Bush, Congress leaders agree on US$700 bln rescue plan

Monday 29th September 2008

President George Bush and leaders of the U.S. Congress agreed on terms for a US$700 billion fund to mop up toxic assets related to mortgage finance and increase liquidity in credit markets.

The House may vote on the Emergency Economic Stabilization Act as soon as tomorrow. After a weekend of wrangling, the deal includes requiring companies rescued by the government to provide warrants that allow taxpayers to benefit from any futures growth of the firms, according to a summary of the legislation.

"This package will reinvest our economy, establish a means for reimbursing the taxpayer and lay the groundwork for long-term reforms," House Majority Leader Steny Hoyer said in a statement posted on his website.

The dollar rose against the yen and the euro after the agreement was reached. It traded at 106.46 yen from 106.01 yen late in New York on Friday. The dollar rose to $1.4502 per euro from $1.4614.

Under the proposal, the U.S. Treasury will receive US$250 billion immediately, then would require the president to certify that additional funds were needed, in chunks of US$100 billion and US$350 billion.

"This legislation gives us the flexibility to unclog our financial markets,'' Treasury Secretary Henry Paulson said in a statement.

Paulson and Federal Reserve Chairman Ben Bernanke proposed the rescue after the failure of Lehman Brothers, the acquisition of Merrill Lynch in a distressed sale and the Fed's takeover of American International Group Inc. amid signs the credit crisis would widen to engulf more companies.

By Jonathan Underhill

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