Transcripts

The U.S. Treasury's $40B Bailout Auction

SUSIE GHARIB: Today the U.S. Treasury announced a special $40 billion auction to help extend the Federal Reserve's balance sheet that would raise supplemental cash for the Fed, giving it more money to deal with future potential bailouts. But as Darren Gersh reports, after all that's happened in recent days, some analysts question whether the administration has the right strategy.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke were working behind the scenes today. So it fell to White House spokeswoman Dana Perino to try to reassure investors. Perino says the administration is working actively to strengthen financial markets, but it is not prepared to issue blanket guarantees.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: I think that if you look at the actions that have been taken, as they are taken on a case-by-case basis, I don't think any company could be guaranteed anything. I think that they -- everything will be reviewed individually and on its merits.

GERSH: But with markets now testing even profitable firms like Goldman Sachs and Morgan Stanley, economist Adam Posen says it's time for the Fed to make a choice.

ADAM POSEN, DEPUTY DIR., PETERSON INST. FOR INTERNATIONAL ECONOMICS: Right now, their strategy has got to be either biting the bullet and basically saying everybody's got access to the Fed who's over a certain size, which would be honest and diminish uncertainty, even though it completely changes the rules of the game, or they're just going to keep fumbling along.

GERSH: Pressure is growing for the federal government to end the ad hoc interventions and announce a more sweeping policy. Barney Frank, the chairman of the House Financial Services Committee, is thinking about creating the largest government clean-up effort since the Great Depression.

REP. BARNEY FRANK (D-MA), CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE: They would buy up any assets, any paper mostly, that was blocking the system from functioning. Clean it up, try to recognize as much of it as possible, impose probably some restrictions on the people you bought it from, and, then -- and this is the most important thing -- make sure that going forward, this country adopts the kind of regulation that constrains risk taking in the unregulated sector of the financial market, so we don't get into this again.

GERSH: Darren Gersh, Nightly Business Report, Washington.