A group of US conservative Republicans in the House of Representatives proposed a financial rescue package of tax breaks and a new government-sponsored insurance programme for mortgage-backed securities as an alternative to President George Bush's proposed 700 billion US bailout of Wall Street.
Instead of the government buying the toxic mortgage securities, banks, financial firms and other investors holding them would pay premiums to the Treasury to finance the insurance coverage.
Democrats said the idea is unworkable and said Treasury Secretary Henry Paulson agreed.
The Republican plan, said House Financial Services Committee Chairman Barney Frank, a Democrat from Massachusetts, is "a mortgage insurance approach that Secretary Paulson said does not work".
The idea behind the plan is that the insurance would give investors enough confidence to buy the illiquid securities and establish a market for them.
Representative Eric Cantor, a Republican from Virginia, said the plan would be to remove the burden of the bailout from taxpayers and instead place it, over time, on Wall Street.
"Instead of a purchase scenario where you have the government injecting 700 billion US dollars right up front into the markets, what you have here is an insurance plan," Mr Cantor told reporters.
"In order to get this insurance, the banks with these failed assets would have to pay for the government backing, pay for the insurance."
The plan emerged after it became clear that House Republicans in large numbers weren't coming around to the approach favoured by Mr Paulson, which is to have the government buy up the troubled securities, hold them and eventually sell them off.
Under the House conservatives' plan, institutions holding stronger assets would pay lower premiums for the government backing; higher-risk securities would require higher premiums.
Robert Litan, an expert on banking and finance at the Brookings Institution, called the framework unworkable, saying it would not achieve the basic goal of creating a market - and establishing prices - for mortgage securities no-one's willing to buy.
"Everything depends on how you value the security," Mr Litan said. "If you do the deposit insurance scheme, there's nobody out there to know what the right price is."Reuse content