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US Senate passes bail-out plan

Discussion in 'The Economy' started by Billv, 2nd Oct, 2008.

  1. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW
    The US Senate has passed a revised $US700 billion ($890 billion) financial bail-out bill, bringing the rescue plan one step closer to final passage.

    The vote was expected to send a positive signal to global markets that there may be some systemic relief to the crisis that has ensnared global banking, threatening the world's economy.

    The initial response in Australia, though, was weak, with the benchmark S&P/ASX-200 share index sliding more than 0.5%, before eventually seesawing back into the black in afternoon trade. The Australian dollar also slumped to below 79 US cents as investors ignored the biggest monthly trade surplus in more than 11 years.

    Final passage of the US plan, however, needs support in the US House of Representatives, which sent shockwaves through global markets this week by rejecting an earlier version of the bail-out proposal. A House vote may come as early as Friday, US time.

    President George Bush, along with Treasury Secretary Hank Paulson and Fed Reserve chairman Ben Bernanke, is anxious for the bail-out to be passed, to avert further corporate failures and restore some calm to financial markets.

    The plan for the US Treasury to buy up billions of dollars in bad debts has run into a popular revolt by US voters who pressured the Congress to reject the bill just weeks ahead of presidential and congressional elections.

    The bill today passed easily through the Senate after it was strongly backed by the leadership of both the Republican and Democratic parties. The vote was 74 to 25 against.

    The Senate vote comes after the global banking system has been plunged into crisis with a string of corporate failures claiming some of the largest US financial firms including Bear Stearns, Lehman Brothers and American International Group.

    Market view

    Traders in Australia were divided over the impact of the Senate's vote.

    "I don't think it's enough to fix to the system," Rick Klusman, head of institutional trading at Aequs Securities. "I don't think the bill is enough to fix the problem."
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    US Senate passes bail-out plan