Bailout agreement announced

Politicians have reached agreement on a $700 billion rescue plan for the US financial system which they hope will end the credit crunch.   ┬á Republican and Democratic leaders have both backed the deal, which allows the US Treasury to spend up to $700 billion to buy bad debts from ailing banks. ┬á┬á The bill must still be approved by both Houses of Congress, which President Bush has urged them to do. Recommending the plan, he said: ÔÇ£This plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system. Without this rescue plan, the costs to the American economy could be disastrous.ÔÇØ┬á┬á The deal was announced after a weekend of intense wrangling. Both parties had vigorous objections to the proposal submitted last week by Treasury Secretary Henry Paulson that would have given him sweeping powers over how the money was spent. ┬á┬á Several of the key concerns raised by both Democrats and Republicans have been dealt with. First, the government will get the money in stages, with $250 billion available immediately, and a further $100 billion at the request of the White House. Congress has a power of veto over the release of the remaining $350 billion. ┬á┬á Banks given bailout money will have to hand over shares in return, allowing taxpayers to benefit from their recovery. There will be restrictions on the pay of top bankers, and "golden parachutes" will be banned. ┬á┬á House speaker Nanci Pelosi seemed particularly pleased with this development. ÔÇ£The party is over,ÔÇØ she said. ÔÇ£The era of golden parachutes for high-flying Wall Street operators is over. No longer will the US taxpayer bail out the recklessness of Wall Street. And that's the news that this legislation brings.ÔÇØ┬á┬á Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board. Banks will also be obliged to join an insurance program to protect them against the losses of mortgage-backed securities.┬á┬á Senate majority leader Harry Reid was upbeat about the controls written into the new deal. ÔÇ£We received from the Treasury Department a few days ago a three-and-a-half page bill giving unfettered discretion to the secretary to do basically anything he wanted to do with $700 billion. As the Speaker mentioned, there is now a bill on the internet and it's very clear that it's no longer unfettered discretion.ÔÇØ┬á┬á The bill, called the Emergency Economic Stabilization Act of 2008, goes to the House today. If approved by both the House and the Senate, the revised plan will lead to the biggest intervention in the markets since the Great Depression in the 1930s.   ┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á