Washington watchdog says bailout should cost less than $700B US
A watchdog agency says Washington's plan to rescue Wall Street will eventually cost "substantially less" than the often-quoted amount of $700 billion US.
"The administration probably will spend that amount of money buying bad debt from ailing financial institutions," said Peter Orszag, director of the Congressional Budget Office, a federal agency that examines and criticizes various government proposals.
"[But] the government would sell the acquired assets and thus generate income that would offset at least much of the initial cost," he said in testimony Wednesday before the U.S. House of Representatives' budget committee.
Washington's proposed deal to assist debt-addled financial companies has come under fire for its estimated $700-billion price tag and because, critics charge, the plan amounts to a bailout for wealthy executives who made bad decisions.
Washington gets assetsThe CBO's Orszag said that, while light on details so far, the Bush administration's proposal appears to include the purchase of mortgage-backed commercial debt from failing corporations.
Those financial instruments represent an asset that the government can sell when commercial markets settle down, he said.
"The program’s impact on the future costs of other federal programs would depend on what kinds of assets were acquired and from what types of institutions and on how successful the program was in restoring liquidity to the nation’s financial markets," Orszag said.
Washington's controversial financial rescue plan was proposed after U.S. stock markets plunged in the wake of the bankruptcy of Lehman Brothers and the takeover of Merrill Lynch & Co. and American International Group in two days.
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