U.S. Congress unveils financial rescue bill
September 29, 2008
- U.S. Treasury Secretary Henry Paulson departs Capitol Hill after the negotiations with Congress.
Lawmakers in the United States will this week vote on whether to pass a $700 billion rescue plan for the nation’s troubled financial system, after days of intense bargaining led to a deal being struck over the terms of the package.
The bill, released Sunday and endorsed by President George W. Bush, is based on Treasury Secretary Henry Paulson’s request for authority to purchase bad debts from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate normally.
However many politicians — both Democrats and Republicans — were concerned about the potential cost to the taxpayer and inserted several conditions and restrictions to protect taxpayers from any down side, while giving them a chance to benefit from the potential upside if companies on Wall Street benefit from the plan.
The 106-page bill could be put to a vote in the House of Representatives as early as Monday, while the Senate is expected to schedule a vote on Wednesday.
President Bush, in a statement Sunday evening, said “this is a difficult vote, but with the improvements made to the bill, I am confident Congress will do what is best for our economy by approving this legislation promptly.”
House Speaker Nancy Pelosi said the provisions added by Congress — which include a restriction on salary packages for senior executives whose companies benefit from the rescue plan — will protect taxpayers from having to foot the bill for the bailout.
“We sent a message to Wall Street - the party is over,” she said at a press conference Sunday with other Democratic leaders from the House and Senate.
However she added that “people have to know that this isn’t about a bailout of Wall Street. It’s a buy-in so we can turn our economy around.”
Paulson first announced that the White House would seek an economic bailout plan on Sept. 18, after meeting with key lawmakers in the House and Senate — a meeting that left lawmakers looking ashen when they spoke to the press afterwards.
If enacted, the rescue plan would be the most dramatic and extensive government intervention in the economy since the Great Depression in 1929. President Bush on Sept. 24 gave a prime-time address to the nation in which he urged lawmakers to pass his plan and warned that the “entire economy is in danger.”
In the past two weeks, the banking world and Wall Street have been reordered by a wave of collapses and corporate mergers. The most recent development was the seizure by federal regulators on Thursday night of Washington Mutual, once the nation’s largest thrift and a major mortgage lender.
The chill of the credit freeze has been felt far beyond Wall Street, as well. Businesses large and small have seen the cost of borrowing spike higher.
At the same time, the scale of the administration’s plan - and the quick pace of the debate over it - has given pause to many Americans and lawmakers worried about its potential cost to taxpayers.
“We begin with a very important task, a task to stabilize the markets, to protect all Americans - and do it in a way that protects the taxpayer to the maximum extent possible,” Paulson said early Sunday morning.
Key provisions of the bill
Doling the money out: The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use. Authority to use the money would expire on Dec. 31, 2009, unless Congress certifies a one-year extension.
Protecting taxpayers: The ultimate cost to the taxpayer is not expected to be near the amount the Treasury invests in the program. That’s because the government would buy assets that have underlying value.
If the Treasury pays fair market value - which investors have had a hard time determining - taxpayers stand a chance to break even or even make a profit if those assets throw off income or appreciate in value by the time the government sells them. If it overpays for the assets, the government could be left with a net loss but would get something back on the open market for the assets when it eventually sells them.
If it ends up with a net loss, however, the bill says the president must propose legislation to recoup money from the financial industry if the rescue plan results in net losses to taxpayers five years after the plan is enacted.
In addition, Treasury would be allowed to take ownership stakes in participating companies.
Stemming foreclosures: The bill calls for the government, as an owner of a large number of mortgage securities, to exert influence on loan servicers to modify more troubled loans.
In cases where the government buys troubled mortgage loans directly from banks, it can adjust them more easily.
Limiting executive pay: Curbs would be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000.
They also will not be allowed to write new contracts that allow for “golden parachutes” for their top 5 executives if they are fired or the company goes belly up. But the executives’ current contracts, which may include golden parachutes, would still stand.
Overseeing the program: The bill would establish two oversight boards.
The Financial Stability Oversight Board would be charged with ensuring the policies implemented protect taxpayers and are in the economic interests of the United States. It will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary.
