U.S. readies massive toxic-debt plan
The U.S. government is preparing to mop up hundreds of billions of dollars in bad mortgage debt, after curbing short-selling and guaranteeing mutual funds in an effort to stabilize financial markets.
The moves cap a week in which financial markets faced their most serious confluence of crises since the Great Depression in the 1930s and threatened national economies and the worldwide banking system.
“It’s like having a heart attack, and you go and get your chest cracked open and get it fixed, but the next morning you’re still hurting,” said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas. “This has been a beast of biblical proportions. Nobody has seen anything like it.”
Lawmakers promised fast action on the toxic-debt plan, which two banking industry sources put in the $500 billion to $800 billion range. A Treasury spokeswoman declined comment.
As the government brought out the big guns to tackle the financial crisis, investment bank Morgan Stanley bought itself some time to come up with a plan for its future and talked to Wachovia Corp and other banks about a merger.
On Saturday, a U.S cheap payday loans. bankruptcy judge approved British bank Barclays Plc’s deal to purchase the core U.S. business of Lehman Brothers Holdings Inc.
But much of the markets’ focus was on Washington, as officials from President George W Bush’s administration, Congress and the Federal Reserve worked to craft a number of plans to restore confidence in shaken stock markets.
The U.S. government has pledged more than $1 trillion to prop up the financial system and housing market.
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