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$700b Bush dole to ease US economy
US legislators on Sunday were set to sign a deal to create a $700 billion government fund to buy bad debt from ailing banks in a bid to stem a credit crisis threatening the global economy.
US legislators on Sunday were set to sign a deal to create a $700 billion government fund to buy bad debt from ailing banks in a bid to stem a credit crisis threatening the global economy.
The three stage bailout — $250 billion on enactment, $100 billion if the US President decides it’s needed and the remaining $350 billion subject to congressional review — is expected to keep credit markets from grinding to a halt said Treasury Secretary, Henry Paulson.
US President George W Bush spoke with House of Representatives Speaker Nancy Pelosi late on Saturday. The news of a deal was welcomed at the White House.
“We’re pleased with the progress and appreciate the bipartisan effort to stabilise our financial markets,” said Spokesman Tony Fratto.
To protect taxpayers, institutions selling assets under the plan would issue stock warrants giving “taxpayers an ownership stake and profit-making opportunities with participating companies”. The plan would also let the government buy troubled assets.
No executives at participating companies could get severance pay — known as golden parachutes — while CEO pay that encourages excessive risk-taking would be limited.
Meanwhile, reports said Wachovia Corp, the sixth-largest US bank, began merger talks with potential partners after a 27 per cent drop in its shares on Friday.
Investors worried about a contagion effect as the crisis showed signs of spilling into Europe, where Belgian-Dutch financial group Fortis NV fired its interim CEO after its shares dipped to a 14-year low.
In London, regulators were in talks on the future of troubled lender Bradford & Bingley, raising the prospect that the bank could be nationalised.
