Banks pressuring Washington for big bailout

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The banks are making their case, and the government is listening. From The New York Times tonight: ‘Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Which banks? ‘Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans. The bank warned that tightening credit conditions were leading to ‘escalating levels of delinquency and default among borrowers’ and ‘an unprecedented number’ of homes that would enter foreclosure.’ ‘

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Photo credit: Treasury Secretary Henry M. Paulson Jr. by AP