Washington/New York/London, October 2
Giving a major boost to the efforts for bailing out troubled American financial firms, the US Senate has approved the $700- billion rescue package proposed by the Bush administration, with some modifications.
The Senate passed the Bill, which incorporated tax cuts and a higher insurance limit for bank deposits, by a wide margin 74-25 on Wednesday evening.
The modified rescue package will now go to the House of Representatives, which had voted against the original proposal on Monday.
In the Senate, 40 Democrats, 33 Republicans and one independent voted in favour of the Bill while nine Democrats, 15 Republicans and one independent voted against it.
Along with proposed tax cuts for businesses, the modified bailout plan includes raising the limit on federal insurance for bank deposits to $250,000 from the current $100,000, which sweetened the demands of Republicans and Democrats in the House of Representatives.
“I believe members of both parties in the House can support this legislation. The American people expect and our economy demands that the House pass this good Bill this week and send it to my desk," President George W Bush said in a statement.
The finer aspects of the Senate legislation also looked at ways to prevent the
more than 20 million middle-class taxpayers from feeling the pinch of the alternative minimum tax.
The proposal for increasing the deposit insurance limits had the backing of presidential candidates and many American lawmakers, after the House of Representatives, rejected the bailout plan on Monday.
Meanwhile, the European Central Bank left interest rates steady but its president, Jean Claude Trichet, said inflation risks had diminished, which markets took as a signal of possible future cuts. Economic activity in the euro zone was weakening, he said.
The crisis has spread well beyond the US shores and beyond the financial sector. Top automakers, including General Motors Corp and Ford Motor Co, warned of tough times, as evaporating credit for consumers cuts demand and could force production cuts and job losses.
“The problems of subprime and credit crunch are now all over the world,” Ford chief executive Alan Mulally said. “The downturn is longer and deeper than we foresaw a year ago,” he said.
Oil prices were down $3 a barrel on an expected slowdown in economic activity around the world, major US stock indexes fell more than 1 per cent and the dollar rose to a year high against the euro.
In a week marred by bank rescues across Europe, French President Nicolas Sarkozy’s office said he would host the leaders of Britain, Italy, Germany and the European Central Bank on Saturday to discuss a response to the credit crisis.
Sarkozy denied reports a 300 billion euro ($415 billion) plan akin to the US bailout was under consideration.
The bailout plan, equivalent to some $2,300 per American, is intended to reinvigorate credit markets and interbank lending that has frozen up while overleveraged financial institutions staggered under the weight of failed mortgages.
It has stirred fierce criticism from those who see it as help for a Wall Street guilty of taking reckless risks in pursuit of short-term profit.
Under the deal, the Treasury would take on illiquid assets held by banks, in the hope of restoring confidence and unfreezing credit markets vital to the wider economy. Asian stocks drifted lower on fears of recession. The FTSEurofirst 300 index of top European shares rose 0.5 per cent.
— Agencies
