Hope for markets as Senate rescues bailout

Shares in Barclays, Société Générale, Deutsche Bank, Crédit Agricole and Lloyds TSB were among the fastest climbers on European exchanges this morning after news of the successful vote filtered through.

The original bill was turned down by the House of Representatives in an acrimonious vote on Monday, but last night the Senate voted 74-25 in favour of the new version, which will now return to the House for approval within the next few days.

The new bill contains the entire text of the law rejected by the House, as well as a suite of additions aimed at making it more palatable. If passed, it will raise the federal deposit insurance limit from $100,000 to $250,000, and will also introduce $150 billion in new individual and business tax cuts over the next ten years, much of which will be paid for by deficit spending. The tax cuts include credits for research and development, incentives for the use of renewable energy, higher unemployment payments and expanded child tax credits.

As with the rejected House version, the new bill would give the Treasury access to $250 billion immediately to purchase illiquid assets from the balance sheets of financial institutions. Another $100 billion would be available at the president's discretion, and the last $350 billion would require Congressional approval.

See also: Failure of $700bn bailout sparks equity slump
Interbank lending suffers as $700 billion rescue vehicle breaks down
Bailout saga pushes CDS spreads ever wider

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