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Market Jitters as Stocks Fall Sharply Ahead of House of Representatives Vote on Bailout
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by Christina 123 | October 1, 2008 at 11:23 am
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AS THE Senate discusses the Bill, US Share prices are down sharply as the market's nerves get the jitters ahead of the vote. The Dow Jones ended at a dismal -348 down. As well as the fears it may again be rejected, there is a fear that the rescue package does not go far enough beyond the short-term. Update: 2nd October 2008
THE EVENT: The U.S. stocks are down sharply as credit tightness, economic data and doubts about the congressional rescue plan combined to spark concerns about an economic slowdown.
MARKET REACTION:
N.Y. stocks opened down - and have drifted lower. The Dow Jones Industrial Average is off about 300 points.
Treasurys were up on recession fears and safe-haven buying.
The dollar continues its strength against the euro amid concerns about the euro-zone economy. However, the yen was up against the greenback on risk aversion.
Crude futures were down $4 on fears demand will suffer amid the financial turmoil.
DOUBTS ABOUT RESCUE PACKAGE: The U.S. House, which rejected the financial rescue package Monday, is expected to vote Friday on a Senate-passed version. The new version sweetens the deal by raising the cap on insured deposits and including some tax breaks.
However, market participants questioned whether the bill will be enough to eliminate the tensions in short-term funding markets and get the economy back on track. The government measures to buy distressed mortgage assets from banks will take time.
Senators have approved the revised "bailout" which now has to pass through the House of Representatives which narrowly voted against the same bill on Monday 228 to 206.
Earlier in the day, shares fell in advance of the vote. Senator Obama united with President George Bush and urged Democrats to vote in favour.
The revised pacakge includes a US$150bn tax break for small businesses and tax concessions for middle-class earners. It was thought that this compromise would make Congressmen more agreeable to the deal.
The plan will now be put in front of the House of Representatives on Friday.
Senators voted 74 to 25 in favour of the emergency legislation designed to stabilise volatile markets and limit further damage to the economy. It included an increase in the level of government insurance for bank deposits and a raft of targeted tax breaks. The plan will now go before the House of Representatives, which narrowly rejected a similar bill on Monday. Capitol Hill have added sweeteners to entice a last chance saloon vote for the bailout package. Its fate is still of deep concern and by no means certain. Political leaders on Capitol Hill hope to take a second high-stakes gamble on the Bush administration's stricken $700 billion financial rescue package by seeking a final make-or-break vote in the US House of Representatives on Friday. The critical first stage of the battle to resurrect the Bill, after its stunning defeat in the House on Monday, begins with a vote due to be held in the Senate tonight. The White House and leaders from both parties, scrambling to pass the legislation before more banks fail, hope a revised version of the plan will be passed in the upper chamber, giving it momentum and increasing pressure on the House to quickly follow suit. It reconvenes at noon tomorrow after the Jewish New Year. Yet despite cautious optimism among Congressional leaders that the $700 billion package can be salvaged from the wreckage of Monday's 228-206 defeat, its fate is still deeply uncertain. Failure by the Senate to pass the revised version, which contains "sweeteners" to make it more palatable in the House, would deal the legislation a devastating - and possibly mortal - blow. John McCain, Barack Obama and Joe Biden - the Democratic vice-presidential nominee - were all returning to Washington tonight to vote in favour of the modified Bill. But even it passes the first Senate hurdle, the Republican and Democratic leadership in the House - all of whom back the plan - are still deeply wary. None is yet claiming to have won over enough waverers to pass the legislation and there are risks that the Senate modifications - aimed more at Republicans - could push House Democrats away Both Democrats and Republicans are being urged to support a revised package of the US$700 bn rescue package tonight, already voted against once this week. President George Bush is determined that the bailout will go through. Senate Democrat Harry Reid said "inaction is not an option" and stressed the bill was "not a bail-out for Wall Street, but for the country". Republican Mitch McConnell said he was optimistic for a "bipartisan victory". The plan also needs support in the House of Representatives, which rejected a similar bill on Monday. President George W Bush has been speaking to senators ahead of the vote. The White House said it hoped to see "strong support for the bill". "It's critically important that we approve legislation this week and limit further damage to our economy," said spokesman Tony Fratto. US presidential hopefuls John McCain and Barack Obama are returning from their campaign trail for the vote, which is due to begin late on Wednesday. Revised proposal Global shares were mixed in Wednesday trading ahead of the vote. By early afternoon on Wall Street the Dow Jones was down 0.2% or 30 points. But hopes that enough changes had been made to get the bill through saw shares close up strongly in Asia on Wednesday. In Europe, the UK's FTSE 100 finished 1.1% higher at 4,959.6 points, France's key index added 0.6% while German shares fell. Changes to the rescue plan involve lifting the US government's guarantee on savings from $100,000 to $250,000 and a package of targeted tax breaks. They are designed to answer critics who felt the original plan was weighted too much in favour of Wall Street while not enough was being done to help struggling American families. To get through the Senate, the bill will require backing by 60 of the 100 senators. It would then return to the House of Representatives for a vote on Thursday or Friday. Some members of Congress continue to press for more fundamental changes to the bill, says the BBC's Americas editor Justin Webb.
The Senate has approved a new version of a $700bn (£380bn) rescue plan for the troubled US financial system.
Democratic and Republican Senate leaders have appealed for a new version of a $700bn (£380bn) rescue plan for the economy to be approved in a vote.
Will the US public buy the plan? Global shares mixed ahead of vote Q&A: US $700bn bail-out package
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René
New Orleans, Louisiana, United States
Christina 123
LONDON, United Kingdom
Most RecentMost Recommended Comments (8)
at 20:09 on October 1st, 2008
Interesting that you posted this at: Oct 1, 3:23 p.m., approximately 6 hours before the vote actually happened.
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Chris N (not verified)at 06:18 on October 2nd, 2008
That was the senate vote. These 12 are house members. The house voted NO 228 - 205, and will vote again, probably this week. If 12 or more switch votes to YES the bailout bill will pass.
There's still time to redouble pressure on house members to say NO again.
at 03:16 on October 2nd, 2008
Christina 123, I like this story. It's good stuff.
at 05:39 on October 2nd, 2008
Thank you, Dave!
at 03:24 on October 2nd, 2008
Christina 123, I like this story. It's good stuff.
at 05:41 on October 2nd, 2008
Thank you, Rob!
at 05:56 on October 2nd, 2008
So can I send Congress my Visa bill?
at 08:26 on October 3rd, 2008
Update: Global makets remained jittery today as expection mounts over the fate of the United States' $700 billion bailout plan. Having passed the Senate, it still awaits approval (or rejection) in the House of Representatives.
Source: iht.com