Investors wait anxiously, Bush urges speed on bank rescue plan (AFP)
22.09.2008 21:15 Business
The "whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector and retirement accounts," Bush said, amid growing unease about the proposals' fate in the US Congress.
"Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants," he added.
The plan to buy toxic mortgage-related assets from the banks was unveiled Friday to staunch the gravest financial crisis since the 1930s Great Depression amid warnings that the economy could collapse without prompt action.
Leaders of the Democratic-controlled Congress support the plan but also insist there should be some help for ordinary Americans hit by the worst housing slump in decades.
Some raised questions about oversight of the plan and curbs on what they call excessive compensation for top executives.
"We will not simply hand over a 700 billion dollarblank check to Wall Street and hope for a better outcome. Democrats will act responsibly to insulate Main Street from Wall Street," House Speaker Nancy Pelosi said Sunday.
After historic one-day gains Friday in a massive global relief rally, stock markets were subdued Monday as investors tried to work out the ultimate cost of the rescue plan -- be it slower growth, a weak dollar or even more instability.
On Wall Street, stocks were showing substantial losses as doubts and concerns grew, with the Dow Jones Industrial Average slumping 1.75 percent at around 1525 GMT.
"While desperate times require desperate measures, this might be a bit too desperate," said Paul Nolte, analyst with Hinsdale Investments.
"It is a bold plan with concentration of power and authority in the Treasury that could be fraught with more problems than we have today.
"Of course, even if passed, the program will not have an immediate impact upon the markets -- it will be drawn out over the next six to 12 months," Nolte added.
Wall Street's losses dampened Europe in turn, with most markets there turning sharply lower -- London lost 1.41 percent, Paris was down 2.34 percent and Frankfurt shed 1.32 percent.
Gold rose sharply to 877.5 dollars an ounce from 848.5 dollars on Friday as investors sought safety while the dollar fell against the euro and the yen.
News that once stellar US investment banksMorgan Stanley and Goldman Sachs had become the latest victims of the crisis was a reminder that there is still some way to go, dealers said.
The two legendary names shed their elite status to become more mundane bank holding companies, reliant for their funds on ordinary deposits from now on rather than the hugely volatile and speculative money markets.
Meanwhile, Japanese banking giant Mitsubishi UFJ Financial Group said it will buy 20 percent of Morgan Stanley in a deal worth up to 8.5 billion dollars.
At the same time, top Japanese brokerage group Nomura Holdings said it was to buy all the Asian operations of failed US investment bankLehman Brothers.
For London, which vies with New York for the title of being the world's top financial centre, the government was trying to draw a line under the crisis with a series of reforms to increase regulatory oversight.
British finance minister Alistair Darling announced that a bill will be presented in two weeks for "strengthening the supervision of the banking system, making it easier to intervene if a bank gets into trouble."
Taking up the theme, the Group of Seven industrialized nations pledged cooperation to address the financial turmoil.
"We strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns, especially through its plan to implement a program to remove illiquid assets that are destabilizing financial institutions," G7 finance ministers and central bank governors said in a statement.
"We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system."
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