Wall Street Surges on 'Bad Debt Trust' Idea

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WASHINGTON -  Wall Street surged in a late-session turnaround, after a report revealed that the federal government may create an entity that would take over banks' bad debt.

The Dow soared late afternoon, ending up about 410 points after a report on CNBC said Treasury Secretary Henry Paulson is considering the creation of an entity like the Resolution Trust Corp., established during the savings and loan crisis 20 years ago. 

Supporters of the emergency lending program say it would allow banks to hand over bad debt from their balance sheets, allowing them get back to conducting business as usual.

Earlier today, President Bush told the American people today that he shares their concers about the economy, saying that he and his advisers are working to help stabilize the markets. 

In a brief address made just outside the Oval office, Bush said the markets are adjusting to "extraoardinary measures" taken by the government. He did not announce any new policy moves.

Bush canceled his plans to attend a GOP fundraiser today to work with his top economic advisers on the crisis in the financial system. The meeting comes as investors are looking for a rebound on Wall Street.

White House press secretary Dana Perino said she could not comment on what any new plans might be.

"I can't tell you where this ends. I wish that I could," Perino said. "But we will take any necessary steps to deal with this in the days that follow."

Ripple Effect

If this week's economic headlines weren't bad enough already, Seattle-based Washington Mutual announced that it has put itself up for sale.

WAMU, the nation's largest savings and loan bank, appears to be the latest casualty of the now infamous risky subprime mortgage mess.

Now the panic on Wall Street has rippled overseas.

Asian stocks initially took a tumble early Thursday. But they started to rebound after Europe's central bank announced that it was following the lead of the Federal Reserve and other central banks around the world and pumping more money into the global markets.

It's a move some analysts hope will help restore some investor confidence after the U.S. government's $85-billion loan to insurance giant A.I.G.

"AIG's rescue was designed to help restore confidence in Wall Street but it wasn't enough because people are asking the question 'Who's next?'" Edward Jones Chief Market Strategist Alan Skrainka said.

Mark Zandi, chief economist for Moody's Economy.com said, "That's clearly the concern that one financial institution goes under, and it takes another and another."

Economy Top '08 Campaign Agenda

The worry on Wall Street has further cemented the economy as the top issue on the campaign trail. And while the Bush administration argues that government intervention is keeping taxpayers from facing the potential for even worse problems, not all voters are buying it.

"It's always the same people, it's always us the taxpayers that are paying the price," one woman said.

One disgruntled man said, "I call it United States of Socialism in the sense that we are privatizing the gains on Wall Street and socializing the losses to all the taxpayers."

But federal officials say the rescue actions have been necessary to prevent problems from spreading, and to protect the overall financial system. And they're hoping that system is getting closer to the end of this crisis.

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