Treasury to work through weekend on asset plan

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WASHINGTON (Reuters) - Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke plan to work through the weekend with Congress on a comprehensive plan to deal with toxic bank assets choking the financial system, a Treasury spokeswoman said on Thursday.

Paulson and Bernanke met with House and Senate Republicans and Democrats to discuss a "comprehensive approach to address the illiquid assets on bank balance sheets that are at the underlying source of the current stresses in our financial institutions and markets," Treasury spokeswoman Brookly McLaughlin said in an email statement.

Congressional aides said earlier that the plan may call for a government agency or vehicle similar to the 1990s-era Resolution Trust Corp. to take on problem mortgage-related assets from banks. The RTC assumed insolvent loans and other assets during the savings and loan crisis of the 1980s and 1990s from failed institutions and rehabilitated them or sold them to investors.

"They are exploring all options, legislative and administrative, and expect to work through the weekend with congressional leaders to finalize a way forward," McLaughlin said.

She did not disclose details of any Treasury proposals. Paulson's and Bernanke's meeting with Congress comes on the heels of massive government rescues of insurer American International Group , housing finance firms Fannie Mae and Freddie Mac and the bankruptcy of Wall Street investment bank Lehman Brothers .

Uncertainty over the depth of potential losses from mortgage bonds and other securitized debt instruments on bank balance sheets has sent investors around the globe into a panic this week, threatening to bring the financial system to a halt and cut off credit to the global economy.

(Reporting by David Lawder)