Friday, October 03, 2008 Editorials: Super-dollar to the rescue
FAILURE of the United States House of Representatives at mid-week to pass the $700 billion economic bailout plan of the Bush government has sent a message of peril throughout the global financial market, causing investors to cower in fear.
The Dow Jones industrials plunged 777 points, “the most ever for a single day.”
The non-passage of the bailout measure did not worry much the Asian market in the belief that the stakes are simply too high, at least for Americans, for US lawmakers to risk inaction.
The Asian market was thus able to face the situation with a measure of resiliency.
Revised plan
While the bailout plan has undergone revision to make it acceptable in the US Senate, its main mission has reportedly remained the same: “allow the US treasury to buy $700 billion worth of toxic mortgage-related assets from banks to unlock credit markets and head off a deeper economic downturn in the US and abroad.”
The revised version, which has the US Senate’s assurance of passage, “raised to $250,000 from $100,000 the amount of individual deposits insured by the Federal Deposit Insurance Corp.
The new provision seeks to shore up consumer and business confidence in banks and prevent a run on deposits.
The revised version also incorporates legislation granting $112 billion in tax breaks that will benefit 20 million middle-class taxpayers over the next five years, hopefully turning the tide in the global banking crisis.
Banks and other financial institutions in the US that would benefit from the bailout are those that are saddled with the so-called “toxic mortgages” or failed subprime loans.
“These are the loans that had been lent by banks and mortgage companies to American home buyers that the latter could no longer pay for.”
The buyout under the bailout plan would “permit millions of these homeowners who now face threat of losing their homes to foreclosure to keep their homes, at least for now.”
Optimism
The reality that American legislators would never allow this crisis affecting millions of middle class American lives to come
to pass unresolved has given heart and resiliency to the Asian financial markets.
And occurring as it does just a number of weeks before the US presidential elections on Nov. 4, it will be disastrous, indeed, for the political party to cause such defeat.
What is important at the moment is that economies in Asia would not be gravely affected, if at all, by any recession that may result from the present US financial crisis.
