Members of U.S. Congress and the Bush administration agreed on legislation to effect a government buyback of illiquid mortgage-backed securities in an effort to get credit markets moving again.

U.S. Federal Reserve Board chairman, Ben Bernanke, welcomed the deal, saying that the legislation “should help to restore the flow of credit to households and businesses that is essential for economic growth and job creation, while at the same time affording strong and necessary protections for taxpayers.” He called for Congress to pass the bill quickly.

Treasury secretary Henry Paulson, Jr. said that the legislation “will enable U.S. to strengthen our financial markets and promote the flow of credit to businesses and consumers that is so vital to our economic growth and prosperity.”

The bill provides the necessary tools to deploy up to US$700 billion, Paulson noted, either by purchasing troubled assets broadly, insuring troubled assets, or averting the potential systemic risk from the disorderly failure of a large financial institution.

“I am confident this legislation gives U.S. the flexibility to unclog our financial markets and increase the ability of our financial institutions to deliver the credit that will help create jobs. We are taking the steps needed to be ready to begin implementing this legislation as soon as it is signed,” he added.