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Call In the Plumbers

Here?? what?? next for the candidates to ponder: A big, but as-yet undefined, government fix. In a brief news conference this morning, Treasury?? Henry Paulson said that, whatever Congress and the Administration comes up with, ??e??e talking hundreds of billions of dollars.?/p>

The Treasury and SEC both unveiled a variety of smaller measures today — among other things, Paulson said the Treasury would join Fannie Mae and Freddie Mac in stepping up purchases of mortgage-backed securities in the market — but he made clear the main event would be whatever regulators and lawmakers cook up.

“This needs to be big enough to make a real difference,” he said. “Until we get stability in the housing market, we’re not going to get stability in the financial markets.”

As a few details emerged ahead of the press conference, the presidential candidates took cautious but supportive stances. As for Paulson, he described the fundamental problem as more or less a financial plumbing job.

"When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs," Paulson said, hewing closely to two pages of prepared remarks. "As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy."

Before Paulson spoke, Obama called for "bold and decisive action" and said he'd broadly support a bipartisan solution, though he said he'd reserve judgment until examining the details. Key for him: Any bailout should have the overall economy as the focus, rather than any given financial firm; it must be temporary and accompanied by "tough new oversight and regulations of our financial institutions"; taxpayers should benefit from stability brought about by the plan; it should be coordinated with other industrialized countries. "Swift and unprecedented action to shore up Wall Street must come alongside equally swift and serious efforts to help struggling families on Main Street, create new jobs, and grow our middle-class once more," he said.

John McCain called for a new government entity he's calling the "Mortgage And Financial Institutions Trust," to help financial institutions avoid bankruptcy by helping them identify bad loans, "provide funding and eventually sell them at a profit." He wants it to be part of the Treasury, act when institutions approach it voluntarily, lend money at "reasonable rates" but "receive warrants for controlling interest in troubled institutions," and have a set lifespan. Financial companies under the MFI would "keep operating as private companies with the help of the MFI."

Among other steps, Treasury set up a temporary money-market fund guarantee program of up to $50 billion. Under considerable political pressure, the SEC made good on reports that it would halt short-selling altogether for some 799 financial firms it identified, following a similar move in the U.K.

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