News & Current Affairs

October 1, 2008

Senate urged to back crisis bill

Senate urged to back crisis bill

Wall Street, file pic

Shares remain volatile ahead of Wednesday’s key vote

Democratic and Republican Senate leaders have appealed for a new version of a $700bn (£380bn) Wall Street bail-out to be approved in a key vote.

Republican Mitch McConnell said it would shield Americans from “shockwaves of a problem they didn’t create”.

The plan needs support in the Senate and House of Representatives, which rejected a similar bill on Monday.

Senate Democrat Harry Reid said he hoped a strong show of bipartisanship would “spark the House to do the same”.

President George W Bush has been speaking to senators ahead of the vote. The White House said it hoped to see “strong support for the bill”.

“It’s critically important that we approve legislation this week and limit further damage to our economy,” said spokesman Tony Fratto.

US presidential hopefuls John McCain and Barack Obama are returning from the campaign trail for the vote, which is due to begin late on Wednesday.

Revised proposal

Global shares were mixed in Wednesday trading ahead of the vote.

By early afternoon on Wall Street the Dow Jones was down 0.2% or 30 points.

CHANGES TO BILL
Raises government’s guarantee on savings from $100,000 to $250,000
Tax breaks to help small businesses and promote renewable energy
Expansion of child tax credit and help for victims of recent hurricanes

But hopes that enough changes had been made to get the bill through saw shares close up strongly in Asia on Wednesday.

In Europe, the UK’s FTSE 100 finished 1.1% higher at 4,959.6 points, France’s key index added 0.6% while German shares fell.

Changes to the rescue plan involve lifting the US government’s guarantee on savings from $100,000 to $250,000 and a package of targeted tax breaks.

They are designed to answer critics who felt the original plan was weighted too much in favour of Wall Street while not enough was being done to help struggling American families.

To get through the Senate, the bill will require backing by 60 of the 100 senators. It would then return to the House of Representatives for a vote on Thursday or Friday.

Some members of Congress continue to press for more fundamental changes to the bill.

President Bush has warned of “painful and lasting” consequences for the US should Congress fail to agree a rescue plan.

The House’s rejection of the earlier version of the plan on Monday led to sharp falls on world stock markets.

In other developments:

  • The European Union outlines its own proposals for reforming banking regulation which, if approved, could see dramatic changes to the way in which banks operate
  • Russian Prime Minister Vladimir Putin says the “irresponsibility” of the US financial system is to blame for the crisis
  • Ireland’s government discusses a move to guarantee all bank deposits with the EU Competition Commissioner

‘Painful recession’

In election campaigning on the eve of the vote, Mr McCain and Mr Obama urged politicians of both parties to work together to pass the emergency legislation.

Speaking in Reno, Nevada, Mr Obama warned that without action by Congress “millions of jobs could be lost, a long and painful recession could follow”.

John McCain campaigns in Iowa, 30 Sept

John McCain said inaction by Congress was putting the US at risk

He added: “There will be a time to punish those who set this fire, but now is the moment for us to come together and put the fire out.”

Mr McCain, who campaigned in Des Moines, Iowa, said inaction by Congress had “put every American and the entire economy at the gravest risk” and that Washington urgently needed to show leadership.

“I am disappointed at the lack of resolve and bipartisan goodwill among members of both parties to fix this problem,” he said.

The vote comes a day before a TV debate between vice-presidential candidates Joe Biden and Sarah Palin.

Mr Biden, Mr Obama’s running mate, is also expected to take part in the Senate vote.

Meanwhile, ex-President Bill Clinton is to hold his first rally for Mr Obama.

Mr Clinton, whose wife Hillary lost to Mr Obama in a fierce primary contest for the Democratic nomination, is due to appear in Florida, where he will encourage people to register as voters before a deadline on Monday.

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2 Comments »

  1. The American people will weather this storm, but to think we want these morons in Washington to bail out anyone is beyond a stretch of the imagination. No one I talk to in the mixed Democrat/Republican area I live in believe even a modified bill is supported or even wanted. These elected fools will be voted out if they pass anything that helps Wall Street. Markets faulter and businesses fail. That’s the way it works and it should be left alone.

    Comment by joepublic — October 1, 2008 @ 6:06 pm

  2. I wouldn’t be surprised if the recent overhaul of bankruptcy legislation was designed for this economic situation; it turns human debtors into indentured servant. And that is necessary for the following reason:

    The ’sssssss’ we are noticing with this credit crunch is just the leak before the big burst. This credit bubble has been inflated by a logorithmic base 10 scale of dollar creation.
    The practice of using 90% of ‘real’ wealth for lending that can then be invested and re-deposited for recycling again and again for more and more credit probably has the same effect of simply printing more money. The difference between those two ways of creating wealth is that creating money by credit inflation redistributes wealth for the benefit of financiers. And printed money is real; not fake.

    This credit bubble burst should, then, be creating a shortage of money. And the cure may be as simple as the government printing more money. The only problem with that scheme is that there would not be another bubble to burst to correct for over-inflation. Printed dollars don’t evaporate away like the ones the financiers are trying to sell taxpayers now.

    And that is why those who have engineered this bubble need those new draconian bankruptcy laws. Only wage earners can turn this fake money into real wealth. And that is why the Bush administration and other supporters of the great bailout plan are adamantly against giving bankruptcy judges the right to restructure debt according to who is most responsible for making bad loans.

    Bryant Arms

    Comment by Bryant Arms — October 2, 2008 @ 1:39 am


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