Washington Tries to Wrap Up the Bailout
White House and party leaders must sell a revised financial rescue to Congress, with a wary eye on market reaction
Is the deal finally on?
Lawmakers from both parties once again announced the broad framework of a pact on Sunday afternoon, Sept. 28, to rescue U.S. financial markets. Many details of Treasury Secretary Henry M. Paulson Jr.’s proposed $700 billion plan remained vague, and opposition by conservative Republicans in the House of Representatives stayed strong. Still, legislative aides and business lobbyists said they expected the House to pass the measure. Indeed, with investors in markets around the world anxiously awaiting progress on the package, legislators know that further delays would likely cause another rout for stocks.
House leaders eager to keep up the sense of urgency were aiming for a vote as early as Monday. If it passes the House, the Senate—where a bill is expected to find more support—will vote by Oct. 1.
After days of intensive negotiations, Paulson released a statement early Sunday evening, lauding the bipartisan efforts and pledging to move as quickly as possible to begin implementing the legislation as soon as it is signed. “Members on both sides were focused on the right things: creating an effective program that can be implemented quickly and effectively, and doing everything possible to protect the taxpayers,” Paulson said in the statement. “Quick, effective, and bipartisan action sends a signal to investors large and small, here and abroad, that we are committed to taking the necessary actions to protect our financial system and our economy.” Asian markets were up in early trading on news of the accord.
A Continental Bailout: Fortis
President George W. Bush issued a statement calling the bill necessary “to help protect our economy against a system-wide breakdown.” He added: “The bill will help allow access to credit so American
Meanwhile, the financial crisis seemed to cascade in Europe. As recently as last week, European officials said they had no intention of mimicking a U.S.-style bailout of Old World banks, claiming their financial situation wasn’t as dire.
But the rapidly deteriorating financial situation at Brussels-based banking giant Fortis (FOR.BR), whose shares plunged 35% last week on concerns over its balance sheet, prompted an emergency $16.3 billion bailout engineered over the weekend by the governments of Belgium, Luxembourg, and the Netherlands. According to a Bloomberg report, the Belgian government will buy a 49% stake in the bank’s Belgian business for $6.9 billion, while Holland will pay $5.8 billion for the bank’s Dutch business. Fortis—one of the victorious partners in a hard-fought takeover battle last year for Dutch investment bank ABN Amro—was hammered over concerns that its capital base had been too depleted by the acquisition.
More pages added little in DC
Also in Europe, the BBC reported late Sunday that the British government will take over the $92 billion loan portfolio of mortgage lender Bradford & Bingley (BB.L), whose shares have tumbled 93% in the past year. Spanish banking giant Santander (BSCH.DE) will acquire B&B’s retail banking and savings business, including 200 branch offices around Britain. Read More
by Theo Francis and Jane Sasseen
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[...] the financial system bailout plan derailed by the House of Representatives on Sept. 29, the resulting plunge in equities made [...]