Paulson to Work Quickly With Congress to Revive Plan

Paulson to Work Quickly With Congress to Revive Plan

Sept. 29 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson said he will work with Congress to salvage a $700 billion rescue plan after the House of Representatives rejected his initial proposal.

``We need to work as quickly as possible; we need to get something done,'' Paulson told reporters at the White House after meeting with President George W. Bush. ``We believe that our plan, and the plan that we developed with congressional leaders and worked so hard, is a plan that works. And we need a plan that works.''

The House earlier voted 228 to 205 against giving Paulson the authority to buy troubled assets from financial companies, in what would have been the biggest government intervention in the markets since the Great Depression. U.S. stocks plunged after the vote, with the Standard & Poor's 500 Index falling the most since the October 1987 crash.

Paulson and Federal Reserve Chairman Ben S. Bernanke warned congressional leaders on Sept. 18 that a ``comprehensive'' approach was needed to restore confidence after the government takeover of three financial institutions and the collapse of Lehman Brothers Holdings Inc.

The Fed today said it will pump an additional $630 billion into the global financial system to address the worst banking crisis in almost 80 years.

``Our tool kit is substantial but insufficient,'' Paulson said. ``I am committed to continue to work with my fellow regulators to use all the tools available to protect our financial system and our economy.''

`Very Disappointed'

The Treasury's three-page proposal calling for unprecedented power to buy assets from banks without judicial review became a 110-page bill adding oversight provisions and limiting executive compensation. Paulson, who warned on Sept. 23 that it would be ``a grave mistake'' for Congress to curtail or delay the legislation, today said he was ``very disappointed'' in the final tally in the House.

Based on the Dow Jones Wilshire 5000 Index, almost $1.3 trillion was erased from the value of U.S. stocks today. That's the most ever for that index and almost double the size of the bailout authority Paulson is requesting from lawmakers.

``We're going to continue to work with what we have until we get from Congress what we need,'' Paulson said, adding that the banking system ``has been holding up very well given all the pressures.''

House Majority Leader Steny Hoyer said the House may take up the measure again as early as this week, possibly after Senate action.

BLOOMBERG