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Plan to avert market depression in works

AUSTIN, Texas (NBC) — In another dramatic development from Wall Street, two finance giants are trying to save themselves.

It comes as lawmakers this week debate a plan Bush administration officials said will avert a depression.

With the fed’s approval Sunday night, Goldman Sachs and Morgan Stanley will become more like traditional banks, taking deposits, reshuffling assets and accepting more regulation, a reshaping of an industry poised to get bailed out.

“This’ll be far less costly to the American taxpayer than the alternative, and that’s why I’m confident that Congress is going to move and move quickly,” said Treasury Secretary Henry Paulson.

The plan would have the government buy up $700 billion in bad debt. The money could be recouped when assets are sold later, but that’s not certain.

“To put the taxpayers’ funds at risk is a serious question, and this is a very serious money,” said Rep. John Boehner of Ohio.

Democrats want help for homeowners, not just banks.

“I don’t want the federal taxpayer to be at risk for their bad debt, and then the guy who incurred the debt gets tens of millions of dollars on the way out the door,” said Barney Frank, with the House committee on financial services.

Both White House hopefuls back strict oversight of the bailout but sound different on new rules for Wall Street.

“What we don’t want is a situation where they are able to say, ‘Heads, I win; Tails, the taxpayer loses,'” said Democratic presidential candidate Barack Obama. “And you know, this whole process of deregulation is one that I think could have been thought through. Still a deregulator?”

“Of course, I don’t,” said Republican presidential candidate John McCain. “Americans don’t want increased regulations on their lives.”

Both also want pay limits for CEOs of firms that get bailout help.

Expect the candidates to talk more about the bailout in their first debate Friday night in Mississippi. Congress is expected to approve some form of the rescue package by then.

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