Paulson announces new Resolution Trust Corporation

US Treasury secretary Henry Paulson has confirmed he is working with the Federal Reserve Board and the Securities and Exchange Commission to get legislation through the US Congress to remove illiquid mortgage assets from the balance sheets of stricken financial institutions.

In a press conference today, Paulson said he will work with the Congress to pass the legislation this weekend. While little details of the scheme were forthcoming, it is believed to be similar to the Resolution Trust Corporation that acquired troubled savings and loans assets in the 1980s. Paulson said the scheme must be sufficiently large enough to have maximum impact, while including features that protect the taxpayer to the maximum extent possible.

“The ultimate taxpayer protection will be the stability this troubled asset relief programme provides to our financial system, even as it will involve a significant investment of taxpayer dollars,” Paulson said. “I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failure and frozen credit markets unable to fund economic expansion."

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