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US$700 billion Credit deal is agreed

Discussion in 'The Economy' started by Billv, 29th Sep, 2008.

  1. Billv

    Billv Getting there

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    POLITICIANS in the United States last night made a breakthrough in talks to approve an unprecedented $US700 billion ($840 billion) plan to revive credit markets.

    The rescue plan for Wall Street is a huge boost to world financial markets, which were on tenterhooks over the weekend amid fears the deal would fail to gain support.

    The bill, which will be voted on early tomorrow Sydney time, will cap the salaries of some executives at companies given assistance and will ensure the US Government makes more aggressive efforts to prevent home foreclosures.

    The decision to buy the troubled debt from ailing companies and prevent widespread economic collapse came as the contagion threatened to spread across the Atlantic, with Belgium's Fortis poised last night to become the first large continental European bank to fall victim to the credit crunch.

    The fallout from the turmoil in financial markets has also left the British mortgage lender Bradford & Bingley and the American savings giant Wachovia teetering on the brink.

    The US plan will allow taxpayers to profit from a recovery of the financial sector in the months and years ahead by giving the government an equity stake in companies that seek aid.

    The White House also agreed to strict oversight of the program by a congressional panel, and to conflict-of-interest rules for companies hired by the US Treasury to help run the program.

    As they approached a final deal, both sides appeared to have given up a number of contentious proposals, including a change in the bankruptcy laws, sought by some Democrats, to give judges the authority to modify the terms of first mortgages, and a temporary suspension of mark-to-market accounting rules, sought by some Republicans.

    Congressional leaders and the Treasury Secretary, Henry Paulson, emerged after two days of protracted meetings late yesterday. "We have made great progress toward a deal, which will work and be effective in the marketplace," Mr Paulson said at a news conference.

    The speaker of the House, Nancy Pelosi, said: "All of this was done in a way to insulate main street and everyday Americans from the crisis on Wall Street.

    "We have to commit it to paper so we can formally agree, but I want to congratulate all of the negotiators for the great work they have done."

    A senior Administration official, who participated in the talks, said the deal was effectively done and staff would work out details and finalise legislative language. "I know of no unresolved open issues for principals
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    Credit deal is agreed | smh.com.au