Bailout tab could reach $1.8 trillion US

Following are details of actions, proposals and amounts:

—Up to $700 billion to buy assets from struggling institutions. The plan is aimed at sopping up residential and commercial mortgages from financial institutions but gives Treasury broad latitude.
—Up to $50 billion from the Great Depression-era Exchange Stabilization Fund to guarantee principal in money market mutual funds to provide the same confidence that consumers have in federally insured bank deposits.
—The Fed committed to make unspecified discount window loans to financial institutions to finance the purchase of assets from money market funds to aid redemptions.
—At least $10 billion in Treasury direct purchases of mortgage-backed securities in September. In doubling the program on Friday, the Treasury said it may purchase even more in the months ahead.
—Up to $144 billion in additional MBS purchases by Fannie Mae and Freddie Mac.The Treasury announced they would increase purchases up to the newly expanded investment portfolio limits of $850 billion each. On July 30, the Fannie portfolio stood at $758.1 billion with Freddie's at $798.2 billion.
—$85 billion loan for AIG, which would give the Federal government a 79.9 percent stake and avoid a bankruptcy filing for the embattled insurer. AIG management will be dismissed.
—At least $87 billion in repayments to JPMorgan Chase [JPM  42.25     -4.80  (-10.2%)    ] for providing financing to underpin trades with units of bankrupt investment bank Lehman Brothers [LEH  0.195     -0.0201  (-9.34%)    ]. Paulson said over the weekend he was adamant that public funds not be used to rescue the firm.
—$200 billion for Fannie Mae and Freddie Mac. The Treasury will inject up to $100 billion into each institution by purchasing preferred stock to shore up their capital as needed. The deal puts the two housing finance firms under government control.
—$300 billion for the Federal Housing Administration to refinance failing mortgage into new, reduced-principal loans with a federal guarantee, passed as part of a broad housing rescue bill.
—$4 billion in grants to local communities to help them buy and repair homes abandoned due to mortgage foreclosures.
—$29 billion in financing for JPMorgan Chase's government-brokered buyout of Bear Stearns in March. The Fed agreed to take $30 billion in questionable Bear assets as collateral, making JPMorgan liable for the first $1 billion in losses, while agreeing to shoulder any further losses.
—At least $200 billion of currently outstanding loans to banks issued through the Fed's Term Auction Facility, which was recently expanded to allow for longer loans of 84 days alongside the previous 28-day credits.

In Toronto, the TSX slipped slightly, down 21 points at 12,891, by 10 a.m. ET.

In the United States, the Dow Jones industrial index was off 122 points, to 11,276.62.

Both markets were digesting the news that the U.S. administration and Congress still need to hammer out the details of the $700-billion US bailout plan, announced by Treasury Secretary Henry Paulson.

Under the so-far sketchy proposal, the government plans to buy up non-performing mortgage-backed commercial paper and other toxic financial assets from ailing financing companies at some fraction of their face value. The administration would seek to sell the bonds and other bad loans at some future point when credit markets revive.

Crude oil climbed more than $10 a barrel on speculation that a proposed $700 billion U.S. government rescue plan for the finance industry may bolster the economy and shore up demand.

Oil has risen 26 percent since Sept. 16, the biggest four- day gain since at least June 1998, as lawmakers pledged fast consideration of the Treasury's plan to buy devalued mortgage- related securities. The dollar fell to a three-week low against the euro, increasing the appeal of commodities as a hedge.
 

The recent volatility in gold prices and the slump in the US economy has created a spur in gold investments, as consumers preferred the metal for safer investments. As the prices touched great highs, it pushed stocks in Australia's top gold miners.

Gold enjoyed its biggest one-day gain in nine years, with gold futures for December delivery adding $US70 an ounce, or 9 percent, on the Comex division of the New York Mercantile Exchange, ending Wednesday’s trading session at $US850.50 an ounce. Such a percentage gain in a session was last seen on September 28, 1999.

In local trading, on 18th September 2008, the spot price was traded at $US869 an ounce, up $US85.70 on Wednesday's close. BGF Equities analyst Warwick Grigor said to the media, that when the financial markets hit similar lows in 1974, what followed were four to five years of gold price outperforming. He also opined that the overnight change in gold indicates change of times. The movement could inspire a new bull market in gold, and the recent rally in the US dollar had taken the focus away from a "dire straits financial sector.

The gold sector did face difficulty in the year, but the high performance in the last two days has meant top producers soared into the black. Newcrest rose 14.54 per cent, adding $3.11 to close at $24.50, while Sino Gold rose 80c, or 22.54 per cent, to reach $4.35. Lihir Gold was up 15.89 per cent to $2.48.

The Federal Reserve said Sunday it had granted a request by the last two major U.S. investment banks — Goldman Sachs and Morgan Stanley — to change their status to bank holding companies.

The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.

The change continued the biggest restructuring on Wall Street since the Great Depression.