labels: World economy
White House, lawmakers plan new bailout deal news
30 September 2008

Mumbai: US lawmakers and White House officials are drawing up a new bailout proposal that they hope to make reluctant congressmen vote for and rescue troubled financial market.

Congressional leaders and administration officials are assessing the type of changes required in the package to win over votes and guarantee success. President Bush also planned to make a statement on the rescue plan. The new package, however, is unlikely to be unveiled before Thursday when the House meets next.

''Doing nothing is not an option,'' House majority leader Steny Hoyer (Democrat), said after the $700 billion emergency package was rejected 228-205 on Monday.

While the legislation itself was highly unpopular with the public, ideological groups on the left and the right organised against it, a rejection of the financial bailout package has hit market the world over.

The bill failed despite lobbying and even pressure from some of the biggest special interests in Washington, including the US Chamber of Commerce and the National Association of Realtors.

The package was opposed by some of the Republican senators themselves. ''I cannot with good conscience put Nevada's taxpayers on the hook for the foolish excesses of Wall Street,'' said Representative Dean Heller (Republican). ''Congress should pass legislation that protects the taxpayer, assists with bad assets and allows the market to correct itself,'' he said.

Some Republican leaders blamed their failure to secure more votes on the partisan tone of Democrat Speaker Nancy Pelosi's pre-vote speech on the House floor.

The rescue package would have allowed the government to buy bad mortgages and other illiquid assets held by troubled financial institutions, lifting a major burden off the sputtering national economy.

Treasury secretary Henry Paulson warned of a credit crunch that would affect American businesses and said families would find it harder to get student loans and car loans.

''We need to work as quickly as possible,'' he said. ''We need to get something done."

Lawmakers have pledged to work again. ''We are going to have a couple days to see how the marketplace reacts to all this, and maybe that's a good thing,'' said one Republican senator.

Republicans have, meanwhile, suggested a doubling of the $100,000 ceiling on federal deposit insurance. Some others suggested an end to rules that require companies to devalue assets on their books to reflect the price they could get in the market.

Even as Democratic and GOP leaders and Treasury Secretary Henry Paulson pledged to keep working to design a bailout package acceptable to all sides, central banks are likely to continue injecting money to try to boost confidence among corporate lenders.

While stocks have made a partial rebound - after logging their steepest declines in years on Monday following the proposal's failure - without a bailout plan in place, ailing banks would find handling of mounting losses tied to bad mortgage debt increasingly difficult.

The dollar, however, gained against the euro amidst signs that Europe is also being drawn into a financial crisis.


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White House, lawmakers plan new bailout deal