Saving grace ... United States House Speaker Nancy Pelosi has nailed down a $US700 billion ($830.47bn) rescue plan to avert the country`s financial crisis. Picture: Reuters.
US policitician strike rescue deal
Breakthrough came overnight
Key rescue steps outlined
US politicians have struck a deal on an unprecedented $US700 billion ($840 billion) bailout for struggling Wall Street banks to avert the worst financial crisis since the Great Depression.
“We have given the (Treasury) secretary the authority and the resources and the flexibility necessary, that he feels is necessary,`` Republican negotiator Judd Gregg said, announcing the deal.
“I think it`s a good product,`` he added, saying he hoped the bill could be voted on as early as Monday (US time) by both the House of Representatives and the Senate.
The deal came after an overnight breakthrough by House Speaker Nancy Pelosi following nine days of marathon negotiations in Congress, anxiously watched by jittery markets and governments worried about a meltdown in the world`s biggest economy.
The main points of the bill, known as the Act of Emergency Economic Stabilisation 2008, include the immediate release of $US250 billion, with future payments to be conditioned on approval by Congress.
The US government may buy up troubled assets from pension plans, local governments and small banks serving low-income families, but the bill also meets a key Republican demand by allowing the Treasury to set up an insurance program to guarantee troubled assets.
Four separate oversight agencies or processes, including a presence in the Treasury office, would be set up to conduct audits and prevent fraud. An independent inspector general would monitor the Treasury secretary`s actions.
It would also give taxpayers an ownership stake and a chance to share in any future profits of participating companies, limit the compensation payments for company bosses and allow the government to help prevent home foreclosures.
US lawmakers had struggled to reach a deal on the original plan put forward on September 18 by Treasury Secretary Henry Paulson.
The plan aims to steady an economy reeling from a bursting of the US housing bubble that has ravaged the global banking system and dried up credit flows.
The hope is that over time the Government will be able to resell the assets they buy up into a more stable market and recoup the money being spent.
But some analysts remained sceptical about the deal -- whether it will work or create new problems for markets and the economy.
“If you impose too much regulation, too much supervision, too much management and too much cost, you damage the franchise and profit outlook for banks,`` said David Kotok, chief investment officer at Cumberland Advisors.
US officials were spurred to act as a series of banks and financial institutions collapsed, triggering fears of a global economic meltdown and sparking a credit squeeze.
White House hopefuls Republican John McCain and his Democratic rival Barack Obama reluctantly hailed the progress that had been made, both claiming that demands they had made had been incorporated into the new bill.
Key bailout points
• Introduction of the rescue plan will be phased, beginning with an initial authorisation for the US Treasury to purchase up to $US250 billion in “troubled assets”. At the request of the President, this can be increased to $US350 billion.
• The plan gives Congress a veto power over purchases above that limit and sets a ceiling for all purchases of $US700 billion.
• Gives taxpayers an ownership stake in companies that take advantage of the bailout, raising the possibility of the public making profits if market conditions improve or of recovering some assets if participating companies.
• Eventual profits from the sale of Government-owned assets will be used to retire federal debt, with a portion set aside for a federal housing authority.
• Calls on the Treasury secretary to coordinate with foreign financial authorities and central banks about establishing similar rescue programs.
• Limits “excessive” pay and bonuses for executives
• Implementation of the plan will be overseen by a board including the chairman of the Federal Reserve, the Treasury secretary and the chairman of the Securities and Exchange Commission -- the Wall Street regulator.
• Gives Government the power to renegotiate terms of mortgages to ease pressure on homeowners facing foreclosure.
Saving grace ... United States House Speaker Nancy Pelosi has nailed down a $US700 billion ($830.47bn) rescue plan to avert the country`s financial crisis. Picture: Reuters.
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