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Wall St rescue plan 'needs work' Wall Street rescue deal blocked
(10 minutes later)
Talks to agree a huge $700bn (£380bn) bail-out of the US financial industry have ended in a "shouting match".Talks to agree a huge $700bn (£380bn) bail-out of the US financial industry have ended in a "shouting match".
After several hours of discussions with President George W Bush, a group of Republican members of Congress blocked the government plan.After several hours of discussions with President George W Bush, a group of Republican members of Congress blocked the government plan.
The proposal would have seen the government buy bad debts from US banks.The proposal would have seen the government buy bad debts from US banks.
Without a swift rescue package more finance companies are expected to collapse, causing more serious damage to the global economy.Without a swift rescue package more finance companies are expected to collapse, causing more serious damage to the global economy.
Financial markets are gummed up because banks do not know exactly how much bad debt they hold and are therefore reluctant to lend to businesses, consumers and each other.Financial markets are gummed up because banks do not know exactly how much bad debt they hold and are therefore reluctant to lend to businesses, consumers and each other.
The fall-out of this credit crunch continues to make a huge impact: The fall-out of this credit crunch continues to make a huge impact:
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  • The United States suffered its largest bank failure yet, when regulators moved in to close down Washington Mutual and then sold it to US rival JP Morgan Chase for $1.9bn
  • In a co-ordinated move the European Central Bank, the US Federal Reserve, the Bank of England, Bank of Japan and the Swiss National Bank announced new short-term loans to the banking sector worth tens of billions of dollars
  • Banks continued to cut costs, with UK banking giant HSBC saying it would axe 1,100 jobs
  • Shares in UK bank Bradford & Bingley fell another 20% to 17 pence before recovering slightly.
  • The United States suffered its largest bank failure yet, when regulators moved in to close down Washington Mutual and then sold it to US rival JP Morgan Chase for $1.9bn
  • In a co-ordinated move the European Central Bank, the US Federal Reserve, the Bank of England, Bank of Japan and the Swiss National Bank announced new short-term loans to the banking sector worth tens of billions of dollars
  • Banks continued to cut costs, with UK banking giant HSBC saying it would axe 1,100 jobs
  • Shares in UK bank Bradford & Bingley fell another 20% to 17 pence
'Full throated discussion''Full throated discussion'
President Bush has lost authority to an extent that must be unprecedented in modern times Justin WebbNorth America editor Justin Webb's blogRobert Peston on the crisisBail-out: For and AgainstBernanke demands action President Bush has lost authority to an extent that must be unprecedented in modern times Justin WebbNorth America editor Justin Webb's blogRobert Peston on the crisisBail-out: For and AgainstBernanke demands action class="" href="/1/hi/business/7637026.stm">Regulator shuts Washington Mutual
On Thursday, Democrat and Republican legislators appeared to have struck a deal.On Thursday, Democrat and Republican legislators appeared to have struck a deal.
A group of Democrats and Republicans even made a public statement, with Senator Christopher Dodd, chairman of the Senate Banking Committee, announcing that they had reached "fundamental agreement" on the principles of a bail-out plan.A group of Democrats and Republicans even made a public statement, with Senator Christopher Dodd, chairman of the Senate Banking Committee, announcing that they had reached "fundamental agreement" on the principles of a bail-out plan.
But after the White House meeting, the top Republican on the committee, Richard Shelby, told reporters: "I don't believe we have an agreement."But after the White House meeting, the top Republican on the committee, Richard Shelby, told reporters: "I don't believe we have an agreement."
The intense discussions reportedly saw US Treasury Secretary Henry Paulson literally down on one knee, begging Nancy Pelosi, the leader of the Democrats in the House of Representatives, to help push through the bail-out package.The intense discussions reportedly saw US Treasury Secretary Henry Paulson literally down on one knee, begging Nancy Pelosi, the leader of the Democrats in the House of Representatives, to help push through the bail-out package.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
However, the agreement unravelled when a group of Republican legislators objected to the principle of the plan.However, the agreement unravelled when a group of Republican legislators objected to the principle of the plan.
