otherassets during the savings and loan crisis of the 1980s and1990s from failed institutions and rehabilitated them or soldthem to investors.
"They are exploring all options, legislative andadministrative, and expect to work through the weekend withcongressional leaders to finalize a way forward," McLaughlinsaid.
She did not disclose details of any Treasury proposals.Paulson's and Bernanke's meeting with Congress comes on theheels of massive government rescues of insurer AmericanInternational Group, housing finance firms Fannie Mae andFreddie Mac and the bankruptcy of Wall Street investment bankLehman Brothers.
Uncertainty over the depth of potential losses frommortgage bonds and other securitized debt instruments on bankbalance sheets has sent investors around the globe into a panicthis week, threatening to bring the financial system to a haltand cut off credit to the global economy.
(Reporting by David Lawder)
