US Senate passes bailout vote

2 Oct 2008, 9:25 am   -   Source: AFP
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The US Senate is voting on a crucial financail bailout package, which must also pass the House.(Getty Images)

The US Senate is voting on a crucial financail bailout package, which must also pass the House.(Getty Images)

The US Senate has passed a crucial vote on a revised $US700-billion financial rescue package which will go to the House of Representatives on Friday.

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The US Senate has passed a crucial vote on a revised $US700-billion financial rescue package which will go to the House of Representatives on Friday.

Senators voted 74-25 in favour of the bill, which now goes back to the lower House of Representatives, which voted against an earlier version on Monday.

Before the vote presidential candidates Barack Obama and John McCain suspended campaigning and rushed to Washington for the Senate vote.

The modified bill raises the ceiling on federal insurance for bank deposits from $100,000 to $250,000, a move aimed at curbing a run on bank deposits by portfolio managers and businesses.

It retains most facets of the original plan which gives Treasury Secretary Henry Paulson the power to buy up troubled mortgage-related assets in troubled banks and includes restrictions on "golden parachute" payoffs for executives.

The proposal however has run into fierce grass-roots resistance by voters who see it as a reward for imprudent Wall Street money spinners, raising doubts about its passage.

Worldwide fears

Amid growing fears about the impact of the crisis on Europe, the head of the eurozone finance ministers said the big four European powers would convene.

The chairman of the eurozone finance ministers, Jean-Claude Juncker, insisted "there is no threat" to Europe's banking system, but added the leaders of Germany, France, Britain and Italy would meet in Paris Saturday to deal with the crisis.

The Italian government, following precipitous falls in shares of leading bank UniCredit, pledged to "guarantee the stability of the banking system and protect savers" as leading bank UniCredit struggled.

Shares in UniCredit, which has the most foreign exposure among Italian banks, fell to their lowest level in 10 years earlier this week before rebounding Wednesday.

In Moscow Russian Prime Minister Vladmir Putin denounced the "irresponsibility" of US financial practices for the crisis.

"This is not the irresponsibility of specific individuals but the irresponsibility of the system, which claimed leadership," Putin said.

Despite more heavy injections from European, Japanese and British central banks, aimed at keeping credit flowing on money markets, key short-term rates on European interbank markets rose Wednesday.

That suggested banks remained reluctant to lend to one another, aggravating a credit squeeze despite renewed hopes for a US finance sector rescue deal.
 

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