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US 'agrees Wall Street bail-out' US 'agrees Wall Street bail-out'
(20 minutes later)
A leading US senator says both parties in Congress have reached agreement on the outline of a $700bn (£380bn) bail-out plan to revive the finance sector.A leading US senator says both parties in Congress have reached agreement on the outline of a $700bn (£380bn) bail-out plan to revive the finance sector.
Democrat Senator Christopher Dodd said they had reached "fundamental agreement" on the principles of a package though he did not give details.Democrat Senator Christopher Dodd said they had reached "fundamental agreement" on the principles of a package though he did not give details.
He said Congress could act in the next few days to pass a bill on the subject.He said Congress could act in the next few days to pass a bill on the subject.
A main concern for Democrats and Republicans has been who will bear the brunt of the cost of the package.A main concern for Democrats and Republicans has been who will bear the brunt of the cost of the package.
"We look forward to reviewing the proposal. Our focus remains the same - ensuring that the final package is effective," said Treasury spokeswoman Jennifer Zuccarelli.
The plan, as it was first proposed last week, would broadly help finance firms offload bad debt, which has triggered a global credit crisis.The plan, as it was first proposed last week, would broadly help finance firms offload bad debt, which has triggered a global credit crisis.
"We now expect that we will have a plan that can pass the House, pass the Senate and be signed by the president," Senator Robert Bennett of Utah said after meetings with lawmakers on Thursday."We now expect that we will have a plan that can pass the House, pass the Senate and be signed by the president," Senator Robert Bennett of Utah said after meetings with lawmakers on Thursday.
Details of the package were not immediately available but it is expected to include limits on executives' pay as well as oversight requirements. Details of the package were not immediately available but it is tipped to include restrictions on executives' pay as well as oversight requirements.
The news comes as President George W Bush is set to meet both presidential candidates, John McCain and Barack Obama, to discuss the bail-out and how to revive the economy.The news comes as President George W Bush is set to meet both presidential candidates, John McCain and Barack Obama, to discuss the bail-out and how to revive the economy.
The benchmark Dow Jones index continued to rise after Senator Dodd's comments, adding 3%, to 11,128.7.The benchmark Dow Jones index continued to rise after Senator Dodd's comments, adding 3%, to 11,128.7.
ConcernsConcerns
The bail-out has been under scrutiny with politicians on both sides nervous about the deal being rushed through too quickly.The bail-out has been under scrutiny with politicians on both sides nervous about the deal being rushed through too quickly.
Of particular concern has been the issue of pay for the bosses of the firms in question, as well as concerns over the cost of the plan to the US taxpayer.Of particular concern has been the issue of pay for the bosses of the firms in question, as well as concerns over the cost of the plan to the US taxpayer.
But both US Federal Reserve head Ben Bernanke and US President George W Bush have warned that without a deal, it would cause a significant set-back to the economy as a whole.But both US Federal Reserve head Ben Bernanke and US President George W Bush have warned that without a deal, it would cause a significant set-back to the economy as a whole.
Those in favour of the deal have argued that:Those in favour of the deal have argued that:
  • The deal would boost global financial stability
  • Increase investor confidence
  • Prevent a global slowdown
  • Encourage banks to lend to each other, and beat the credit crunch
  • The deal would boost global financial stability
  • Increase investor confidence
  • Prevent a global slowdown
  • Encourage banks to lend to each other, and beat the credit crunch
Those with reservations have said the bail-out would:Those with reservations have said the bail-out would:
  • Cost the taxpayer too much money
  • Benefit bosses of firms who have taken huge risks
  • Increase state debt
  • Give too much power to the US Treasury
  • Cost the taxpayer too much money
  • Benefit bosses of firms who have taken huge risks
  • Increase state debt
  • Give too much power to the US Treasury
Turmoil
The package was proposed after a period in which markets saw almost unprecedented global turmoil and upheaval.
Key investment firm Lehman Brothers, the fourth largest investment bank in the US, filed for bankruptcy protection and the government had to intervene to rescue insurance giant AIG.
Meanwhile Bank of America stepped in to buy Merrill Lynch.
And investment banks Goldman Sachs and Morgan Stanley changed their status, enabling them to tap into commercial banking, effectively marking the end of an era on Wall Street.
The bail-out is being seen as a way to help boost the outlook for banks, and improve the availability of credit which has been harder to obtain for banks and businesses as well as individuals.