WASHINGTON–Treasury Secretary Henry Paulson twice referenced support for an optional federal charter for insurance companies during testimony yesterday on his financial bailout plan for the nation.

During a lengthy questioning period during his testimony before the Senate Banking Committee, Secretary Paulson said he supported creation of an optional federal charter.

His comment was made in response to a question by Sen. Tim Johnson, D-S.D., of his views on the OFC in light of the government need to loan up to $85 billion to American International Group last week.

In his response, Secretary Paulson cited the Treasury Blueprint on Financial Modernization, unveiled March 31. This calls for creating an OFC.

At the same time, he acknowledged that it would take lots of time and work by Congress to pass such legislation.

And, in concluding his prepared statement, Secretary Paulson said, “When we get through this difficult period, which we will, our next task must be to address the problems in our financial system through a reform program that fixes our outdated financial regulatory structure and provides strong measures to address other flaws and excesses.”

He cited the modernization blueprint, then added; “Many of you also have strong views, based on your expertise. We must have that critical debate, but we must get through this period first.”

Secretary Paulson testified before the panel in an effort to secure prompt action on his request for authority to spend up to $700 billion over the next two years to buy mortgages and other underwater securities held by U.S. and foreign institutions.

Mr. Paulson asked members of the Committee “to enact this bill quickly and cleanly, and avoid slowing it down with other provisions that are unrelated or don't have broad support.”

Ben Bernanke, chairman of the Federal Reserve Board, also testified in support of the bailout.

He said the financial system “continues to be very unpredictable, and very worrisome,” and that inaction could lead to a recession.

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Paulson Plumps For OFC With Financial Rescue Plan

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