US senate approves amended bailout package

Global financial markets are breathing a sigh of relief after the US senate finally approved the US Government’s $US700 billion bailout package that will result in the Government buying the bad debts of US banks.

Global financial markets are breathing a sigh of relief after the US senate finally approved the US Government’s $US700 billion bailout package that will result in the Government buying the bad debts of US banks.

The senate passed the bill after attaching middle-class tax breaks and expanded government insurance for bank deposits.

The package will now have to pass through the House of Representatives tomorrow. Two days ago Congress blocked the bill, citing concerns about the way taxpayers were being forced to save the Wall Street banks that created the current mess.

“This was a measure for Main Street, not Wall Street. This was a measure to get credit markets working again,” senate minority leader Mitch McConnell said after the vote.

“This doesn’t entirely solve the problem but it begins to move the economy back in the direction of moving the American economy where it needs to be.”

But the earlier rejection was roundly criticised by global leaders and financial markets who are desperate for something – anything – that will help stabalise the global economy.

The pressure on Congress to pass the bill will be intense and most political pundits expect that the package will get over the line.

But until then, investors around the world will keep holding their breaths.

New data released overnight in the US highlighted the growing problems in the economy.

A report by ADP Employer Services revealed US private-sector employers cut 8000 jobs in September – and that was before the financial chaos of the past few weeks.

The Institute for Supply Management, which tracks the US manufacturing sector, said its index of national factory activity fell to 43.5 in September from 49.9 in August, under the level of 50 that separates contraction from expansion.

That was the worst reading since 40.8 in October 2001, when the economy was still mired in the last recession.