Keep partisan politics out of economic rescue

THE ISSUE Bush administration officials and congressional leaders are assembling a plan to cope with the economic crisis.

BUSH administration economists and congressional leaders appear to have come together in an effort to cope with the country's worst economic crisis in decades. A mechanism to deal with the catastrophe should provide relief to threatened financial institutions as well as homeowners facing foreclosure.

The crisis seems unprecedented. Early talk about creation of an agency similar to the one that bought and sold billions of dollars worth of real estate in the 1990s from failed savings and loan companies came to an end in realization of important differences.

While the more than 700 savings and loan companies closed or reorganized by Resolution Trust Corp. had been regulated, the investment banks, hedge funds and Wall Street firms that need saving are largely free of regulation, a status that should be reviewed. Instead, existing agencies, such as the Treasury Department or the Federal Reserve, will spend tax dollars to acquire distressed assets in the mortgage market, not the institutions themselves, according to reports.

President Bush was in the background last week, sending Henry Paulson Jr., the Treasury secretary, Federal Reserve Chairman Ben Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission, to Capitol Hill to join members of Congress in drawing up a plan. The strategy resulted in a truly bipartisan effort that was desperately needed.

The cost of such a rescue operation will be enormous, ranging from $500 billion estimated by Paulson to more than $1 trillion predicted by others. This follows an $85 billion bailout loan to American International Group and rescues of Bear Stearns Cos. and mortgage titans Fannie Mae and Freddie Mac. More bailouts are certain to be needed to restore liquidity to the market.