I'm glad they blocked the 840b it would have been just a waste...

I'm glad they blocked the 840b it would have been just a waste of tax payers money.

Bloodbath after bailout blocked
By staff writers
NEWS.com.au
September 30, 2008 08:00am
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+ - Print Email Share Add to MySpace Add to Digg Add to del.icio.us Add to Fark Post to Facebook Add to Kwoff What are these? US politicians vote down bailout plan
Wall St suffers worst day since 9/11
Experts warn of financial chaos
THE $840 billion bailout of US banks has been rejected by US politicians, wiping tens of billions of dollars off Wall Street and threatening to do the same when the Australian market opens.

The plan, only agreed yesterday after a week of back and forth, was voted down this morning, sending markets into a panic. Wall St's losses were even bigger than the falls suffered after the September 11 terrorist attacks.

Traders watched the politicians reject the package, then erupted into frenzied selling as what has been described as "Wall Street's worst fears" came true.

Experts are saying that while the markets were not really convinced by the mega-bailout in the first place, the fact that it could not even pass its first vote means there could be no end in sight to the world financial crisis.

"It is unclear what the next step will be. It took days of painstaking negotiations to put together the deal, and congressional leaders and administration officials may have to go back to the drawing board,'' said Augustine Faucher at Economy.com.

"The US is looking at a severe recession if Congress fails to pass some sort of package.''

For Australians, it means that the slim hope of banks independently lowering interest rates have disappeared for the time being. It was thought the package could have made borrowing cheaper for banks, which would then pass on those savings to customers.

It also raises the chances that the banks will cling to their current rates even if the Reserve Bank lowers the official rate when it meets next week.

Why the bailout was needed


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Your Say
What Bin Laden couldn't do on 9/11, the US have managed to do to themselves. All he had to do was wait! Maybe next time we will borrow what we can afford to pay back.

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Barry of Canberra
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Years of easy credit, where banks and other lenders made loans they knew couldn’t be repaid finally caught up with the US financial system this year.

Many US banks hold bonds, which are backed by mortgages – many of these mortgages are in default, making the bonds worthless . Under the bailout plan $US700 billion of taxpayers’ money would be used to buy these distressed bonds.

But even when US political leaders agreed on the package yesterday, traders knew nothing was final until it was voted on.

When it was clear it would be defeated, the plunge began. The Dow Jones Industrial Average sank 770.59 points (6.92 per cent) to 10,372.54 after the closing bell in the worst single-day point decline ever, based on provisional data at the close of trade.

The slide eclipsed a 684-point drop on September 17, 2001, when the markets reopened following the September 11 terror attacks.

"It takes an incredible amount of fear to set off such an intense reaction on Wall Street," one business writer said after watching the fall. "The worry now is that with the ... plan's fate uncertain, noone knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover."