Pols Pitch Federal Agency to Take On Bad Debt

Agency would formalize what feds are already doing in money crisis
By Rob Quinn,  Newser Staff
Posted Sep 17, 2008 2:40 AM CDT
House Financial Services Chairman Rep. Barney Frank (D-Mass.) questions Federal Reserve Chairman Ben Bernanke during a committee's hearing on Capitol Hill earlier this summer.   (AP Photo/Susan Walsh)
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(Newser) – The idea of creating a federal agency to dispose of the toxic debt at the heart of the credit crisis is gaining traction in Washington, the New York Times reports. The proposed agency would resemble one set up in 1989 to resolve the savings and loan crisis—but in a controversial extension would also acquire assets not backed by federal deposit insurance.

With the presidential election only 7 weeks away, observers believe it's unlikely that lawmakers will move swiftly to create an agency to manage hundreds of billions of dollars in bad debt. But the government has effectively embarked on a similar course already with its bailouts of Bear Stearns, Fannie Mae, Freddie Mac and now AIG—and the proposed agency would simply be a formalization of current policy, say analysts.