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US lawmakers publish rescue deal US lawmakers publish rescue deal
(20 minutes later)
US politicians have published a $700bn deal to bail out Wall Street and end the global credit crunch. US lawmakers have published a $700bn deal to rescue America's financial system and end the credit crunch.
The measure allows the Treasury to spend up to $700bn (£380bn) buying bad debts from ailing banks in the USA. The move, backed by both Republican and Democratic leaders, allows the Treasury to spend up to $700bn (£380bn) buying bad debts from ailing banks in the US.
In return the government will get a stake in these firms, the pay of bank bosses will be limited and the bail-out will be independently monitored. The government will get a stake in these firms and the pay of bank bosses will be limited. President George W Bush announced his support of the bill.
It is the biggest intervention in the markets since the Great Depression of the 1930s. It is the biggest intervention in the markets since the the 1930s.
Nancy Pelosi, the Democrat leader of the House of Representatives said the message to Wall Street was that "the party is over".Nancy Pelosi, the Democrat leader of the House of Representatives said the message to Wall Street was that "the party is over".
She said the "bipartisan deal" was "not a bailout of Wall Street", but designed to ensure pensions, savings and jobs would be safe.She said the "bipartisan deal" was "not a bailout of Wall Street", but designed to ensure pensions, savings and jobs would be safe.
The Democrat majority leader of the Senate, Harry Reid, said Americans had "every reason to be concerned and even angry" in the light of the "greed on Wall Street" and "unenforced regulations".The Democrat majority leader of the Senate, Harry Reid, said Americans had "every reason to be concerned and even angry" in the light of the "greed on Wall Street" and "unenforced regulations".
During the past two weeks, the global credit crunch has seen several financial institutions running into liquidity problems, where they cannot free up the money to keep their daily business going.During the past two weeks, the global credit crunch has seen several financial institutions running into liquidity problems, where they cannot free up the money to keep their daily business going.
  • In the United States' largest bank failure, Washington Mutual was taken over by regulators and sold on to JPMorgan Chase
  • Several investment banks got into varying degrees of trouble, with Lehman Brothers collapsing, Merrill Lynch seeking refuge in a takeover by Bank of America and Morgan Stanley securing a large capital injection from a Japanese rival
  • US insurance giant AIG had to be bailed out by the US government, which effectively took an 80% stake in the firm
  • In the UK, meanwhile, mortgage lender Bradford & Bingley is set to be nationalised on Monday morning, with the savings part of the business to be sold to Spanish banking group Santander
  • In Germany Hypo Real Estate, a bank specialising in financing property deals, is widely reported to face a serious cash crisis
  • The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, effectively nationalising it
  • In the United States' largest bank failure, Washington Mutual was taken over by regulators and sold on to JPMorgan Chase
  • Several investment banks got into varying degrees of trouble, with Lehman Brothers collapsing, Merrill Lynch seeking refuge in a takeover by Bank of America and Morgan Stanley securing a large capital injection from a Japanese rival
  • US insurance giant AIG had to be bailed out by the US government, which effectively took an 80% stake in the firm
  • In the UK, meanwhile, mortgage lender Bradford & Bingley is set to be nationalised on Monday morning, with the savings part of the business to be sold to Spanish banking group Santander
  • In Germany Hypo Real Estate, a bank specialising in financing property deals, is widely reported to face a serious cash crisis
  • The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, effectively nationalising it
No golden parachutesNo golden parachutes
The negotiations had lasted all weekend and were so intense that at one point US Treasury Secretary Hank Paulson suffered what was described as a "woozy spell".The negotiations had lasted all weekend and were so intense that at one point US Treasury Secretary Hank Paulson suffered what was described as a "woozy spell".
Now that agreement has been reach on the so-called Act of Emergency Economic Stabilization 2008, both the House of Representatives and the Senate are expected to vote on it as early as Monday. Now that agreement has been reached on the so-called Act of Emergency Economic Stabilization 2008, both the House of Representatives and the Senate are expected to vote on it as early as Monday.
When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration Senator Barack Obama Santander to buy parts of B&BBail-out debate: For and againstDeal sticking pointsQ&A: US $700bn bail-out planWhen taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration Senator Barack Obama Santander to buy parts of B&BBail-out debate: For and againstDeal sticking pointsQ&A: US $700bn bail-out plan
The US administration wanted a deal to be announced before markets open in Asia on Monday morning.The US administration wanted a deal to be announced before markets open in Asia on Monday morning.
After senior members of Congress announced the agreement, President Bush gave his backing to the draft legislation.
He said the bill would send a strong message that the US was serious about restoring confidence in its financial markets.
"This bill provides the necessary tools and funding to help protect our economy against a system-wide breakdown," he said in a statement.
The deal addresses several of the key concerns raised by both Democrat and Republican critics of the original plan proposed by the US administration.The deal addresses several of the key concerns raised by both Democrat and Republican critics of the original plan proposed by the US administration.
  • The government will get the money in tranches - $250bn straight away, and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn
  • Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks' recovery
  • Top bankers, meanwhile, will see their pay limited, and "golden parachutes" - huge payments when they leave the firm - will be banned
  • The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves
  • Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board
  • Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities
  • The government will get the money in tranches - $250bn straight away, and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn
  • Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks' recovery
  • Top bankers, meanwhile, will see their pay limited, and "golden parachutes" - huge payments when they leave the firm - will be banned
  • The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves
  • Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board
  • Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities
The proposed legislation was now "frozen", said Ms Pelosi, which means critics can not strike out individuals provisions that they do not like.The proposed legislation was now "frozen", said Ms Pelosi, which means critics can not strike out individuals provisions that they do not like.
The text of the deal has now been put on the internet, but immediately after the deal was announced all websites showing the published text crashed because of the huge public interest in its provisions.The text of the deal has now been put on the internet, but immediately after the deal was announced all websites showing the published text crashed because of the huge public interest in its provisions.
However, these provisions may not be enough to placate all the critics of the bail-out, both on the Republican and Democrat side of the political divide.However, these provisions may not be enough to placate all the critics of the bail-out, both on the Republican and Democrat side of the political divide.
Already, several key critics of the deal called on their fellow legislators to block it.Already, several key critics of the deal called on their fellow legislators to block it.