The talks at the White House, led by Mr Paulson and US President George W Bush, then descended into what one participant described as "a full-throated discussion".The talks at the White House, led by Mr Paulson and US President George W Bush, then descended into what one participant described as "a full-throated discussion".
Officials with the campaign team of Republican presidential candidate John McCain spoke of "a contentious shouting match".Officials with the campaign team of Republican presidential candidate John McCain spoke of "a contentious shouting match".
Congressional leaders are to meet again on Friday morning to try to hammer out an agreement.Congressional leaders are to meet again on Friday morning to try to hammer out an agreement.
The Republican critics of the bail-out plan worry about both its cost and how it would involve the government in the financial sector. Instead, they want a government-backed insurance policy for the huge amounts of bad debt built up by US banks.The Republican critics of the bail-out plan worry about both its cost and how it would involve the government in the financial sector. Instead, they want a government-backed insurance policy for the huge amounts of bad debt built up by US banks.
This proposal, however, was described as "unworkable" both by Democrat politicians and some US government officials.This proposal, however, was described as "unworkable" both by Democrat politicians and some US government officials.
Doubts over presidential debateDoubts over presidential debate
Some Democrats were scathing about the lack of support for the Paulson plan.Some Democrats were scathing about the lack of support for the Paulson plan.
Senator Obama spoke of progress being made "on all fronts"Senator Obama spoke of progress being made "on all fronts"
"For House Republicans to take a walk is just appalling," said Democrat Barney Frank."For House Republicans to take a walk is just appalling," said Democrat Barney Frank.
"Secretary Paulson has told us several times that the number one plank of the House Republican plan, an insurance scheme, will not work," Mr Frank added."Secretary Paulson has told us several times that the number one plank of the House Republican plan, an insurance scheme, will not work," Mr Frank added.
The breakdown of talks has put a huge question mark over the first debate in the presidential election campaign in the US.The breakdown of talks has put a huge question mark over the first debate in the presidential election campaign in the US.
Democrat candidate Barack Obama and Mr McCain were supposed to meet in Oxford, Mississippi.Democrat candidate Barack Obama and Mr McCain were supposed to meet in Oxford, Mississippi.
But Mr McCain said he wanted to pull out and focus on getting a bailout plan agreed instead. Democrats accused him of posturing and avoiding telling voters how he would solve the crisis.But Mr McCain said he wanted to pull out and focus on getting a bailout plan agreed instead. Democrats accused him of posturing and avoiding telling voters how he would solve the crisis.
Bank failureBank failure
As the credit crunch continues to bite, regulators moved in and shut down Washington Mutual (WaMu), one of the largest savings and loan institutions in the US. Depositors had withdrawn $16.7bn from the bank during the past 10 days alone.As the credit crunch continues to bite, regulators moved in and shut down Washington Mutual (WaMu), one of the largest savings and loan institutions in the US. Depositors had withdrawn $16.7bn from the bank during the past 10 days alone.
HAVE YOUR SAY$700bn should pay off a lot of mortgages - bail the people out not the companies Wen Wy, London Send us your commentsHAVE YOUR SAY$700bn should pay off a lot of mortgages - bail the people out not the companies Wen Wy, London Send us your comments
They immediately sold on the bank to banking giant JPMorgan Chase for $1.9bn.They immediately sold on the bank to banking giant JPMorgan Chase for $1.9bn.
"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," said the Office of Thrift Supervision."With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," said the Office of Thrift Supervision.
WaMu had seen its share price drop by more than 80% this year, after suffering considerable losses due to failed mortgages. Earlier this year JPMorgan Chase also bought investment bank Bear Stearns when it faced collapse.WaMu had seen its share price drop by more than 80% this year, after suffering considerable losses due to failed mortgages. Earlier this year JPMorgan Chase also bought investment bank Bear Stearns when it faced collapse.