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Paulson Urges Swift Approval of Bailout Legislation

Treasury Secretary Henry Paulson says mortgage giants Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. Video by AP

Paulson said he has "every confidence that Congress will go along with" the plan.

The plan would also make foreign financial firms eligible to sell their bad assets to the Treasury.

"If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets," Paulson said, "they have the same impact on the American people as any other institution."

Sen. Richard Shelby (R-Ala.), a member of the Senate Banking Committee who has been skeptical of the rescue plan, said the cost of the plan is likely to be $1 trillion.

"We don't know the end game in this," Shelby said. The Treasury and Federal Reserve have "been staggering from crisis to crisis, and they haven't even said today that this will end the crisis."

Paulson said the intervention was "not something we wanted to do." He said that "excesses" in lending and borrowing had built up over much of this decade, starting a "chain reaction" that spread to financial institutions and now is "playing out in the broader economy."

"This is a humbling experience to see so much fragility in our capital markets," he said.

Paulson said the ultimate cost of the plan would depend on the economy.

"The price you will get for those assets will be based upon how the economy does, the pace at which the housing markets recover," he said.

Paulson also defended the administration's decision to bail out Fannie Mae, Freddie Mac and insurance giant American International Group, but not Lehman Brothers.

In the case of AIG, he said, "This is a situation where there are 50 different insurance regulators, very little oversight at the holding company, a hedge fund on top of insurance companies."

Paulson, who is expected to leave office with the Bush administration in January, said a new administration will have the flexibility to change the program.

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