Rescue Plan Talks Set Back by Republican Alternative (Update4)

From Bloomberg:

Negotiations on a $700 billion proposal to inject new capital into the paralyzed credit markets stalled after House Republicans offered a different solution to the financial crisis.

Senate Banking Committee Chairman Christopher Dodd said the agreement in principle he had reached earlier in the day with some Republicans was later undermined by a proposal offered by House Republicans led by Representative Eric Cantor.

Dodd said that if Treasury Secretary Henry Paulson backs Cantor's plan, then negotiations would ``have to start all over again.'' Talks are to resume tonight, Dodd said at a press conference.

The proposal that Dodd, Paulson and Federal Reserve Chairman Ben S. Bernanke had been pursuing would have the federal government buy troubled assets from financial companies.

The plan circulated by Cantor calls for a mortgage-backed security insurance fund, rather than taxpayer-funded purchases of those securities. The plan calls on the Treasury to design a system to charge premiums to MBS holders to finance the insurance, according to a fact sheet....MORE