There aren't many details, but the government is gearing up for another attempt at digging out the financial markets. We've seen several moves over the last few weeks aimed at easing the credit crunch, but this move could be bigger and hopefully better than ever.
A glimmer of hope came from a meeting on Capitol Hill on Thursday, with the U.S. treasury secretary, the Fed. chairman, and leaders from both sides of both houses of congress.
"We've talked about a comprehensive approach that will require legislation to deal with the illiquid assets of financial institutions to fix their balance sheets," said U.S. Treasury Secretary Henry Paulson.
That means the government could take bad loans and assets from banks to help lighten their loads, before they go under. The details haven't been announced, but a lot of financial experts believe help is on the way.
"Instead of waiting for those institutions to fail and try later on to sweep up, I think that what they've decided is, it's too difficult to put Humpty Dumpty back together again," said Professor Jim Wilcox, Ph.D., from Haas School of Business and a former economist for the Federal Reserve.
Early word is the proposal could work a lot like the set-up of the Resolution Trust Corporation, or RTC, Commission during the savings and loan crisis.
"They recovered a remarkable amount of assets and managed them to the point where people were able to recover something," said Richard Lapping of Thelen LLP.
And that's coming from a San Francisco attorney, who actually sued the RTC in several cases.
"Whatever the problems were, they couldn't get to them all at once obviously, and so it took some time to get to things. That's a process we're just going to have to deal with," said Lapping.
Wilcox says the government's plan will have an immediate positive effect.
"I think this is exactly the kind of move that can ultimately break the fever that these markets have gotten themselves into," said Wilcox.
And that's exactly what Washington wants to see, the situation so dire, the president cancelled his travel plans today to meet with advisors.
"The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence," said President Bush.
Lawmakers are talking about having this plan up for debate in a matter of hours rather than days. The chair of the House Financial Services Committee says they could have a legislative drafting session on a proposal as early as Friday.
