US officials working on rescue plan for banks

US officials are understood to be working on a plan to help rid US banks of their bad debts.

The BBC has reported that after a meeting with Congress members late on Thursday, US Treasury Secretary Henry Paulson said new laws were needed to deal with the problems facing banks.

Paulson is reported as saying: “We talked about a comprehensive approach that will require legislation to deal with illiquid assets on financial institutions’ balance sheets.”

There is speculation that one plan being discussed involves legislation that would force lenders to renegotiate mortgages that homeowners are having difficulty paying.

Another possibility is to establish a government agency that would take on the debt.