A congressional oversight panel would be charged with reviewing the state of financial markets, the regulatory system and the Treasury’s use of its authority under the rescue plan. Sitting on the panel would be 5 outside experts appointed by House and Senate leaders.
Insuring against losses: Treasury must establish an insurance program - with risk-based premiums paid by the industry - to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 14, 2008.
The amount the Treasury would spend to cover losses minus company-paid premiums would come out of the $700 billion the Treasury is allowed to use for the rescue plan.
Source: bbc.co.uk/
Freighter to end life in fireball
September 29, 2008
Freighter to end life in fireball
Europe’s biggest, most sophisticated spaceship is about to bring its six-month mission to an end by plunging into the Pacific in a ball of flames.
The “Jules Verne” freighter undocked from the space station three weeks ago packed with rubbish and will take its unwanted cargo into a destructive dive.
Most of the vehicle is expected to burn up in the atmosphere; only fragments will make it down to the ocean water.
Two engine firings should bring the ship out of the sky on Monday.
Events will be overseen from the European Space Agency’s (Esa) freighter control centre in Toulouse, France.
Mike Steinkopf, the mission director for re-entry, says a “safety zone” has been drawn in the south Pacific some 2,700km long by 200km wide.
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 We will see what appears to be a very bright meteor  Jason Hatton
Esa-Nasa re-entry observing team |
“We issue a notification to the air traffic and maritime authorities to make sure there are no planes or boats going through that zone during our re-entry time,” he told BBC News.
Astronauts on the overflying International Space Station (ISS) and scientists in two chase planes will take pictures as the disintegrating mass of metal streaks through the morning Pacific darkness.
“Visually, we will see what appears to be a very bright meteor,” explained Jason Hatton from the chase team set by Esa and the US space agency (Nasa). “It will start as a point of light with a trail, and then as it comes apart, we will see fragments.”
Source: bbc.co.uk/
Seven killed in India explosion
September 29, 2008
Seven killed in India explosion
At least seven people have been killed in an explosion in a house where people were making firecrackers ahead of a festival in eastern India, police said.
Two others were seriously injured in the explosion in Balasore district in Orissa state on Sunday evening.
The blast happened when people were making crackers illegally inside a house in a village, police say.
Such incidents are not uncommon ahead of the popular festival of lights during which crackers are exploded.
The police said a portion of the house collapsed on a group of people after the blast increasing the number of casualties.
Source: bbc.co.uk/
US lawmakers publish rescue deal
September 29, 2008
House Speaker Nancy Pelosi announces bail-out package
US politicians have announced a $700bn deal to rescue America’s financial system and end the credit crunch.
The move, backed by both Republican and Democratic leaders, allows the Treasury to spend up to $700bn (£380bn) buying bad debts from ailing banks in the US.
President George W Bush urged lawmakers to support the bill, which needs approval by both houses of Congress.
Some Republicans have voiced objections to massive state intervention in the financial sector.
The deal was announced after days of high-level wrangling between Republicans and Democrats in Congress over the content of the bill.
Both parties had vigorous objections to a proposal submitted last week by Treasury Secretary Henry Paulson that would have given him sweeping powers over how the money was spent.
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Every American has an interest in fixing this crisis - inaction would paralyse the economy Harry Reid
Senate majority leader  Announcement in quotes
Santander to buy parts of B&B
Q&A: Bail-out plan
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His plan was prompted by a string of failures in large US financial institutions, including the government bail-out of insurance giant AIG.
If approved by the Senate and House, the revised plan will lead to the biggest intervention in the markets since the Great Depression in the 1930s.
Nancy Pelosi, the Democratic Speaker of the House of Representatives, said the agreement was “not a bailout of Wall Street”, but designed to ensure pensions, savings and jobs would be safe.
Democratic Senate leader Harry Reid said the deal was a big improvement on the initial proposal.
“They wanted a blank cheque and we couldn’t give them one… Now we have to get the votes.”
‘Necessary tools’
The negotiations had lasted all weekend and were so intense that at one point Treasury Secretary Hank Paulson suffered what was described as a “woozy spell”.
