The United States Senate voted in favour of a revised US$700 billion economic bailout package on Wednesday evening, sending it back to the House of Representatives.
However, those expecting a panacea to the current financial crises may be disappointed. “The bill is not a cure-all, and nobody pretended it would be,” says Douglas Porter, deputy chief economist at BMO Capital Markets.
According to him, the bailout is likely to help stabilize the markets by infusing some much-needed confidence, and he expects it to take some of the pressure off the money markets, which have seen a run in short-term interest rates over the past few days due to mounting concerns about the health of a number of U.S. and European financial institutions.
“This could help relieve some of that uncertainty, and probably result in a pull-back in some of these short-term interest rates,” he says.
Related Links |
The bailout was passed by a vote of 74 to 27. There were 16 Republicans and nine Democrats who voted against it. One senator, Ted Kennedy, did not vote because he was being treated for cancer.
Two days earlier the House voted against it, due mainly to a lack of support from the American public and the appearance that it would only benefit Wall Street.
Changes to the bailout included a boost in federal deposit insurance on bank accounts to US$250,000, up from $100,000, and tax breaks for businesses and alternative energy. The changes are seen as a nod to critics who charge that the bailout favours Wall Street and ignores average Americans.
The bailout package was tacked on to legislation that requires insurers to treat mental health problems like general health conditions.
To comment on this story, email jody.white@rci.rogers.com.