Should the US taxpayers be burdened with a debt that is almost double the budget deficit from this fiscal year in bailing out institutions as urged by the US Department of Treasury?  Or, is this the only way to solve the American financial crises? 

Here is the statement from Sunday from the US Department of Treasury to purchase troubled assets:  Tell us how you feel about the issue, the candidate’s positions and what you suggest.

FACT SHEET:
Proposed Treasury Authority to Purchase Troubled Assets

Washington –  The Treasury Department has submitted legislation to the Congress requesting authority to purchase troubled assets from financial institutions in order to promote market stability, and help protect American families and the US economy. This program is intended to fundamentally and comprehensively address the root cause of our financial system's stresses by removing distressed assets from the financial system. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs.  As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to significantly damage our financial system and our economy, undermining job creation and income growth.  The following description reflects Treasury's proposal as of Saturday afternoon.

Scale and Timing of Asset Purchases. Treasury will have authority to issue up to $700 billion of Treasury securities to finance the purchase of troubled assets. The purchases are intended to be residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans. The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets.  Removing troubled assets will begin to restore the strength of our financial system so it can again finance economic growth. The timing and scale of any purchases will be at the discretion of Treasury and its agents, subject to this total cap. The price of assets purchases will be established through market mechanisms where possible, such as reverse auctions. The dollar cap will be measured by the purchase price of the assets. The authority to purchase expires two years from date of enactment.

Asset and Institutional Eligibility for the Program. To qualify for the program, assets must have been originated or issued on or before September 17, 2008. Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.

Management and Disposition of the Assets. The assets will be managed by private asset managers at the direction of Treasury to meet program objectives. Treasury will have full discretion over the management of the assets as well as the exercise of any rights received in connection with the purchase of the assets. Treasury may sell the assets at its discretion or may hold assets to maturity. Cash received from liquidating the assets, including any additional returns, will be returned to Treasury's general fund for the benefit of American taxpayers.

Funding. Funding for the program will be provided directly by Treasury from its general fund.  Borrowing in support of this program will be subject to the debt limit, which will be increased by $700 billion accordingly.  As with other Treasury borrowing, information on any borrowing related to this program will be publicly reported at the end of the following day in the Daily Treasury Statement. (http://www.fms.treas.gov/dts/)

Reporting. Within three months of the first asset purchases under the program, and semi-annually thereafter, Treasury will provide the appropriate Congressional committees with regular updates on the program. 

Here is the statement from John McCain on the issue (dated September 20):

ARLINGTON, VA -- Today, U.S. Senator John McCain issued the following statement on the Treasury Department's proposed financial plan:

"This financial crisis requires leadership and action in order to restore a sound foundation to financial markets, get our economy on its feet, and eliminate this burden on hardworking middle-class Americans. I've spoken with Secretary Paulson and look forward to reviewing the full Administration proposal, as well as any modifications that might emerge in Congressional negotiations. As part of that process, I encourage all parties to consider both the principles and the proposals that I laid out on Friday in my Mortgage and Financial Institutions (MFI) trust plan -- an approach that would proactively resolve troubled financial institutions, enforce discipline on management and shareholders , and minimize the burden on the taxpayer."

Here is the statement from the Obama campaign on the issue, dated September 19:

Chicago, IL - Below is a Statement from Senator Barack Obama on the Emerging Federal Reserve - Treasury Plan:

"The events of the last few days have made it clear that we must take further bold and decisive action to shore up confidence in our financial markets and avoid a deepening economic crisis that could jeopardize the life savings and well-being of millions of Americans. I support the effort of Secretary Paulson and Federal Reserve Chairman Bernanke to work in a bipartisan spirit with the Congressional leadership to find a systemic solution to our deepening crisis, and I will closely examine the specifics of their effort and the opportunities for swift action. As I review the emerging details of Fed-Treasury proposal with my top economic advisors this morning I will be guided by four basic principles:

"First, we cannot lose sight that we are in the midst of a broad economic crisis that also requires immediate action to create jobs and help support distressed homeowners and communities. For too long, this Administration has been willing to hit the fast forward button in helping distressed Wall Street firms while pressing pause when it comes to saving jobs or keeping families in their homes. Swift and unprecedented action to shore up Wall Street must come alongside equally swift and serious efforts to help struggling families on Main Street, create new jobs, and grow our middle-class once more.

"Second, any taxpayer-funded support must have as its focus protecting our nation's long-term interest in a stable financial market and a growing economy rather than rewarding particular companies or the imprudent decisions of borrowers or lenders. These extraordinary steps must be designed with only the public good in mind, not to enhance the personal gain of CEOs and management at taxpayers’ expense.

"Third, this plan must be temporary and coupled with tough new oversight and regulations of our financial institutions. There must be a clear process to wind down this plan and restore private sector assets into private sector hands after restoring stability to the system. Taxpayers must share in any upside benefit that such stability brings.

"Finally, this plan should be part of a globally coordinated effort with our partners in the G-20. We are facing a global financial crisis and the United States can take a leadership role in coordinating a global response to the present crisis, as well as greater regulatory cooperation and alignment to prevent future crises.

"As we move beyond immediate actions to stabilize financial markets, it is important that we build upon the ideas I have laid out over the last several years about how to modernize our financial regulation. Eliminating consumer protections and lax oversight contributed to the crisis we are in today, and establishing commonsense rules of the road for our financial system can help restore confidence in our financial system.

"Given the gravity of this situation, and based on conversations I have had with both Secretary Paulson and Chairman Bernanke, I have asked my economic team to refrain from presenting a more detailed blue-print of how an immediate plan might be structured until the Treasury and the Federal Reserve have had an opportunity to present their proposal. It is critical at this point that the markets and the public have confidence that their work will be unimpeded by partisan wrangling, and that leaders in both parties work in concert to solve the problem at hand," said Senator Barack Obama

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