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READ THE BAIL-OUT BILL
Emergency Economic Stabilization Act[189KB]
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After senior members of Congress announced the agreement, President Bush gave his backing to the draft legislation.
He said the bill would send a strong message that the US was serious about restoring confidence in its financial markets.
“This bill provides the necessary tools and funding to help protect our economy against a system-wide breakdown,” he said in a statement.
The US administration had wanted a deal to be announced before markets opened in Asia, but Asian investors appear yet to be convinced about the rescue plan’s impact.
By Monday afternoon trading in Japan, Tokyo’s main Nikkei 225 index was down 118 points or 0.8% to 11,776.
The fall on Hong Kong’s Hang Seng was even more pronounced, down 383 points or 2% to 18,230.
No golden parachutes
The deal addresses several of the key concerns raised by both Democrats and Republicans:
- The government will get the money in tranches - $250bn straight away, and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn
- Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks’ recovery
- Top bankers, meanwhile, will see their pay limited, and “golden parachutes” - huge payments when they leave the firm - will be banned
- The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves
- Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board
- Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities
The bill, called the Emergency Economic Stabilization Act of 2008, faces its first hurdle later on Monday when the House votes on it, says the BBC’s Justin Webb in Washington.
It goes before the Senate later in the week.
The proposed legislation was now “frozen”, said Ms Pelosi, which means critics can not strike out individual provisions that they do not like.
However, several key critics of the deal called on their fellow legislators to block it.
Financial woes
The Bush administration submitted its initial proposal after several financial institutions got into trouble - unable to free up the money to keep their daily business going.
The liquidity problems have not been limited to the US.
- In the United States’ largest bank failure, Washington Mutual was taken over by regulators and sold on to JPMorgan Chase
- Lehman Brothers collapsed, Merrill Lynch sought refuge in a takeover by Bank of America and Morgan Stanley secured a large capital injection from a Japanese rival
- US insurance giant AIG had to be bailed out by the US government, which in effect took an 80% stake in the firm
- In the UK, meanwhile, mortgage lender Bradford & Bingley is set to be nationalised, with the savings part of the business to be sold to Spanish banking group Santander
- The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, in effect nationalising it.
Source: bbc.co.uk/
US destroyer nears Somali pirates
September 29, 2008
A US Navy destroyer has made visual contact with a Ukrainian ship which was seized by pirates last week and is now moored off the Somali coast.
There is no indication that the USS Howard intends to approach the ship, which is carrying 33 battle tanks destined for Kenya’s government.
The pirates’ ransom demand for the ship and its 21 crew has fallen from $35m to $20m (£10.9m), their spokesman said.
A man on the ship also told the BBC that one of the crew members had died.
The man, who the pirates said was the captain of the MV Faina, was speaking via a satellite phone handed to him by one of the pirates.
He said the dead sailor was Russian and had died as the result of an illness. The report could not be confirmed by independent sources.
He also said the other crew members were fine and that he could see three ships about a mile away, including one carrying a US flag.
International concern
In an earlier interview with the BBC, a spokesman for the US Navy’s 5th Fleet, Lt Nathan Christensen, said the USS Howard was within 8km (5 miles) from the Ukrainian vessel, but refused to say whether an intervention was likely.
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If we are attacked, we will defend ourselves until the last one of us dies Sugule Ali
Spokesman for the pirates Battles and looting in Mogadishu
Life in Somalia’s pirate town
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“The USS Howard… [is] currently on station, in visual contact and is monitoring the situation there,” he said.
“The motor vessel is anchored off the Somali coast, near the town of Hobyo, along with, actually, a couple of other pirated vessels that are also anchored in that location.”
Lt Christensen said the USS Howard had been in contact with MV Faina using VHF radio, and that negotiations were continuing between the pirates and its owners.
He said the ship’s cargo of Russian-made 72T battle tanks made it a particularly worrying situation.
“We’re concerned that this might end up in the wrong hands, such as terrorists or violence extremists,” he said.
One of the pirates, Sugule Ali, claiming to be speaking on their behalf, later told reporters via satellite phone that they wanted a ransom and “nothing else”.
