WASHINGTON – Bush administration architects of the massive government bailout of the mortgage markets yesterday made it clear credit unions will be included in the program.
“We have proposed a program to remove troubled assets from the system – a program we analyzed internally for months, and had hoped would never be necessary," Treasury Secretary Henry Paulson told Congress yesterday. "Under our proposal, we would use market mechanisms available to small banks, credit unions and thrifts across the country."
Paulson, testifying on the bailout before the House Financial Services Committee, said credit unions and other participants will benefit in two ways from the proposal to buy $700 billion in distressed mortgage assets. First, they will benefit by the stabilization of the markets, and also by the ability to establish a value for their mortgage securities.
The plan, which must be approved by Congress, would buy troubled assets from banks, savings and loans, credit unions and insurers, then either manage them or sell them into the market, recreating liquidity in the vast mortgage securities market that has dissipated in recent weeks.
Paulson and Federal Reserve Chairman Ben Bernanke ran into cynicism and opposition as they tried to explain their bailout plan to the Senate on Tuesday and the House yesterday.
“These bailouts should be as welcome as malaria,” said Rep. Walter Jones, R-N.J., who worried about the impact on taxpayers and average homeowners.
“On the one hand, we have financial peril, on the other hand we may have taxpayer bankruptcy down the road,” said Rep. Jed Hensarling, R-Texas. “Inaction is not an option. However, the Paulson plan is not the only option on the table.”
Rep. Brad Sherman, a California Democrat, insisted numerous conditions be attached to the bailout plan, including close congressional oversight of the bailout, curbs on executive compensation for participants in the bailout and a phase-in of the plan over a few years.
