U.S. administration proposes 700 bln, 2-yr rescue plan

The unprecedented plan would give Treasury Secretary Henry Paulson sweeping authority to buy up to 700 billion dollars of tainted mortgage-related assets to stem a grave financial crisis, CNN television and other U.S. media reported.

The plan also allows for an increase in the public debt limit, to 11.3 trillion dollars, and grants the Treasury secretary powers to buy, sell and hold residential and commercial mortgages as well as securities based on those mortgages.

The extraordinary authority would expire in two years but would permit the government to hold the assets purchased for as long as the Treasury Department believes are necessary, according to U.S. media.

The rescue calls for the purchase of assets only from U.S.-based firms and grants the Treasury Department legal immunity from any lawsuits as part of the bailout proposal.

It remained unclear how the government would manage the assets it buys. But Paulson would have authority to turn to private financial institutions to carry out the operation or create other bodies to purchase mortgage assets and issue debt, the reports said.

News of the proposed rescue plan fueled a powerful market rebound on Friday.