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“We need $20m for the safe release of the ship and the crew,” he told the Associated Press news agency.
“If we are attacked, we will defend ourselves until the last one of us dies.”
On Saturday, another of the pirates, Januna Ali Jama, told the BBC they would not release the MV Faina unless a ransom of $35m (£19m) was paid.
Later, a spokesman for the Kenyan government said they had not received any credible demands for a ransom to release the ship.
The waters off the coast of Somalia are considered some of the world’s most dangerous.
‘Big business’
Ukraine has confirmed that the tanks and “a substantial quantity of ammunition” were aboard the MV Faina.
The ship had a crew of 21 and was sailing towards the Kenyan port of Mombasa.
Authorities in Somalia’s semi-autonomous region of Puntland say they are powerless to confront the pirates, who regularly hold ships for ransom at the port of Eyl.
The USS Howard is one of several vessels in the area
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Last week, France circulated a draft UN resolution urging states to deploy naval vessels and aircraft to combat such piracy.
France, which has troops in nearby Djibouti and also participates in a multi-national naval force patrol in the area, has intervened twice to release French sailors kidnapped by pirates.
Commandos freed two people whose boat was hijacked in the Gulf of Aden earlier this month and in April, six arrested pirates were handed over to the French authorities for trial.
Somalia has been without a functioning central government for 17 years and has suffered from continual civil strife.
Source: bbc.co.uk/
Pirates in small boats sail close to the MV Faina (Photo: US Navy)
Singapore Grand Prix
September 29, 2008
Hamilton extended his championship lead despite finishing third
McLaren’s Lewis Hamilton says he feels comfortable heading into the final three races of the Formula One season with a seven-point championship lead.
The Englishman extended his lead over Ferrari’s Felipe Massa by six points with third in the Singapore Grand Prix, while the Brazilian failed to score.
“A podium is a great result. I’m quite happy with seven points,” he said.
Hamilton can afford to finish second behind Massa in all the three remaining Grands Prix and still win the title.
But the 23-year-old said he would not let that stop him trying to win the races in Japan, China and Brazil.
“We’re going to approach the next few races exactly the same as we have this one,” he said.
“I have no doubts we have a competitive package to compete with them but without a doubt it will be a very tough battle.
“It’s all about scoring points. We came here with a one-point lead and I could see the Ferraris were very competitive this weekend and Felipe was driving well, so I knew it would be very tough to beat them.
“But fortunately the race had a couple of incidents which didn’t benefit them but we did a solid job and came back with the points.
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We could have been ahead because we had a fantastic pace and we could have been first and second
Ferrari’s Felipe Massa
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“So moving forward, we definitely can’t get ahead of ourselves because, as you can see, lots of things can happen.
“So we will just focus on doing a solid job, scoring more points hopefully.”
Hamilton found himself third, right behind Williams driver Nico Rosberg, in the closing laps of an incident-packed race won by Renault’s Fernando Alonso, but decided not to try to challenge for second.
“Nico was driving very well, wasn’t making any mistakes and so unless I made a stupid manoeuvre - which was just unnecessary - there was no point really,” he said.
“So I was just trying to keep with him and then with three laps to go it was clear I wasn’t going to be able to overtake him, so I just brought it home.”
Massa, who started the race a point behind Hamilton had looked poised to take the lead of the championship as he pulled away from the McLaren in the lead during the early laps of the Singapore event.
“The green light was on and I drove away,” explained Massa.
“The only problem was a human problem and the green light came at the wrong moment.”
Massa ground to a halt at the end of the pit lane and his Ferrari crew eventually managed to wrestle the fuel hose free - but too late for the Brazilian to rescue his race and he finished down in 13th.
“We could have been ahead (in the title race) because we had a fantastic pace and we could have finished first and second,” he said.
“But racing is racing. We’re all human beings and everyone can make a mistake.
“I am not the kind of guy who goes to the guy (who made the mistake) and fights with him, because we need him, we need everyone together for the last three races.
Felipe Massa drove away from the pits with the fuel hose attached
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“There are 30 points to be won and we have a quick car so that’s the most important thing.”
