US Congress approves bail-out plan

US Congress have approved the $700 billion (£380 billion) financial rescue plan after a week of talks.

The announcement comes after US billionaire investor, Warren Buffett, described the current financial turmoil as ‘an economic Pearl Harbour’.

Buffett, who is one of the world’s richest men, along with Treasury Secretary, Henry Paulson, and US Federal Reserve chief, Ben Bernanke, have been urging US Congress to quickly approve the financial rescue plan or risk serious consequences to the US economy.

The rescue plan emerged late last week in a bid to prevent the US banking system from meltdown.

According to Democrat Senator, Christopher Dodd, a ‘fundamental agreement‘ has been reached on the principles of a package but exact details are yet to be agreed. However, it is expected to include restrictions on bankers’ pay.

Mr Paulson wants to create a federal-backed fund into which troubled bank can dispose of distressed assets. The banks are to sell these mortgage-backed bonds at a discount to the fund.

Once the market recovers, it is then anticipated that the Treasury will be able to sell the bonds back into the market and reimburse the taxpayer. The plan is for banks to dispose of such assets and then sentiment will return and banks will begin lending to each another again.

Following the announcement, the Dow Jones Industrial Average gained 262 points to 11089.

Meanwhile, Prime Minister Gordon Brown, has been invited to the White House to discuss the global financial crisis with President Bush tomorrow.

The PM is to speak to the UN General Assembly in New York tomorrow morning and then head to Washington for the meeting with the President tomorrow afternoon.

Mr Brown intends to discuss how to support the $700 billion package to calm the financial markets.

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