26 September, 2008

After a week of discussions finally US Congress has granted the $700 billion (£380 billion) financial rescue plan. The declaration comes after US billionaire investor, Warren Buffett, explained the existing monetary chaos as ‘an economic Pearl Harbour’.

Buffett, who is one of the world’s richest men, along with Treasury Secretary, Henry Paulson, and US Federal Reserve chief, Ben Bernanke, have been influencing US Congress to quickly agreed with the monetary rescue strategy or risk severe consequences to the US economy.

The rescue plan came out late last week in a bid to prevent the US banking system to trim down.

According to Democrat Senator, Christopher Dodd, a ‘fundamental agreement’ has been attained on the principles of a package but the accurate information is yet to be agreed. However, it is likely to consist of restrictions on bankers’ pay.

Mr. Paulson wishes to establish a federal-backed fund into which concerned bank can organize their troubled assets. The banks are likely to vend these mortgage-backed bonds at a discount to the fund.

Whenever the market gets better, it is then expected that the Treasury can afford to sell the bonds back into the market and refund the taxpayer. The strategy is for banks to organize such assets and then sentiment will return and banks will start lending to each another again.

However, following the announcement, the Dow Jones Industrial Average was 262 points higher to 11089.

Meanwhile, Prime Minister Gordon Brown has been invited to the White House to talk about the global monetary crunch with President Bush tomorrow.

The Prime Minister is to speak to the UN General Assembly in New York tomorrow morning and then leave for Washington in order to attend meeting with the President tomorrow afternoon.

Mr. Brown plan out to talk about how to maintain the $700 billion package to provide peace in the fiscal markets.

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