Hamilton said he had not been aware of Massa’s problems.
“I didn’t really know Felipe was out of the points. I didn’t really focus on it - I just focused on my race and scoring those points.”
A miserable race for Ferrari was completed when Kimi Raikkonen crashed out from fifth place with three laps remaining.
The Finn is 27 points behind Hamilton and effectively out of the championship reckoning.
Raikkonen admitted as much after the race and hinted he would help Massa’s title bid if asked.
I know what the team wants - they want to win the world championship,” he said.
“I’m trying to win races, too, and we will see what happens. I’m out of the championship anyhow.”
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606: DEBATE
For me natural justice was done today. No-one will ever convince me that the Spa ruling was fair
pokygaz
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Massa’s problem came two races after a similar incident involving Raikkonen, and Ferrari team boss Stefano Domenicali admitted his team were making too many mistakes.
“Historically, in the last 10 or 12 years, we have always had problems with the pit stops. I recall them very well with Eddie [Irvine], with Michael [Schumacher], with Rubens [Barrichello] - so it’s not true that we have more mistakes than in the past,” he said.
“Unfortunately, we shouldn’t have them. That’s another story. Perhaps where a situation is more tricky, and emotion is part of the team, sometimes you may consider that as a weak point that it can influence the fact that you can make a mistake.”
Domenicali described the race as a “black day” for Ferrari because the “best car was last in the results”.
“We will approach the last three races with the view that we can finish first and second every time because we have the potential to do it. So the target is very clear.”
Domenicali said it had been a “mistake” at Massa’s pit stop by the mechanic controlling the system of lights that gives the driver instructions.
The man was in tears when Massa went to console him after the race, Domenicali said.
Source: bbc.co.uk/
Ramos stays calm over job future
September 29, 2008
Ramos is still looking for his first league win this season
Spurs boss Juande Ramos insists his job is not under threat after the club’s worst start to a season for 53 years.
But following his side’s 2-0 defeat by Portsmouth, which has left them with just two points from six games, Ramos admitted he faces an uncertain future.
When asked if he had the confidence of his employers, Ramos said: “Absolutely, we speak regularly and everyone is aware of our delicate position.
“But whether I survive is for the chairman and the board to decide.”
Ramos added: “Whether I survive is something for the chairman and the board to decide but I’m not hurt (by the fans’ abuse). What hurts is not winning matches.”
Some Spurs supporters were unhappy with Ramos when he substituted Russian striker Roman Pavlyuchenko for Darren Bent after 73 minutes.
The move kept the visitors with just one recognised striker on the pitch despite having to chase the game after going 2-0 down, but Ramos defended his decision.
“We have been playing with two strikers in most games but we used just one against Newcastle (in the 2-1 Curling Cup win) and it worked better,” he said.
“Bent had played every minute of the six previous games and needed a break.”
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606: DEBATE
I don’t necessarily like Ramos but he is the board’s choice and he must therefore be given the season to turn things around
biglondon12
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The pressure on Ramos is certain to increase if his side are eliminated from the Uefa Cup by Wisla Krakow on Thursday.
Spurs take a 2-1 lead to Poland but a 1-0 defeat would be enough to see them fall at the first hurdle.
“The players know we have another game in another competition on Thursday and we must recover from this very quickly,” said Ramos.
Former manager Martin Jol led Tottenham to the quarter-finals of the Uefa Cup in 2007 while Ramos, whose Seville team accounted for Spurs on that occasion, guided them to the round of 16 last season.
Against Portsmouth on Sunday, Spurs went behind to a Jermain Defoe penalty after Jermaine Jenas’s handball.
Defoe, whom Ramos deemed surplus to requirements, admitted he had been waiting for the game ever since leaving White Hart Lane in January.
Portsmouth manager Harry Redknapp said he was thrilled to have been able to bring Defoe to Fratton Park.
The visitors were denied a spot-kick when a cross struck Lassana Diarra’s arm before ex-Tottenham trainee Peter Crouch headed in for Pompey’s second.
“We are in a complicated situation and nobody seems to help us when we need it,” said Ramos.
