GLOBAL MARKETS endured renewed turmoil yesterday as US president George W Bush stepped up pressure on Democrats in Congress to sign up to the $700 billion bailout for the US financial sector.
Amid fears that the plan might not prevent recession in the US, Mr Bush called on Democrats to set aside their reservations about the plan to facilitate its swift passage.
"Obviously, there will be differences over some details and we will have to work through them. That is an understandable part of the policymaking process. But it would not be understandable if members of Congress sought to use this emergency legislation to pass unrelated provisions, or to insist on provisions that would undermine the effectiveness of the plan," the president said.
"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. Indeed, the whole world is watching to see if we can act quickly to shore up our markets."
Agreement was delayed by political horse-trading over demands from Democrats that the plan include curbs on executive pay and greater oversight by Congress.
Leading Democrat Barney Frank reported progress as treasury secretary Hank Paulson had agreed that the plan should empower the government to take equity positions in participating companies.
Lawmakers had "made it clear" the US should get stock warrants "so that if the company becomes profitable, we get more than the general share for taking these risks," Mr Frank said.
However there was renewed volatility on international markets as oil rose to more than $130 a barrel, days after falling below the $100 mark. After a big rally late last week, US stocks such as Bank of America, Merrill Lynch all traded lower.
The dollar fell 1.3 per cent against a basket of rival currencies, as investors questioned whether the cost of the bailout plan would weigh on the US currency. The Standard Poor's 500-stock index was down about 2.5 per cent in early afternoon trading.
In Europe, stocks also gave up some of Friday's gains with the Iseq again dipping below the 4,000 threshold as it fell 3.9 per cent and London's FTSE off 1.4 per cent.
This was despite moves by the US authorities to sanction a change in the status of Wall Street investment banks Goldman Sachs and Morgan Stanley. The last surviving independent investment banks on Wall Street will transform themselves into traditional bank holding companies.
In a move designed to protect their financial position, they will be empowered to take consumer deposits or acquire depositors. Morgan Stanley, which was last week in takeover talks with Wachovia bank, also disclosed an agreement to sell 20 per cent of its business to Mitsubishi UFJ, Japan's biggest bank.
It also emerged yesterday that the Irish Financial Regulator is exploring possible mergers between Irish financial institutions to strengthen the banking sector in the event of any further deterioration due to the global financial crisis.
The Bush administration's initiative to bail out banks was welcomed yesterday by the finance ministers and central banks in the G8 group of leading industrial countries.
