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Update 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 is likely to send a positive signal to global markets that there may be some systemic relief to the crisis that has ensnarled global banking, threatening the world's economy.
The benchmark S&P/ASX-200 share index was about 0.5% higher for the day at 4815, just prior to the vote being taken. The index edged lower after the vote, while the Australian dollar was little changed, trading recently at 79.17 US cents.
Any final passage of the US plan, though, will have to be agreed on by the US House of Representatives, which shocked the world days ago 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 stop the losses in global 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 vote the bill down just weeks before the presidential and congressional elections.
The bill 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.
This morning's Senate vote comes after the global banking system has been plunged into crisis with a string of corporate failures claiming Bear Sterns, Lehman Brothers, American Insurance Group, Wachovia, and Washington Mutual in the US.
Momentum
The Senate vote is likely to add momentum to the push to pass the plan into law before the weekend.
The package had been enhanced with several sweeteners including extending tax cuts for business and for the renewable energy industry and an increase in the insurance limits on bank deposits from $US100,000 to $US250,000.
Senate Republican leader, Mitch McConnell said he was hopeful the Senate vote would prompt the House to follow suit.
"I think a good vote coming out of the Senate will certainly be helpful over in the House side," he said.
But it is still uncertain whether the bill has the numbers in the House of Representatives. It is now not expected to vote until Friday US time, (Saturday Australian time) a sign that the leaders are still struggling to persuade 12 lawmakers to change their minds. On Monday, the House stunned the markets by rejecting the package 228-205.
Unlike the Senate, where only one third of the 100 senators are facing re-election, the entire House must face the electorate in November.
"We need 100 Republican votes to pass this," House Majority Leader Steny Hoyer told reporters at a Wednesday afternoon briefing.
House leaders "are bringing in the small business lobby and the banking lobby to buy the 12 Republican votes they need," said Bob Borosage, the co-director of the progressive group Campaign for America's Future.
Those senators who supported the bail-out -- both Republican and Democrat -- repeatedly spoke of their distaste for the plan but they also warned of dire consequences if the bill is not passed: massive job losses, a complete freezing of the credit market and a deep and prolonged recession.
Several said the pro-bailout forces had done a bad job in explaining the program to the public, and that far from spending $US700 billion , it was possible that taxpayers would get some or all of their money back.
Both presidential candidates, Barack Obama and John McCain returned to Washington to speak in favour of the plan.
But not everyone supported it. Senator Bernie Sanders, an independent from Vermont, stood next to a huge picture of Treasury Secretary, Henry Paulson.
Senator Sanders and told how he had received 48,000 signatures on his web site petition and he is from a small state.
"People are saying: 'We had nothing to do with causing this bailout. Go to those people who caused it and ask them to pay for it,'" he said.
Republican Senator Jeff Sessions, a conservative from Alabama also baulked at voting for it.
"It's extraordinary that we are being asked to authorise one person, himself a mavern of Wall Street to do this. This is the biggest authorisation in the history of our Republic, and I am not going to vote for the thing!" he said.
czappone@fairfax.com.au
BusinessDay with Anne Davies, Washington
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2 comments:
I wouldn’t be surprised if the recent overhaul of bankruptcy legislation was designed for this economic situation; it turns human debtors into indentured servants. 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
The End Of the World getting pushed back again due to scheduling conflicts:)
http://rattlergator.typepad.com/rattlergator/2008/10/moving-the-money-from-wall-street-to-main-street.html
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