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Bail-out fears return to markets Bail-out fears return to markets
(about 2 hours later)
Concern returned to the US stock market as US Treasury Secretary Henry Paulson faced tough questions about his $700bn (£382bn) financial rescue plan.Concern returned to the US stock market as US Treasury Secretary Henry Paulson faced tough questions about his $700bn (£382bn) financial rescue plan.
The Dow Jones industrial average fell almost 1.5% as Mr Paulson finished his testimony at a Congressional hearing. Earlier the index was up 0.7%. The Dow Jones industrial average closed almost 1.5% lower after Mr Paulson was grilled by a Congressional hearing.
Investors worried the plan could face more opposition than had been expected and either be delayed or watered down. The plan faced opposition from both Republican and Democrat senators on the Senate Banking Committee.
Mr Paulson has urged Congress to act quickly and pass the rescue package. Investors are concerned that the measures could now either be delayed or watered down.
Share prices in Europe and Asia also declined amidst uncertainty about the effectiveness of the bail-out. "We have got to look at some alternatives," said senior Republican senator Richard Shelby.
The committee's chairman Democrat senator Chris Dodd, speaking after the hearing, said: "What they have sent us is not acceptable."
Another senator asked if a smaller programme worth $150 billion might be enough to begin the bail-out, with a promise of more to come.
Mr Paulson replied that this would be a "grave mistake" and would fail to end the financial turmoil in the markets.
'Private greed''Private greed'
Despite positive reaction soon after the plan was announced, doubts over how soon the rescue plan could be applied have emerged from both the Democrats and Republicans. Senators voiced concerns that taxpayers would be paying the price of mistakes made by banks.
Mr Paulson and others on the Senate Banking Committee met tough questions at a Congressional hearing on Tuesday during a session that lasted almost five hours. I believe if the credit markets are not functioning that jobs will be lost...that the economy will just not be able to recover in a normal, healthy way Ben Bernanke, US Federal Reserve chairman class="" href="/1/hi/business/7629766.stm">Global reaction to financial turmoil
Senators from both parties voiced concerns that taxpayers would be paying the price of mistakes made by banks.
Until Lehman brothers collapsed, Japanese financial institutions were pretty confident BBC's Chris Hogg in Tokyo Global reaction to financial turmoil
They also said it was crucial not to rush through the bail-out, without carefully considering how it would work.They also said it was crucial not to rush through the bail-out, without carefully considering how it would work.
Richard Shelby, a senior republican on the Senate Banking Committee said: "I have long opposed government bail-outs for individuals and corporate America alike." Richard Shelby said: "I have long opposed government bail-outs for individuals and corporate America alike."
And Senator Chris Dodd, a Democrat and the committee's chairman, said the "economic maelstrom" stemmed from a mixture of "private greed and public regulatory neglect". And Chris Dodd said the "economic maelstrom" stemmed from a mixture of "private greed and public regulatory neglect".
In prepared remarks, US Federal Reserve head Ben Bernanke said: "Action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy." However US Federal Reserve Chairman Ben Bernanke urged swift action.
The White House has said Congress must back the rescue plan to stop wider economic harm. He warned that without the plan, the "fragile" financial markets would almost certainly get worse and this would have an effect on the rest of the economy.
On the European markets, the UK's FTSE 100 closed down 1.6%, France's Cac 40 fell 1.7%, while in Germany the Dax ended 0.5% lower. "I believe if the credit markets are not functioning that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way," said Mr Bernanke.
European markets were also hit by concerns about the bail-out plan.
The UK's FTSE 100 closed down 1.6%, France's Cac 40 fell 1.7%, while in Germany the Dax ended 0.5% lower.
Earlier in Asia, Hong Kong's Hang Seng index ended nearly 4% lower. Japan's market was closed for a public holiday.Earlier in Asia, Hong Kong's Hang Seng index ended nearly 4% lower. Japan's market was closed for a public holiday.
Will the $700bn package stabilise the economy? Are you in the US? How do you think the money should be best spent?Will the $700bn package stabilise the economy? Are you in the US? How do you think the money should be best spent?
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