Financial Rescue Plan Wording Being Finalized

Congressional leaders and the Bush administration have reached a tentative agreement in regards to what is being dubbed as the largest financial bailout in American history. The Treasury department is authorized to purchase $700 billion worth of troubled debt from failing firms to prevent a widespread, catastrophic failure of the U.S. financial system. Officials will be working throughout the evening to finalize the language of the bill and should be on the House floor for voting on Monday.

Some terms of the agreement are;

• Limiting the pay for executives who seek help for their firms.
• Requiring the Government to become more aggressive to prevent foreclosures as it steps into its new role as the owner of these distressed mortgage-backed securities.
• In some cases the Government would receive an equity stake, allowing taxpayers to potentially profit should the plan work and the firms begin to prosper in the months and years ahead.
• The White House has also agreed to strict oversight governance by a Congressional panel.

Both Presidential candidates, Mr. Obama and Mr. McCain have expressed their support for the plan. The money will not be given as one large sum or “blank check” as it was being called early last week, but instead will be disbursed in parts. An initial $250 billion will get the rescue under way which will be followed up by another $100 billion after a report to be given by Mr. Bush to Congress. The President could then request the balance of the $350 billion at any time.

While the ultimate cost to the taxpayers of America is still an unknown, it is important to remember that the Government would be buying assets of value and far below market rates, so that there is a chance to profit.

When the markets opened this evening, the dollar has seen strength on the idea that the rescue plan has been finalized. Gaps seen on the dollar denominated pairs ranged from 90 on the pound to 70 on the euro. The aussie and swissy also both saw gaps of approximately 30 pips while the loonie and yen were relatively unchanged. Extreme caution should be taken in these volatile times as the bill has not been passed yet, but will be up for Congressional leaders to vote on tomorrow.

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