The US may be days away from a complete catastrophic meltdown of its financial system, says Senate Banking Committee chairman Chris Dodd.

“I’ve been here 28 years. To listen to the language of last evening, we maybe days away from a complete meltdown of our financial system,” AFP quoted Dodd as saying while referring to the late Thursday meeting of the US Congressional leaders with the US Treasury Secretary Henry Paulson and the Federal Reserve Chairman Ben Bernanke.

Senator Dodd noted it was “one of the rare moments, certainly rare in my experience here, that Democrats and Republicans decided we needed to work together, quickly.”

“We’re talking hundreds of billions,” Paulson said ahead of talks with Congress on details of the massive rescue effort, unveiled initially late Thursday.

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Stunned by the depth of the economic meltdown of the US financial institutions, Congressional leaders pledged a quick vote on the rescue plan.

“I figure it will be at least half a trillion,” Richard Shelby, the Ranking member of the Banking Committee, Housing and Urban Affairs Committee, told ABC news network.

“But if you look at what the Fed has already done, and the extension of power to Treasury to deal with Fannie Mae and Freddie Mac, I believe we’re talking about a trillion dollars,” he added.
US President George W. Bush has admitted confidence in the US economy has been shaken as he promised more tax dollars to save Wall Street from bad debt.

“Confidence in our financial system and in its institutions is essential to the smooth operation of our economy, and recently that confidence has been shaken,” he said

The government plan provides an immediate $50 billion to shore up strained financial markets. A state-sponsored organization will then be given hundreds of billions more in government money to buy up bad debt accumulated over years of unregulated lending by the US financial services sector.

The Fed has spent hundreds of billions of dollars in the past year to stabilize the financial markets, including $180 billion swap lines extended Thursday to five other major central banks.

Early September, the Treasury Secretary announced that the government was seizing control of ailing mortgage finance giants Fannie Mae and Freddie Mac that supply almost half of all mortgages in America to prevent a collapse that would have seriously damaged the world economy.

Last year these two mortgage companies’ sustained losses of more than $14 billion, as so called ’sub-prime’ homeowners defaulted on their mortgage repayments. The bailout of these two financial institutions could cost up to $200 billion.