US $700bn bailout finally agreed

After a weekend of negotiations, America’s $700 billion (£380 billion) bailout plan has finally reached a conclusion.

US Treasury Secretary, Henry Paulson, managed to convince Republican and Democratic leaders to agree to a compromise, prior to the opening of the Asian stockmarkets.

However, the announcement did little to allay fears in the global stock markets, which declined sharply.

The US Congress is preparing to vote later today to pass the bill and calm the markets.
President George W. Bush said the deal was a bold one which he was confident would restore strength and confidence to the US economy.

The deal will effectively give Mr Paulson $350 billion immediately to start buying toxic mortgage-related assets, while the second $350 billion will have to be approved by Congress.

However, the President warned that the rescue plan will not be the solution to the current turbulence in the markets with difficulties lasting ‘for some time’.

According to Nancy Pelosi, the Democratic Speaker of the House of Representatives, the deal is not a bailout of Wall Street but designed to ensure the safety of pensions, savings and jobs.

The two presidential candidates, Democrat Barack Obama and Republican John McCain, gave their cautious support for the proposed scheme.

Last week, US billionaire investor, Warren Buffett, described the current financial turmoil as ‘an economic Pearl Harbour’.

Despite the rescue plan, the banking industry is still awash with problems after the UK’s biggest buy-to-let lender, Bradford & Bingley, has been nationalised. Meanwhile, Belgian-Dutch financial group Fortis has been rescued by three Governments.

Furthermore, 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.

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