The plan to use up to US$700 billion of American taxpayers’ money to buy up troubled assets from financial institutions is up in the air after Democrats and Republicans failed to reach an agreement.
Negotiations fell apart after Republicans came up with a competing plan on Thursday. The talks are expected to resume on Friday morning.
The news came after U.S. authorities shut down Washington Mutual, the largest savings and loan association in the United States. It’s the latest victim in the credit crisis and the largest bank failure in U.S. history.
JPMorgan Chase reached an agreement Thursday to buy all deposits, assets and certain liabilities of Washington Mutual’s banking operations from the Federal Deposit Insurance Corporation (FDIC) for $1.9 billion.
And Sun Life announced it holds $270 million worth of bond securities with a par value of $270 million. It expects to record a charge to earnings in the third quarter of 2008 in respect of its holdings in Washington Mutual.
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The credit crisis has taken its toll on a number of financial institutions over the past month. Last week, Lehman Brothers filed for bankruptcy protection and the Federal Reserve Bank of New York announced it would loan up to $85 billion to AIG in exchange for a 79.9% stake.
And earlier this month, the U.S. government seized control of mortgage firms Freddie Mac and Fannie Mae.
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