The US Senate’s approval of a revised US$700 billion bailout bill helped boost European stocks and lift the dollar yesterday, but economic worries weighed on Asia and concern over final passage of the proposal lingered.
The fate of the rescue plan, passed by the Senate 74 to 25 on Wednesday night, now lies with the House of Representatives, which rocked global markets this week by rejecting an earlier version.
“With the improvements the Senate has made, I believe members of both parties in the House can support this legislation,” US President George W. Bush said in a written statement.
The House is expected to vote on the package later today.
But the crisis has spread well beyond US shores and beyond the financial sector. Top automakers including General Motors Corp and Ford warned of tough times amid fears slowing demand could force production cuts and job losses.
“The problems of subprime and credit crunch are now all over the world,” Ford Motor Co chief executive Alan Mulally said. “The downturn is longer and deeper than we foresaw a year ago.”
European Commission President Jose Manuel Barroso welcomed the Senate’s approval as heading in the right direction.
“We need global effort to inject confidence in the financial markets and the United States, of course, have a major responsibility,” he said.
Meanwhile, French President Nicolas Sarkozy’s office said the president would host the leaders of Britain, Italy, Germany and the European Central Bank tomorrow to discuss a response.
Sarkozy, however, denied reports a 300 billion euro (US$414.4 billion) plan akin to the US bailout was under consideration.
Market participants warned, however, that the rescue package is not a cure-all, with a worsening economic outlook spurring calls for central banks to cut interest rates.
“Even if the bill is passed, worries remain over the global economic outlook so financial markets are unlikely to stabilize,” said Masamichi Adachi, senior economist at JPMorgan in Tokyo. “It’s a completely different world now. All the things US authorities are doing now are simply aimed at preventing a global meltdown.”
Under the deal, the Treasury would take on illiquid assets held by banks, in the hope of restoring confidence and unfreezing credit markets.
The bailout package was never in danger in the Senate. Senators instead played catalysts for the House, adding billions of dollars in tax provisions popular with the left and right in a bid that House leaders hope — but cannot guarantee — will persuade enough of the House rank-and-file to switch from “nay” to “aye” on a highly contentious bill a month before Election Day.
They were especially targeting the 133 House Republicans who voted against the package.