THE US Congress will vote this week on a $700 billion bailout package for the US financial system, it was confirmed late last night.
Agreement on the terms of the package, which includes provisions enabling the US to claw back any outstanding losses from its purchase of "toxic" mortgage assets from the financial sector after five years, followed a tentative deal late on Saturday night.
"The party is over. The era of golden parachutes for high-flying Wall Street executives is over," said House of Representatives speaker Nancy Pelosi, referring to a ban in the legislation on generous severance packages for unsuccessful company chiefs.
Senate majority leader Harry Reid said a $700 billion bank-rescue package will be voted on early this week and "now we have to have the votes".
The House of Representatives may vote today, Ms Pelosi said. The Senate will consider it at least by Wednesday, Mr Reid said.
In a sign, however, that the turmoil that has rocked the US financial system is without boundary, Dutch-Belgian bank Fortis and British lender Bradford & Bingley were each on the cusp of nationalisation last night.
European Central Bank president Jean-Claude Trichet entered emergency discussions on the future of Fortis, whose shares collapsed last week. Fortis, which is co-owner with An Post of Postbank Ireland, may be partially nationalised if a buyer cannot be found.
A similar fate awaits Bradford & Bingley, whose £50 billion (€62.9 billion) mortgage and loan book may be nationalised as part of an expected deal to sell its £20 billion savings business to Spanish bank Santander. British chancellor Alistair Darling will make a statement before markets open this morning.
US treasury secretary Hank Paulson tentatively agreed the parameters of the Wall Street bailout package late on Saturday night with Democrats and Republicans. Drafts of the legislation, titled the Emergency Economic Stabilisation Act 2008, were circulating by mid-afternoon yesterday.
With agreement on the plan coming only five weeks out from the US presidential election, Republican candidate John McCain and his Democratic rival Barack Obama each offered qualified support for the bailout. "This is something that all of us will swallow hard and go forward with," Mr McCain said on ABC television network."The option of doing nothing is not an acceptable option."
Mr Obama, speaking on CBS television, said he was likely to back the package. "My inclination is to support it," he said. "We have to remember how we got here. Not so much to allocate blame, but to understand the choices that will face the next president."
The legislation will empower the treasury to immediately spend $250 billion on "toxic" mortgage securities, while the president can authorise a further $100 billion in expenditure. However, release of the remaining $350 billion will be conditional on the outcome of a congressional review.
In the face of taxpayer resistance to the plan, the legislation will allow the US government to take an equity position in participating companies. This is designed to support the argument that taxpayers will benefit from the scheme if the performance of the companies improves after the toxic assets are removed.
The plan includes restrictions on top-level pay in participating banks.
