UPDATE: On Friday, in a 263-171 vote, the U.S. House of Representatives
joined the Senate in approving a measure aimed at rescuing U.S. financial markets.
President Bush quickly signed the bill into law. Full story
the VOA Special English Economics Report.
night, the United States Senate passed a rescue bill for the financial
industry. A wide majority sent the bill for debate in the House of
Representatives. The House rejected its own version on Monday.
earlier bill, the new one approves up to seven hundred billion dollars to buy
troubled assets. The government would aim to resell them later, maybe even at a
Senate added so-called sweeteners for the House. These include tax breaks for
businesses and individuals and a temporary increase in federal insurance for
general elections are in a month. Members of Congress know that many Americans
hate the idea of what they call a "bailout for Wall Street." Public
opinion takers find greater support, however, when the plan is described as a
say it is needed to rescue Main Street, meaning average Americans. Businesses
large and small are finding it harder to get credit -- a bad sign for an
already weak economy.
thing is clear: credit demands trust, and there is a lack of it in the
financial system. This loss of confidence has led to a flight from risk. Yields
on short-term Treasury debt recently fell to almost zero. Investors were
willing to accept almost no interest because they were more interested in
recent sign of worry: the LIBOR, the widely used London Interbank Offered Rate.
The LIBOR for overnight loans between banks rose above six percent. Banks are
holding onto money in case they need it for a sudden increase in withdrawals.
part of the problem is suspicion about the assets that other banks might use to
secure a loan. Many financial companies invested in pieces of complex
securities based on mortgages and other debt. Spreading the risk this way meant
high returns with little danger. Or so they thought.
housing market began to collapse in two thousand six, followed by these
securities. No one knows how to value them now. The financial industry has had
to report billions in losses because of accounting rules.
is called mark-to-market. Companies must mark the value of their assets as the
price they would receive if they tried to sell them. But what if the market has
collapsed? Some experts call for a suspension of this rule. In any case,
experts say the problem of toxic assets must be solved before credit markets will
that's the VOA Special English Economics Report, written by Mario Ritter.