WASHINGTON (AP) -- The Bush administration sketched out a multi-faceted effort on Friday to confront the worst U.S. financial crisis in decades, outlining a program that could cost taxpayers hundreds of billions of dollars to buy up bad mortgages and other toxic debt. Relief washed over Wall Street with a surge of buying.
President Bush, flanked by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, acknowledged that the program will put a "significant amount of taxpayers' money on the line."
Markets unhinged by anxiety in recent months greeted the plan enthusiastically. The Dow Jones industrials shot up over 400 points and stayed in that territory into the afternoon. Global stock markets soared, too.
The administration is asking Congress to give it sweeping new powers to execute the plan. Paulson said it "needs to be big enough to make a real difference and get to the heart of the problem."
Paulson gave few details but said he would work through the weekend with leaders of Congress from both parties to flesh out the program, the biggest proposed government intervention in financial markets since the Great Depression. Members of the Senate Banking Committee said they had yet to receive details of the proposal, but were ready to move quickly when they do.
Before the markets opened Friday, the government announced plans to temporarily insure money-market deposits and to block short-selling in financial securities. Short selling is a trading method that bets the stocks will go down.
Speaking to reporters at the Treasury Department, Paulson said that the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said in a prepared statement.
"The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing," he said.
Paulson said mortgage giants Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market.
He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises.
"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.
At a news conference in which he only took three questions, Paulson was asked the approximate dollar size of the government intervention. "We're talking hundreds of billions," he said.
Paulson did not address specifics about the plan to buy back bad debt or whether the government would take a direct stake in troubled banks in exchange for its help.
"These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted," Paulson said.
He said that the administration would present Congress with a proposed legislative package and then work with lawmakers "to flesh out the details through the weekend. And we're going to be asking them to take action on legislation next week."
"This is what we need to do. Because for some time we've been saying that the root cause of the problems in our economy and our financial system is housing, and until we get stability in the housing market we are not going to get stability in our financial markets," he said.
Earlier, Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money market mutual funds. And the Federal Reserve announced it will expand its emergency lending program to help support the $2 trillion in assets of the funds.
Both moves are designed to bolster the huge money market mutual fund industry, which has come under stress in recent days.
The Fed said it is expanding its emergency lending efforts to allow commercial banks to finance purchases of asset-backed paper from money market funds, which should help the funds meet demands for redemptions.
The Securities and Exchange Commission early Friday imposed a temporary emergency ban on short-selling, which had been contributing to the collapse of stock values of investment and commercial banks.
Congressional leaders said they expected to get the rescue plan Friday and act on it before Congress recesses for the election.
The government's actions could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has come to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc.
European Central Bank, Swiss National Bank and Bank of England also offered up more cash Friday. The three banks put a combined $90 billion into money markets in a lockstep move.
The chairman of the Senate Banking Committee, Chris Dodd, D-Conn., warned on ABC's "Good Morning America" Friday that the United States could be "days away from a complete meltdown of our financial system" and said Congress would work quickly to prevent that.
Later Dodd told reporters that the government's rescue plan will be costly, and demanded more details. "We're anxious to hear the specifics. None of us have any idea what the details are. We understand the gravity of the moment," he said. predicted the new bailout plan would cost at least half a trillion dollars.
Paulson said he wanted action next week by Congress.
"Time is of the essence," House Speaker Nancy Pelosi, D-Calif., said Thursday night after being briefed by Paulson and Bernanke.
Rep. Roy Blunt, the No. 2 GOP leader in the House, suggested the rescue can be handled without a tax increase.
"It doesn't necessarily have to be something that impacts taxpayers in a negative way," said Blunt, R-Mo. "It all depends on how you put that structure together."
GOP presidential candidate John McCain said any action should "be designed to keep people in their homes and safeguard the life savings of all Americans."
Democratic rival Barack Obama said it is critical that leaders in both parties work in concert. "Truly we are all in this together," he said.
The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance.
Associated Press writers Martin Crutsinger, Andrew Taylor, Marcy Gordon and Jim Abrams in Washington and Joe Bel Bruno in New York contributed to this report.