WASHINGTON, Sept. 19 (UPI) -- The federal government must take "further, decisive action" to fix the cause of the U.S. financial system's crisis, the U.S. Treasury chief said Friday.
Treasury Secretary Henry Paulson said the government set up a temporary guarantee program for U.S. money market mutual funds.
"The underlying weaknesses in our financial system today is illiquid mortgage assets that have lost value as the housing correction has proceeded," Paulson said. These bad mortgages are "choking off the flow of credit" necessary to the U.S. economy and putting Americans at risk.
Taking over the bad mortgage debt would help protect taxpayers, he said.
Paulson said he, Federal Reserve Chairman Ben Bernanke and others would work with Congress through the weekend to develop a plan, which Paulson said would carry a huge price tag.
"We're talking hundreds of billions (of dollars)," he said. "This needs to be big enough to make a real difference and get at the heart of the problem."
Paulson said the legislative fix would include allowing the Federal National Mortgage Association and Federal Home Loan Mortgage Corp. to increase their purchases of mortgage-backed securities.
"The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars," Paulson said of all the actions taken or under consideration.
Paulson said he was convinced the approach "will cost American families far less than the alternative: A continuing series of financial institution failures and frozen credit markets unable to fund economic expansion."
