US bail-out in U-turn on bad assets
The Bush administration is abandoning the centrepiece of its massive 700 billion dollar (£466bn) economic rescue plan and is instead exploring new ways to shore up not only banks - but credit card, car loan and other huge businesses.
Democrats are pressing hard to also include a multibillion-dollar bail-out for faltering car-makers -- despite the administration's objections.
Unimpressed by any of the talk, Wall Street plunged ever lower.
"The facts changed and the situation worsened," US Treasury Secretary Henry Paulson said at a news briefing, explaining the administration's switch from its original plan that was to help financial institutions by buying up troubled assets, primarily securities backed by bad home loans.
Despite its new flexibility, the administration remained opposed to using the rescue fund to bail out the ailing car industry or to provide guarantees for home loans, an idea that supporters say offers the greatest hope for helping legions of Americans facing foreclosure.
But Congressional Democrats felt otherwise on cars. House of Representatives speaker Nancy Pelosi and Senate majority leader Harry Reid were pressing for quick passage of a major package for car-makers during a post-election session that begins next Tuesday.
One key House Democrat was putting together legislation that would send £15.6 billion in emergency loans to the beleaguered industry in exchange for a government ownership stake in the big three car companies.
But not all the news was bad, Mr Paulson suggested. He said the rescue programme approved by Congress a month ago had already had an impact in dealing with the most severe financial crisis in decades, a credit squeeze threatening to push the country into a deep and prolonged recession.
"Our system is stronger and more stable than just a few weeks ago," he said. But he warned that much more needed to be done before the economy could turn the corner.
To accomplish those goals, Mr Paulson said the administration would continue to use £156 billion of the rescue fund to make direct purchases of bank stock as a way of supplying hundreds and potentially thousands of banks with extra capital in the hope that they will resume more normal lending.
Source:http://ukpress.google.com/article/