“Portsmouth scored from a penalty today but in the same kind of incident we were denied a penalty - the same as against Wigan last week.
“In critical moments we are not getting these decisions.”
Source: bbc.co.uk/
Belarus opposition fails in polls
September 29, 2008
At least 500 opposition supporters marched in Minsk
Opposition candidates in Belarus have failed to win any seats in the parliamentary elections, electoral officials say.
All 110 seats went to pro-government candidates, the chief of the central elections commission said.
The opposition says Sunday’s vote was not legitimate, urging international observers not to recognise the outcome.
The country’s authoritarian President Alexander Lukashenko insists the poll was free and fair.
He says he expects the election to lead to better relations between the former Soviet republic and the West.
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There was no election in Belarus. It was an electoral farce for the West Anatoly Lebedko, opposition leader
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In a bid to appease his critics, the president ordered some opponents to be freed from prison and allowed about 70 opposition candidates to stand.
Observers from the Organisation for Security and Co-operation in Europe (OSCE) are due to give their assessment of the election later on Monday.
Past polls have been seriously flawed, and Mr Lukashenko - who has been in power since 1994 - has been condemned by the US as the “last dictator” in Europe.
Rally in Minsk
Full results showed that opposition parties failed to win a single seat, elections commission chief Lidia Yermoshina told a press conference.
“Not a single opposition candidate was elected,” she said.
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 You wouldn’t have seen the last dictator had you not come here President Alexander Lukashenko
President’s farming roots
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She said the conduct of the vote was “in accordance with the law”, but opposition parties rejected that assessment.
“There was no election in Belarus. It was an electoral farce for the West,” Anatoly Lebedko, leader of the opposition United Civil Party, was quoted as saying by the Associated Press news agency.
“We call on the EU and the US not to recognise the results of the election,” Mr Lebedko said.
Opposition groups also say that they were not allowed to monitor voting properly.
They say that advance voting - which began on Tuesday - gave the government an opportunity to cheat. The authorities deny the accusation.
At least 500 opposition supporters held a peaceful protest rally in the capital Minsk after the polls closed late on Sunday.
Many in the crowd carried white-and-red nationalist flags and also EU flags.
‘Free’ election
“If the election goes smoothly, the West will recognise Belarus,” Mr Lukashenko, banned from travelling to EU countries and the US, said after casting his vote.
He later said that it would be hard for some 400 foreign observers not to judge the vote as free and fair.
Correspondents say Mr Lukashenko has been trying to improve relations with the West as his country’s ties cool with Russia.
European and US diplomats had suggested that sanctions against Belarussian companies could be lifted if the election was conducted well.
Ms Yermoshina of the central election commission said turnout was 75%.
All 110 seats of the House of Representatives in Belarus are currently occupied by politicians who back Mr Lukashenko.
Source: bbc.co.uk/
Deadly blast rocks Lebanese city
September 29, 2008
Security forces at the scene of the explosion
At least five people have been killed in a suspected car bomb attack on a military bus carrying soldiers in the northern Lebanese city of Tripoli.
Witnesses said the blast happened on the outskirts of the city during morning rush hour. Some 30 people are believed to be wounded.
Several soldiers as well as civilians were killed in a similar blast that hit a bus in the city last month.
Tripoli has been hit by sectarian fighting in recent months.
Such attacks threaten the reconciliation effort aimed at ending the fighting between pro-government Sunni fighters and pro-Syrian gunmen.
Threatened deal
Lebanese officials said the blast came after a car parked by a busy roadside near the southern entrance to the city was detonated by remote control.
The explosives were believed to have been mixed with nuts and bolts, and shattered nearby windows and damaged other cars.
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The blast appeared to target a military bus that was passing through morning traffic in the Bahsas neighborhood at the time.
Security sources said four of the dead and at least 21 of the wounded were soldiers, the rest were civilians.
TV pictures showed soldiers sealing off the area and preventing people from approaching the scene of the blast.
Government officials said an investigation into the attack was under way, but no one had yet claimed responsibility.
At least 14 people were killed in a similar attack on a bus in the city in August. Several of the victims were off-duty soldiers.
