WASHINGTON — Saying it was vital to restore confidence in the financial markets and the overall economy, Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson took their efforts to sell the $700 billion plan to buy illiquid assets from financial institutions to Capitol Hill today.
“Action by Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy,” Bernanke said in testimony to the Senate Banking Committee.
Paulson said while the previous efforts to deal with the financial crisis, such as infusing more capital into Fannie Mae and Freddie Mac and putting them into conservatorship and rescuing AIG, have been helpful, they are not sufficient.
“We must now take further, decisive, action to fundamentally and comprehensively address the root cause of this turmoil. And that root cause is the housing correction which has resulted in illiquid mortgage-related assets that are choking off the flow of credit which is so vitally important to our economy,” he told the same committee.
The plan, which includes a provision allowing credit unions to sell their distressed assets, is currently working its way through the legislative process and congressional leaders have said they hope to pass it by the end of the week.
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