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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September 28, 2008

‘Great progress’ in US bail-out

‘Great progress’ in US bail-out

US congressional leaders say they have reached the broad outline of a rescue plan for the American financial system.

Democratic House Speaker Nancy Pelosi said “great progress” had been made – but details remain to be agreed.

The Bush administration wants $700bn (£380bn) to be able to buy bad debt that is freezing up financial markets.

A vote could be held in the House of Representatives as early as Sunday, with negotiators keen to reassure the markets before they reopen on Monday.

The deal proposes that the government would spend the $700bn to buy up bad mortgage-related debts from US banks, borrowing the cash from the money markets by issuing more government debt.

A White House spokesman welcomed the announcement and praised the efforts of the negotiators.

“We’re pleased with the progress tonight and appreciate the bipartisan effort to stabilise our financial markets and protect our economy,” said Tony Fratto.

The outline deal gives the treasury secretary powers to oversee the two-year plan, but critics have insisted on the inclusion of greater oversight and reporting.

The tentative agreement that appears to have been reached is thought to include a measure to limit the pay for executives of companies which seek financial assistance, which was a key demand of the Democrats.

At the request of Republicans, who have strongly criticised some elements of the administration’s proposal, the accord is believed to include the setting up an insurance program for mortgage-backed securities.

Payoff restrictions

A statement from Nancy Pelosi’s office said the new agreement would see $250bn issued immediately, and another $100bn when the president wanted to spend it.

But the the final $350bn would only be released after review and approval by Congress.

There would also be measures to protect taxpayers, who would be given an ownership stake and profit-making opportunities in relation to any assets that were sold.

It also puts new restrictions on executive compensation for participating companies, including no “golden parachute” payoffs.

Earlier on Sunday it was announced that the two-year project would be supervised by a board of officials, including the Federal Reserve chairman, and scrutinised by Congress’s investigative arm and an independent inspector general.

Finally, the government could use its power as the owner of mortgages and mortgage-backed securities to help more struggling homeowners modify the terms of their home loans.

‘All night’

US Treasury Secretary Henry Paulson, who took part in the talks, said that Congressional leaders had been “working very hard”.

“We’ve made great progress toward a deal, which will work and will be effective in the marketplace, and effective for all Americans,” he told a news conference.

But Ms Pelosi said the deal had to be committed to paper before it could be formally agreed.

Senate Democratic leader Harry Reid said Congress hoped to be able to make an announcement on the deal later on Sunday.

“We’re committing it to paper tonight and our people will work all night long,” he said.

Congressional leaders are trying to finalise the deal in time for the opening of the Asian markets on Monday morning.

September 18, 2008

Deadline looms for Alitalia deal

Deadline looms for Alitalia deal

Alitalia air hostesses and employees demonstrate at Fiumicino airport near Rome, 17 September 2008

Union protests forced the ailing airline to cancel 40 flights on Wednesday

A consortium of investors has warned Italian trade union leaders they have just hours to accept a rescue plan for failed national airline, Alitalia.

The consortium said if the acceptance did not come before an investors’ meeting at 1400GMT on Thursday, the package would be withdrawn.

The deal would include longer working hours and 3,000 job cuts.

Union protests forced Alitalia, which is losing 2.1m euro ($3m; £1.7m) daily, to cancel 40 flights on Wednesday.

The carrier, which is operating under a bankruptcy commissioner, faces liquidation if a deal is not reached.

The airline says it is running out of money to buy aviation fuel.

Under the rescue proposal, the Italian consortium has put forward a 1bn euro offer for the airline.

Alitalia would merge with Air One, the country’s second largest airline, and its 1.2bn euro debt would be absorbed by a second firm, which would then be liquidated.

Disgruntled pilots

Italy’s four main union organizations – CGIL, CISL, UIL and UGL – have already signed up to the agreement with the consortium CAI, but five other unions have rejected the deal as “useless and provocative”.

Alitalia plane

The new Alitalia would employ about 12,500 people

Those opposed to the package – SDL, ANPAC, UP, ANPAV and Avia – include pilots and cabin crews.

The new Alitalia would employ about 12,500 people including 1,500 pilots, 3,300 cabin staff and 7,650 technicians, workers and managerial staff, Italy’s Ansa news agency reported.

Prime Minister Silvio Berlusconi has pledged to do all he can to save Alitalia, in which the Italian government holds a 49.9% stake.

In April, plans for the airline to be bought by Air France-KLM collapsed.

Alitalia suspended trading in its shares in June and filed for bankruptcy protection last month.

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