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After Bailout, Focus Shifts to Fallout |
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Contributed by J. R. Ransom
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 Paulsen & Bush
The US House of
Representatives approved the rescue plan by a vote of 263-171 on
Friday. That sent the measure to President George W. Bush, who quickly
signed it into law, concluding two weeks of high-stakes haggling over
the plan that had roiled and captivated global markets.
Markets
pivoted on passage of the US bailout, as investors' attention turned to
signs of a gathering recession.
Stocks, which had
been higher before the vote, dropped, with the S&P 500 index
closing at its lowest level in almost four years. The dollar was also
in retreat.
"This probably comes a bit too late. If
this had been done earlier, it probably would have had a much bigger
impact in restoring confidence," said Anna Piretti, economist at BNP
Paribas in New York.
US Treasury Secretary Henry
Paulson, who had been the administration's chief lobbyist for the plan,
said he would move quickly to buy up distressed assets from banks.
 Cheney, Bush, Paulsen - The Guys With the Money
Analysts cautioned it was
still unclear whether the US plan would work as advertised.
"There
are more questions than answers out there still," said David Kelly,
chief market strategist of JPMorgan Asset Management. "Even if the
banks do participate, how willing will they be to make new loans into
the economy if they can get rid of the bad ones?"
The
US government has run up a bill of $1 trillion in recent weeks as it
rushed to stabilize its banks, including the seizures of Fannie Mae and
Freddie Mac. That cost is equal to over 7% of the world's largest
economy.
Earlier on Friday, the hobbled financial
sector was bolstered as Wells Fargo & Co stepped in to buy
Wachovia Corp in a deal that would take the place of a shotgun merger
with Citigroup Inc brokered by US banking regulators.
But
in signs of the spreading crisis, California said it was running out of
money, France said the world stood on the "edge of the abyss" and
European leaders divided over their response to the banking sector's
difficulties.
HOUSE FALLS INTO PLACE
The
House had shocked world markets on Monday by rejecting a previous
draft. With elections a month away, lawmakers from both parties were
wary of voter backlash in asking taxpayers to pay for Wall Street's
mistakes.
 Reid, Pelosi Got the Votes & Paulsen Controls The Money
Speaker
after speaker from both parties on the House floor said rejecting the
bailout a second time could have devastating consequences for an
already slowing US economy.
"While the focus has
been on the Dow Jones and Wall Street, we are addressing the real pain
felt by Mr. and Mrs. Jones on Main Street," said House Speaker Nancy
Pelosi, a California Democrat.
The credit crisis and
its threat to the economy have dominated the US presidential election.
Both Republican John McCain and Democrat Barack Obama supported the
bailout and welcomed its passage.
"I'm glad to see
we've finally got this thing dealt with," Obama said while campaigning
in Pennsylvania. "The No. 1 thing is that the administration uses this
authority wisely."
McCain said it was "an outrage"
that the crisis had reached the point of demanding an emergency
response from lawmakers.
"Our economy is still
hurting, hurting badly," he said in Arizona. "Further action is needed
and it shouldn't take a crisis to get this country to act."
Meanwhile,
the nation's most populous state warned it could need to fall back
federal loans because it has been shut out of credit markets.
California, with an economy on par with Spain's, cautioned it could run
out of cash by the end of the month, bringing services to a grinding
halt.
A collapse in the US housing market and
resulting bad mortgages have shattered confidence in the financial
sector, with banks across the United States and Europe needing support
from governments or outside investors this week.
Interbank
lending and credit to businesses and private individuals has all but
seized up. Central banks have injected billions of dollars to maintain
some flow of funds.
 Nicolas Sarkozy - to propose emergency measures
French
Prime Minister Francois Fillon, whose country is hosting an emergency
summit with Italian, British and German leaders on Saturday, said only
collective action could solve the financial crisis. He said he would
not rule out any solution to stop any bank failing.
"The
world is on the edge of the abyss because of an irresponsible system,"
Fillon said, alluding to widespread anger over past lax regulation and
excessive lending.
Fillon said President Nicolas
Sarkozy would propose at the emergency meeting measures to unfreeze
credit and coordinate economic and monetary strategies.
In
Britain, Prime Minister Gordon Brown shook up his cabinet and
authorities took three separate steps to try to shore up the financial
system.
Bad news mounted in the European financial
sector.
Dutch-Belgian banking and insurance giant
Fortis was broken up on national lines, with the Dutch government
taking over its operations in the Netherlands, after an earlier rescue
effort and asset sale failed.
In Switzerland, UBS
AG, hardest hit among European banks by its exposure to subprime
holdings, said it would cut 2,000 investment banking jobs.
Divisions
have emerged within Europe over the past week, with Ireland offering
guarantees on bank deposits, prompting a flight of capital from British
lenders to Irish banks.
EU partners said Ireland's
move could break competition rules and threatened the unity necessary
to ensure an ordered approach to turmoil ahead.
Visit: utvi.com. |
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