WASHINGTON, DC – Congress has passed the Treasury’s $700 billion bail-out bill to nationalise the toxic mortgage exposures of US banks. President George W Bush then signed the Emergency Economic Stabilization Act. The bail-out is the largest US financial intervention since the Great Depression – and has been hailed as a milestone towards the resolution of worldwide financial crisis.
Treasury secretary Henry Paulson said in an official statement: “By acting this week, Congress has proven that our nation's leaders are capable of coming together at a time of crisis, even at a critical stage of the political calendar, to do what is necessary to stabilise our financial system and protect the economic security of all Americans.”
The legislation was rejected in its original three-page form a week ago by the House of Representatives, largely due to a Republican rejection of a bill widely seen to be bailing out Wall Street excesses, with few concessions to appeal to working class Americans ahead of White House and Congressional elections.
Paulson said: “This bill contains a broad set of tools that can be deployed to strengthen financial institutions, large and small, that serve businesses and families. Our financial institutions are varied – from large banks headquartered in New York, to regional banks that serve multi-state areas, to community banks and credit unions that are vital to the lives of our citizens and their towns and communities.”
Since the failure of the original proposal, the bill has increased to over 450 pages. The new version, helped by a Senate victory and much behind-the-scenes political brokering, includes a variety of sweeteners and tax breaks to broaden its support. Tax breaks for small businesses and families, and a depositor protection scheme rise from $100,000 to $250,000 have contributed to making the new deal more palatable to average Americans.
Paulson said: “We will move rapidly to implement the new authorities, but we will also move methodically. In the coming days we will work with the Federal Reserve and the Federal Deposit Insurance Corporation to develop strategies that deploy these tools in an expedited and methodical way to maximise effectiveness in strengthening the financial system, so it can continue to play its necessary and vital role supporting the US economy and American jobs. Transparency throughout this process will be important, and I look forward to providing regular updates as we move ahead to implement this strategy.”