Congress Examines $700B Rescue Plan

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WASHINGTON - Congress is considering more changes in the $700 billion bailout plan.

This comes one day after Treasury Secretary Henry Paulson announced the government is scrapping its original plan to buy bad mortgage-backed securities.

Shifting Gears

The change is set against the backdrop of a deteriorating economy and its impact is global.

Across the board, the financial outlook is anything but pretty. Consumer spending is down, foreclosures went up 25 percent over a year ago - while home prices keep falling. And unemployment is the highest it's been in 14 years.

"I haven't found any other places that are trying to hire just yet, but I am going to keep looking," said one job hunter.

While Congress explores how to deal with the crisis the Bush administration is shifting gears.

On Wednesday, Paulson said frozen credit is at the heart of the problem and announced that the government's bailout program will now focus on shoring up consumer financing instead of buying bad loans.

"I cannot imagine anything else will have a bigger stimulus impact than getting credit going again, getting lending going again," Paulson said.

One thing it will apparently not cover is the struggling auto industry.

Paulson said that while the auto sector was 'critical' the bailout was not designed with car companies in mind.

"Any solution has got to be leading to long-term viability" for auto companies, Paulson said.

A Global Recession?

The change in course helped lead to another sell-off in stocks here in the U.S. and overseas - making matters worse for Europe's biggest economy, Germany, which is officially now in recession.

The Paris-based Organization for Economic Cooperation and Development says the forecast is dire for the world's developed countries, predicting their economies will suffer recessions in 2009.

The White House says President George W. Bush - who is attending this weekend's economic summit in Washington - will warn against protectionism, saying that abandoning the free markets would hurt the global financial system even more while it tries to recover.

Meanwhile, Congress has scheduled multiple hearings as critics complain that the rescue program lacks enough oversight and doesn't do enough to help struggling homeowners.

Rep. Barney Frank is one of those critics.

He said, "As long as you have the foreclosure cascade, as long as you have mortgage-based securities decreasing in value so rapidly, you do not get out of the problem we are in."

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