President Bush confronts America's financial crisis.
The President confronts America's worst financial crisis in decades, and is ready to commit more than half a trillion dollars to bailing out an economy.
There's no question this is the worst financial crisis America has faced since The Great Depression.
But for all the turmoil we've had this week, Wall Street wound up almost exactly where it started. After a gain of 368 points on Friday, the Dow closed just 33 points shy of where it ended last Friday.
Although few details have been made public so far, the Bush Administration is hammering out a plan to shore up the financial industry and buy up billions of dollars in bad mortgages.
The Bush economic team and lawmakers on Capitol Hill have zeroed in on mortgage defaults as the main problem to fix. ABC News has put a $500 billion price tag on bailing out the banks.
The Treasury secretary, the Federal Reserve chairman and members of Congress have made it clear the U.S. financial system was on the brink of a disaster.
"I've never been in a more sobering moment in my 28 years with the language that was used; the careful language used by the financial leaders of this administration of the country," said Senate Banking Committee Chairman Senator Christopher Dodd (D) Connecticut.
Former investment banker, now business school dean at Golden Gate University, Terry Connelly, says bailout may not be the right word.
"The financial institutions are not going to be made whole. What's going to happen is the government and Hank Paulson, who is an old trader from Wall Street, is going to make a very aggressive, tough bid for these toxic securities, so the financial institutions will be lucky to get a few cents on the dollar," said Connelly J.D.
Executives at Novato-based Fireman's Fund, one of the state's largest property and casualty insurers, are relieved at the scope of the plan being prepared.
Fireman's Fund is on firm footing but has felt the turbulence of this week's events.
"They're finally going in the right direction more because they are taking that holistic approach and they're taking a long-term view as opposed to short-term fixes. They've got to view this as a marathon, not a sprint," said Fireman's Fund President & CEO Michael LaRocco.
With property values falling, homeowners struggling to make mortgage payments may see some relief.
Michael Lehmann, professor emeritus of economics at the University of San Francisco, uses an example of a $500,000 home loan.
"The plan will save that borrower harmless. He'll get a loan now that's really only $300,000, and the lender will be able to write off that loan down to $300,000 but then the federal government will make up the difference between the original $500,000 and what's now $300,000," said Lehmann, Ph.D.
The federal rescue plan is approaching $1 trillion:
Let's put $1 trillion in perspective. That's equivalent to the U.S. Treasury sending out a check for more than $3,000 to every person in America.
White House officials say they're working on the rescue plan, and just might be able to share it with Congressional leaders as early as Friday night.