US Bank Bailout Agreement Stalls

US Bank Bailout Agreement Stalls

A tentative $700bn agreement that was reached in the US for a government $700bn lifeline, which could force the financial services sector to cover any losses on the rescue plan, has been rejected.  
Congressional approval on the plan was expected yesterday, after a weekend of negotiations but it has failed when put to congress.  

Stabilising?

The bailout would have proved a stabilising effect in the long term but any agreement will still not settle market nerves in the short term until the dust settles on institutions that have clearly been mis-managed as other insitutions will still be reluctant to lend to them.  Expect a few more 'nationalisations'.  

Who to blame?

We believe that financial services industry and not the taxpayer should be forced to cover its own mistakes.  If a business has been run badly then it should sink, much in the same way as if Need An Adviser is run badly then there is no government bailout for us.

Why is it that the person at the regulator, the FSA,  in charge of monitoring Northern Rock has received a huge bonus? Why is it that certain fat cats at big banks are still getting huge bonuses? What is wrong with this picture? Bonuses in the good times and ‘pass the book’ to the taxpayer in the bad when they make mistakes?

Why did it fail?

As for the US bailout, we do expect it to pass with some changes and political maneuvering.  The reality is that capitalism means that any business survives and falls on its own merits and this was the argument yesterday.  Nationalising is a socialist approach, which is why we believe many Republican’s revolted and voted no as they consider it a breach of the basis rules of market capitalism.

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