The George W Bush administration is asking Congress to let the government buy $700 billion (about Rs 32,42,400 crore) in toxic mortgages in the largest financial bailout since the Great Depression, according to a draft of the plan obtained Saturday by The Associated Press.
(This is approximately 70 per cent of the India’s gross domestic product (GDP) for 2007-08. At Rs 46,93,602 crore according to advance estimates, which works out to 1.013 trillion based on the latest reference exchange rate of Rs 46.32 per US dollar.)
The plan would give the government broad power to buy the bad debt of any U.S. financial institution (FI) for the next two years.
It would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion (a trillion dollars equals Rs 46.32 lakh crore) to make room for the massive rescue. The proposal does not specify what the government would get in return from financial companies for the federal assistance. “We’re going to work with Congress to get a bill done quickly,” President George W. Bush said at the White House. Without discussing details of the plan, he said, “This is a big package because it was a big problem.”
The White House and congressional leaders hoped the developing legislation could pass as early as next week.
Administration officials and members of Congress were to negotiate through out the weekend. The plan is designed to let faltering financial institutions unload their bad debt on the government, and in turn the taxpayer, in a bid to avoid dire economic consequences.
Bush said he worried the financial troubles “could ripple throughout” the economy and affect average citizens.
“The risk of doing nothing far outweighs the risk of the package, and over time we’re going to get a lot of the money back.”
“In my judgment, based upon the advice of a lot of people who know how markets work, this problem wasn’t going to be contained to just the financial community,” the president said. Democrats are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures.
They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.