$700bn rescue package announced

Plans for a $700bn bail out of America’s financial system have been announced.

The plans have been agreed by both the Republicans and the Democrats and will allow the Treasury to spend up to $700bn buying bad debts from banks in the US.

Nancy Pelosi, the Democratic speaker of the House of Representatives, says the move was not to “bail out Wall Street but a buy-in” so the US could help the economy and protect pensions and savings.

There had been rumours of rifts inside Congress over what measures should be passed. Both parties objected to plans by Treasury secretary Henry Paulson, that would have given him complete control over how the money was spent.

The government will get the $700bn in tranches and be given $250bn straight away, $100bn at the request of the White House, while Congress will then be able to veto the release of the remaining $350bn.

In return, banks that accept the money will have to hand over shares, so that taxpayers can feel the benefit.

The deal will also see top bankers pay limited, and golden parachutes, which are huge payments when they leave the firm, will be banned.

Banks will be also be forced to join an insurance programme in order to protect them against the losses of mortgage-backed securities.