$700bn US financial bailout plan is blocked

It has been announced that the $700 billion (£380 billion) US financial bailout plan has been blocked sending stockmarkets throughout the world into turmoil.

After several hours of discussions with President George W Bush, a group of Republican members of Congress blocked the plan.

It is understood that republicans balked at US Treasury Secretary Henry Paulson’s plan to buy bad debts from banks and instead suggested their own idea for mortgage insurance, which threw the whole plan into chaos.

In early trading today, the FTSE 100 index in London lost 90.2 points while all Asian stockmarkets fell, following the news of the bailout collapse. Furthermore, it has been announced today that banking giant, HSBC, is to lay off 1,100 people worldwide.

Prime Minister Gordon Brown is meeting with President Bush today for emergency talks on the financial crisis.

The news comes as Washington Mutual (WaMu) has been closed by regulators making it the largest failure of a US bank. WaMu’s assets have been sold to banking giant, JPMorgan Chase, for $1.9bn (£1 billion).

Today’s news of WaMu’s collapse is the latest in a series of events that have had repercussions on the banking system worldwide.

The events of the last two weeks have seen the collapse of Wall Street giant, Lehman Brothers, the rescue of US insurance giant AIG, Bank of America’s takeover of Merrill Lynch and in the UK, Lloyds TSB’s takeover of HBOS.

Meanwhile, in the last six months, there has been the collapse of Wall Street bank Bear Stearns and the Government takeovers of mortgage companies Fannie Mae and Freddie Mac.

Discuss this in the Finance Markets forums

Story link: $700bn US financial bailout plan is blocked