The Congress comes to the weekend without a bank bailout
NEW YORK, USA (Reuters) – Pressure on the US Congress to pass a multi-billion dollar bailout plan grew on Friday after a stalemate in negotiations and the biggest closure of a bank in the country’s history irritated world markets .
President George W. Bush said that although there are disagreements in some parts of the 700 billion dollar rescue plan, it will be finally approved by Congress.
‘We’re going to have an approved package,’ he said in a brief statement at the White House.
Leading US stocks closed higher on Friday on expectations that there will be an agreement before markets reopen on Monday, but strong declines in the week.
Republican and Democratic lawmakers were battling over the plan, while Treasury Secretary Henry Paulson tried to lobby Congress at a time when turbulence in global financial markets has grown stronger.
The spokeswoman of the House of Representatives of the United States, Nancy Pelosi, promised that the Congress will work during the weekend and assured that there is progress, shortly before the closing of the American markets.
‘The markets require a message from our side (…) that we understand that time is important,’ he told reporters.
Although the Democrats control the Congress, they doubt to approve the rescue without the support of all the republicans before the risk of leaving to his party in the heat of electoral campaign.
Just before the Wall Street shutdown, the New York Times reported that Wachovia Corp, the sixth-largest US bank, holds preliminary talks with Citigroup, but there may be no agreement. The Wall Street Journal said there are others interested in the bank.
The titles of Wachovia. They fell on Friday by 36 percent, before closing with a decline of 27 percent.
Financial institutions have been hit by a growing wave of foreclosures and loan defaults, which have generated the worst credit crisis in the United States since the Great Depression of the 1930s.
In Europe, the Belgian-Dutch group Fortis denied that it had liquidity problems, after its shares sank 20 percent to 14-year lows. Subsequently, he dismissed his interim CEO.
The US authorities closed the Washington Mutual savings and loan entity on Thursday and its assets will be sold to JPMorgan Chase.
Banks around the world accumulated cash and showed an increasing resistance to lend money, which caused a rise in interbank interest rates to a record level in London.
“What we will see is the strong strengthen and the weak will die,” said William Smith, president of Smith Asset Management in New York.
World money markets dried up, forcing an increase in cash injections by central banks because the rates for dollar loans remained high, particularly for three-month money.
The stress of the market was aggravated by the proximity of the end of the quarter next week.
FEARS ABOUT ECONOMY
To add fuel to the fire, several US data showed that the growth of the economy during the second quarter was not as strong as previously said because consumer spending increased with less vigor and companies cut back their investments, in a a sign that confidence has waned even before the resurgence of financial turmoil.
The largest bank in Europe, HSBC Holdings, has announced it will cut 1,100 jobs, or 4 percent of its workforce, due to the crisis. This adds to the loss of more than 80,000 jobs in the entire banking sector in the last 18 months.
“The bailout negotiations are souring the enthusiasm that people could have for the market,” said Rick Meckler, president of LibertyView Capital Management in New York. ‘I think without agreement, it will be difficult for the market to move forward’ ..
The credit crisis, which has lasted 13 months, reached its peak this month, when the government took control of mortgage financiers Fannie Mae and Freddie Mac, rescued insurer American International Group and investment bank Lehman Brothers. filed for bankruptcy