Bush seeks quick approval of $700 bn bailout as Wachovia falls (Lead)

September 29th, 2008 - 10:43 pm ICT by IANS  

Barack ObamaWashington, Sep 29 (IANS) US President George W. Bush Monday asked lawmakers to quickly pass a $700 billion Wall Street rescue plan hammered out with the Congressional leadership, as regional bank Wachovia Corp too succumbed to the credit crisis.Bush spoke at the White House Monday as America’s fourth largest US bank Wachovia, became the latest victim of the credit crisis as the Federal Deposit Insurance Corp, which insures deposits at failed banks, arranging for the sale of its banking assets to Citigroup for $2.2 billion in stock.

“I’m confident that this rescue plan, along with other measures taken by the Treasury Department and the Federal Reserve, will begin to restore strength and stability to America’s financial system and overall economy,” said Bush, calling the proposed measure “an extraordinary agreement to deal with an extraordinary problem.”

“We’ll make clear that the United States is serious about restoring confidence and stability in our financial system,” he said, but conceded that the economy is facing problems even if the bill passes.

“This is a volatile time for our financial system and our economy. Even with the important steps we’re taking to address the current crisis, we will continue to face serious challenges,” Bush said.

The two candidates for the presidency, Democrat Barack Obama and Republican John McCain, have given their cautious support for the proposed legislation.

Federal Reserve Chairman Ben Bernanke too hailed the deal by the Congressional leadership and promised that it would restore the flow of credit to households and businesses.

With leading Republicans in the House of Representatives signing on to the proposal Sunday after expressing earlier reservations, the bill was expected to pass in the lower chamber Monday and the Senate by Wednesday at the latest, as Senate Majority Leader Harry Reid hoped.

House Speaker Nancy Pelosi said the provisions added by Congress will protect taxpayers from having to pay for the bailout. “We sent a message to Wall Street - the party is over,” she said at a press conference Sunday with Reid, and other Democratic leaders from the House and Senate.

The core of the bill is based on Treasury Secretary Henry Paulson’s request for authority to purchase troubled assets from financial institutions so that banks can resume lending and so that the credit markets, now virtually frozen, can begin to operate normally.

But Democrats and Republicans - concerned about the potential cost - have added several conditions and restrictions to protect taxpayers on the downside and give them a chance at some of the potential upside if the companies benefit from the plan.

“People have to know that this isn’t about a bailout of Wall Street. It’s a buy-in so we can turn our economy around,” Pelosi said.

On Sunday evening, the House Republican working group, which stringently opposed earlier drafts of the plan and offered a counterproposal, indicated it would support the bill, and its members are encouraging other Republicans in the House to do the same.

“Nobody wants to have to support this bill, but it’s a bill that we believe will avert the crisis that’s out there,” House Minority Leader John Boehner told reporters.

The new deal addresses several of the key concerns raised by both Democrats and Republicans:

* The government will release the money in tranches - $250bn straight away and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn,

* Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks’ recovery,

* Top bankers, meanwhile, will see their pay limited, and “golden parachutes” - huge payments when they leave the firm - will be banned,

* The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves,

* Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board, and

* Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities.

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