Text of President Bush’s speech on the bailout

Many investors assumed these securities were trustworthy and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac.

Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses.

Before long, these securities became so unreliable that they were not being bought or sold. Investment banks, such as Bear Stearns and Lehman Brothers, found themselves saddled with large amounts of assets they could not sell. They ran out of money needed to meet their immediate obligations, and they faced imminent collapse.

Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.

With the situation becoming more precarious by the day, I faced a choice, to step in with dramatic government action or to stand back and allow the irresponsible actions of some to undermine the financial security of all.

I'm a strong believer in free enterprise, so my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business.

Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.

And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs.

Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.

Fellow citizens, we must not let this happen. I appreciate the work of leaders from both parties in both houses of Congress to address this problem and to make improvements to the proposal my administration sent to them.

There is a spirit of cooperation between Democrats and Republicans and between Congress and this administration. In that spirit, I've invited Senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill.

NYT: Taxpayers at risk with mortgage giants Even as the biggest banks repay their government debt in what is being heralded as a successful rescue program, four giants of the financial world remain on government life support. Senate panel approves Bernanke nomination Latest data points to slow recovery in 2010 Economic survey points to growth in 2010 Construction of new homes rebounds

I know that an economic rescue package will present a tough vote for many members of Congress. It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money.

I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street.

But given the situation we are facing, not passing a bill now would cost these Americans much more later.

Many Americans are asking, how would a rescue plan work? After much discussion, there's now widespread agreement on the principles such a plan would include.

It would remove the risk posed by the troubled assets, including mortgage-backed securities, now clogging the financial system. This would free banks to resume the flow of credit to American families and businesses.

Any rescue plan should also be designed to ensure that taxpayers are protected. It should welcome the participation of financial institutions, large and small. It should make certain that failed executives do not receive a windfall from your tax dollars.

It should establish a bipartisan board to oversee the plan's implementation, and it should be enacted as soon as possible.

In close consultation with Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox, I announced a plan on Friday.

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