Entrepreneurs and investors, it’s time for a sigh of relief – the US congress has finally reached an agreement on US Treasury Secretary Henry Paulson’s $US700 billion bale-out package, which will see the US Government buy bad bank debt and hopefully save
Entrepreneurs and investors, it’s time for a sigh of relief – the US congress has finally reached an agreement on US Treasury Secretary Henry Paulson’s $US700 billion bale-out package, which will see the US Government buy bad bank debt and hopefully save the US financial system.
The deal was finally approved after a week of wrangling between Democrats and Republican politicians over how much taxpayer money should be spent and whether or not salary limits should be put in place for executives of firms that take part in the bale-out.
“We have reduced the amount of taxpayer risk in this bill significantly,” House of Representatives Republican leader John Boehner told reporters this morning.
The US senate is expected to vote on the bill overnight.
According to a summary of the draft plan released by House Speaker Nancy Pelosi, the deal would release up to $US250 billion straight away, with future payments conditional on Congressional approval.
Four separate oversight agencies or processes will be set up to conduct audits and prevent fraud and there will also be an independent inspector general to monitor the Treasury secretary’s actions.
The Treasury would be also required to establish a mandatory industry-funded program to insure the soured assets it acquires through the Wall Street rescue plan.
News that a bale-out has finally been agreed to should spur global markets, despite some economists suggesting that the bale-out will not fix the problem and the US Government may need to continue to pump money into the US financial system.
Australian investors – who were among the first to start trading following the announcement of the deal in Congress – have been lukewarm in their response.
After initially rising around 1% in early morning trade, the benchmark S&P/ASX200 index has fallen 0.3% to 4887.7 points.
Most financial stocks have risen during this morning, but poor performances by resources stocks including BHP Billiton and engineering firm WorleyParsons, have weighed on the index.