However, tensions in the area appeared to ease earlier this month after the two sides agreed a reconciliation deal.
Source: bbc.co.uk/
US lawmakers publish rescue deal
September 29, 2008
House Speaker Nancy Pelosi announces bail-out package
US politicians have announced a $700bn deal to rescue America’s financial system and end the credit crunch.
The move, backed by both Republican and Democratic leaders, allows the Treasury to spend up to $700bn (£380bn) buying bad debts from ailing banks in the US.
President George W Bush urged lawmakers to support the bill, which needs approval by both houses of Congress.
Some Republicans have voiced objections to massive state intervention in the financial sector.
The deal was announced after days of high-level wrangling between Republicans and Democrats in Congress over the content of the bill.
Both parties had vigorous objections to a proposal submitted last week by Treasury Secretary Henry Paulson that would have given him sweeping powers over how the money was spent.
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Every American has an interest in fixing this crisis - inaction would paralyse the economy Harry Reid
Senate majority leader Announcement in quotes
Santander to buy parts of B&B
Q&A: Bail-out plan
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His plan was prompted by a string of failures in large US financial institutions, including the government bail-out of insurance giant AIG.
If approved by the Senate and House, the revised plan will lead to the biggest intervention in the markets since the Great Depression in the 1930s.
Nancy Pelosi, the Democratic Speaker of the House of Representatives, said the agreement was “not a bailout of Wall Street”, but designed to ensure pensions, savings and jobs would be safe.
Democratic Senate leader Harry Reid said the deal was a big improvement on the initial proposal.
“They wanted a blank cheque and we couldn’t give them one… Now we have to get the votes.”
‘Necessary tools’
The negotiations had lasted all weekend and were so intense that at one point Treasury Secretary Hank Paulson suffered what was described as a “woozy spell”.
|
READ THE BAIL-OUT BILL
Emergency Economic Stabilization Act[189KB]
Most computers will open this document automatically, but you may need Adobe Reader
Download the reader here
|
After senior members of Congress announced the agreement, President Bush gave his backing to the draft legislation.
He said the bill would send a strong message that the US was serious about restoring confidence in its financial markets.
“This bill provides the necessary tools and funding to help protect our economy against a system-wide breakdown,” he said in a statement.
The US administration had wanted a deal to be announced before markets opened in Asia, but Asian investors appear yet to be convinced about the rescue plan’s impact.
By Monday afternoon trading in Japan, Tokyo’s main Nikkei 225 index was down 118 points or 0.8% to 11,776.
The fall on Hong Kong’s Hang Seng was even more pronounced, down 383 points or 2% to 18,230.
No golden parachutes
The deal addresses several of the key concerns raised by both Democrats and Republicans:
- The government will get the money in tranches - $250bn straight away, and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn
- Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks’ recovery
- Top bankers, meanwhile, will see their pay limited, and “golden parachutes” - huge payments when they leave the firm - will be banned
- The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves
- Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board
- Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities
The bill, called the Emergency Economic Stabilization Act of 2008, faces its first hurdle later on Monday when the House votes on it, says the BBC’s Justin Webb in Washington.
It goes before the Senate later in the week.
The proposed legislation was now “frozen”, said Ms Pelosi, which means critics can not strike out individual provisions that they do not like.
However, several key critics of the deal called on their fellow legislators to block it.
Financial woes
The Bush administration submitted its initial proposal after several financial institutions got into trouble - unable to free up the money to keep their daily business going.
The liquidity problems have not been limited to the US.
- In the United States’ largest bank failure, Washington Mutual was taken over by regulators and sold on to JPMorgan Chase
- Lehman Brothers collapsed, Merrill Lynch sought refuge in a takeover by Bank of America and Morgan Stanley secured a large capital injection from a Japanese rival
- US insurance giant AIG had to be bailed out by the US government, which in effect took an 80% stake in the firm
- In the UK, meanwhile, mortgage lender Bradford & Bingley is set to be nationalised, with the savings part of the business to be sold to Spanish banking group Santander
- The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, in effect nationalising it.
Source: bbc.co.uk/